Words that yield: The invisible hand of financial storytelling

This paper investigates how structured persuasive strategies, grounded in Cialdini's principles of influence, are embedded in the narrative disclosures of banks and influence financial outcomes. Using a novel persuasion index derived from supervised natural language processing (NLP) analysis of 544 annual reports from publicly listed firms in the Middle East and North Africa Region (MENA) region (2016–2023), we measure rhetorical intensity across five persuasion dimensions: reciprocity, consistency, authority, social proof, and liking. Using system generalized method of moments (GMM) to address endogeneity concerns, we find that higher persuasive framing significantly improves the return on assets, return on equity, and solvency (Z-score). Our sub-index analysis reveals that reciprocity and social proof cues enhance financial performance, whereas excessive authority claims negatively impact profitability. These findings have important implications for policy makers, suggesting that disclosure standards should account for the behavioral effects of narrative construction.