TY - JOUR
T1 - Virtue Rhetoric in Investor Communications
T2 - Setting Up for a Letdown?
AU - Zachary, Miles A.
AU - Connelly, Brian L.
AU - Payne, G. Tyge
AU - Tribble, Lori L.
N1 - Publisher Copyright:
© The Author(s) 2021.
PY - 2023/2
Y1 - 2023/2
N2 - Many companies prominently espouse their virtuous character in communications with investors, with a view toward influencing investor perceptions about the firm’s standards of behavior. While there are benefits to investors perceiving an organization to be virtuous, what happens if the firm violates those standards by engaging in unethical behavior? In this study, we use expectancy violations theory to argue that virtue rhetoric sets investors up for disappointment. When an organization claims to be virtuous but then acts unethically, investors respond to the ethics violation more negatively than they would otherwise. We also theorize about scenarios where investors may overlook unethical behavior or intensify their disapproval of it. To test our ideas, we assemble a unique sample of unethical events committed by S&P 500 companies over a 12-year period, combined with analysis of the virtue rhetoric found in their annual letters to shareholders. Our main finding is that investor reaction to unethical behavior is more negative for companies that claimed to be virtuous prior to the violation than for those that did not make such claims. This relationship is less strong when the company has high expected future value.
AB - Many companies prominently espouse their virtuous character in communications with investors, with a view toward influencing investor perceptions about the firm’s standards of behavior. While there are benefits to investors perceiving an organization to be virtuous, what happens if the firm violates those standards by engaging in unethical behavior? In this study, we use expectancy violations theory to argue that virtue rhetoric sets investors up for disappointment. When an organization claims to be virtuous but then acts unethically, investors respond to the ethics violation more negatively than they would otherwise. We also theorize about scenarios where investors may overlook unethical behavior or intensify their disapproval of it. To test our ideas, we assemble a unique sample of unethical events committed by S&P 500 companies over a 12-year period, combined with analysis of the virtue rhetoric found in their annual letters to shareholders. Our main finding is that investor reaction to unethical behavior is more negative for companies that claimed to be virtuous prior to the violation than for those that did not make such claims. This relationship is less strong when the company has high expected future value.
KW - expectancy violations theory
KW - organizational virtue
KW - strategic framing
KW - unethical behavior
UR - http://www.scopus.com/inward/record.url?scp=85103637714&partnerID=8YFLogxK
U2 - 10.1177/01492063211002622
DO - 10.1177/01492063211002622
M3 - Article
AN - SCOPUS:85103637714
SN - 0149-2063
VL - 49
SP - 741
EP - 770
JO - Journal of Management
JF - Journal of Management
IS - 2
ER -