Business Performance vs. Statements by CEOs in Annual Reports: Evidence from the Japanese Electronics Industry

Toshiro Kita, Masaharu Yoshii
(Doshisha University, Kyoto, Japan)

Abstract: An annual report is an important source of information to understand a company’s activities and performance. In this paper, we analyze statements made in annual reports by CEO (e.g., message to the shareholders, interview with CEO, etc.) by using a computational linguistics technique. In particular, we investigate the relationship between the statements made by the company’s leader and the company’s actual performance. Our study focuses on the Japanese electronics industry, where 10 Japanese firms have been struggling with low profit margins and against two dominating global firms. We find that: (1) in contrast to the high performing global firms, most Japanese firms rarely and inconsistently use important keywords such as M&A, IP or Business Model. (2) Japanese firms seem to drift between “Open Innovation” and “Closed Innovation”. (3) Ambidextrousness in change management is important for firms.

Key words: text analysis; annual reports; innovation management; change leader; ambidextrousness

JEL code: L25