An Examination of the Effect of the President's Letter and Stock Advisory Service Information on Financial Decisions

Steven E. Kaplan, Susan Pourciau and Philip M. J. Reckers
Annual corporate reports to stockholders contain the president's letter to shareholders, which generally has been found to be a "self-serving" commentary [Bettman and Weitz, 1983; Salancik and Meindl, 1984; and Staw, McKechnie, and Puffer, 1983]. Investors may also obtain corporate information from sources external to the firm, such as stock advisory services. Few published studies exist on the role these two sources play in interpreting the firm's financial statements and making decisions about the firm.

Based primarily upon the impression management literature, an experiment was conducted to examine the effects of the president's letter and stock advisory service information on financial decisions. Three different impression management strategies were considered in the experiment. The multivariate results indicate that each of these two variable significantly affects decisions of individual investors. Further, as suggested by Salancik and Meindl [1984], an excuse strategy was not as effective as two other approaches.

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