Tone management in press releases

Details

Supervisors

Thewissen, James

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

This paper aims to examine the strategies companies employ in financial communication, particularly focusing on sentiment manipulation following layoff announcements and the integration of Environmental, Social, and Governance (ESG) considerations to mitigate negative impacts on their reputation. The study also investigates how investors react to these communication practices. The first model analyzes the relationship between the number of layoffs and the tone of press releases. Using tone analysis tools, the study finds that companies tend to use more positive language in press releases following layoffs. While layoffs influence the tone, other factors like company size, net profit, and word count also play significant roles. The addition of temporal factors shows that annual macroeconomic events can also affect the tone. The second model explores the relationship between layoffs and the emphasis on ESG topics in press releases. The findings reveal a significant relationship between the number of layoffs and the focus on ESG issues, indicating that companies may highlight ESG initiatives to counterbalance the negative perception of layoffs. The third model examines the impact of the tone of press releases on investor reactions, measured through Cumulative Abnormal Returns (CAR) over various time periods. The results show that positive tones in press releases lead to immediate and short-term positive investor reactions. Negative tones also result in immediate negative reactions, but interestingly, in the long term, initial negative reactions may be corrected, suggesting a potential mean reversion. This study highlights the crucial role of tone in financial communication in managing investor perceptions following layoffs.