Academic journal article Journal of Management Research

Impression Management Motivations, Strategies and Disclosure Credibility of Corporate Narratives

Academic journal article Journal of Management Research

Impression Management Motivations, Strategies and Disclosure Credibility of Corporate Narratives

Article excerpt


This paper explores the key factors that influence disclosure credibility of corporate managers. Mercer (2004) provided a critical and comprehensive account of the academic literature on disclosure credibility. This paper finds that investors, while determining the credibility of a management disclosure, examine four basic factors-the situational incentives at the time of the disclosure, management's trustworthiness and competence, the degree of assurance for the message from internal and external sources, and several characteristics of the disclosure such as its precision, venue of release and time horizon.

Keywords: Impression management, Disclosure credibility, Narratives

1. Introduction

Discretionary corporate disclosures by the management is often believed to reflect opportunistic behaviour as managers seek to exploit information asymmetries between them and the external users by manipulated reporting (Merkl-Davies & Brennan, 2007). Such opportunistic behaviour is termed as impression management. Broadly speaking, Hooghiemstra (2000) defined impression management as a branch of social psychology where by an individual displays such behaviour that will yield a favourable assessment by others. Clatworthy & Jones (2001) and Yuthas et al. (2002) refined this definition from the corporate perspective by stating that impression management involves controlling and manipulating the impression presented to accounting information users, with a view to strategically manipulate their perceptions, and eventually, their decisions (Merkl-Davies & Brennan, 2007). This can often be done by manoeuvring the information content and its presentation in corporate documents with a view to altering the user's perceptions of the economic performance of the firm (Healy & Wahlen, 1999; Godfrey et al., 2003). The idea of impression management assumes a weak form of market efficiency where investors do not have enough information to assess managerial bias in the short term. Hence, managers engage in impression management to influence the firm's share price, which can result in misallocation of capital and increase managerial compensation (Adelberg, 1979; Rutherford, 2003; Courtis, 2004; Merkl-Davies & Brennan, 2007).

2. Motivations for Impression Management

Leary & Kowalski (1990) suggest three major motivations for managers to engage in impression management. First, managers would engage in opportunistic behaviour, seeking to maximize expected returns and minimize expected punishments (Merkl-Davies & Brennan, 2007). Individuals may engage in impression management if it is relevant for achieving one or several goals, e.g. the maximization of social and material outcomes or the maintenance and enhancement of self-esteem. The value of desired outcomes also affects impression management behaviour-the higher the value attached to particular outcomes, the stronger the motivation for impression management. Also the difference between one's desired and current social image can motivate managers to engage in impression management (Merkl-Davies & Brennan, 2007). Second, Leary & Kowalski (1990) state that individuals attempt to make sure that their public image is consistent with their social role. Individuals also construct self-images that match with the values and preferences of larger, more significant groups. In a corporate context, adopting a stakeholder theory, one can state that firms may engage in impression management by following the target value of stakeholder or interest groups (Merkl-Davies & Brennan, 2007). Third, Leary & Kowalski (1990) state that impression management depends on manager's current as well as potential future image, which may constrain the impression management strategies adopted. Public failures or embarrassments may induce individuals to engage in impression management for countering or repairing their damaged image (Merkl-Davies & Brennan, 2007). …

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