Does Good Governance Make CEO Communications More Realistic?

ABSTRACT In corporate communications, the frequent use of positive words is commonly associated with impression management, while negative words are often considered to have higher informational value, an effect known as the informational negativity effect. This study examines whether corporate governance performance is associated with the frequency of positive and negative words. The study adopts a multidisciplinary approach that draws from social psychology, impression management, and corporate governance research. Examining corporate governance scores and CEO communications for 75 firms on the FTSE 100 index reveals that governance performance is negatively associated with positive words and positively associated with negative words. These findings support the view that strong internal governance mechanisms reduce the incidence of impression management by limiting the use of positive words while enhancing the informative elements. This also aligns with the board's ethical responsibility for the corporation's communication strategy, ensuring that its communications with shareholders and other stakeholders provide a true and fair view.