The Impact of COVID-19 on Abnormal Tone in Corporate Communication: A Comparative Analysis of Affected and Non-Affected Industries

Abstract: Background and Problem Definition: Effective communication is crucial for stakeholder relationships. CEO letters convey important information, but during crises, companies and industries may misrepresent their financial health to maintain a positive impression, potentially through abnormal tone. However, some may even prioritize transparency and display information content during COVID-19. Purpose: The purpose of this thesis is to test whether there has been an increased use of tone management (abnormal tone) in CEO letters during Covid-19 compared to before Covid-19, using data from 2018 to 2021 including firms listed on the Stockholm Stock Exchange. The purpose is additionally to test whether affected industries displayed more abnormal tone than not affected industries due to covid pandemic. Research Design and Methodology: The study tests developed hypotheses using a theoretical framework, and analyzes observations through statistical tests. Tone was calculated using Diction 7.0. Correlation and multiple regression analysis were conducted to achieve research objectives. Empirical Results and Analysis: The study shows that in the overall sample abnormal tone in CEO letters was not higher during the pandemic due to a focus on transparency and information content. Companies received support from the government and adapted to the new business environment, while avoiding impression management. However, we also found some evidence for impression management in industries affected by COVID-19. Concluding Remarks: While companies prioritized transparency and honesty during the pandemic, impression management strategies were still employed by industries that were hit hardest by COVID-19.