Accounting for Failure

Abstract: Purpose: The purpose of this study is to identify possible trends over time in the use of verbal Accounts in CEO-letters for firms with negative profit growth. Further, if such trends are found, potential explanations will be explored. Theoretical perspectives: Account theory with an Account typology based on Sandell & Svensson (2016; 2017) Methodology: The sample included firms listed on the Stockholm stock exchange with negative profit growth compared to the previous year, for years: 2002, 2007, 2012, and 2017. A content analysis methodology was employed in order to quantify the relevant aspects of the CEO-letters in the sample. Descriptive statistics, one way ANOVA tests and multiple linear regressions were used in order to identify relevant trends over time and explore potential explanations. Empirical foundation: Upwards trends over time were identified for the number of Accounts per Failure event and the use of the individual Account types: Justification, Refocusing, and Mystification. Further, an upwards trend over time was identified for the use of visually highlighted Accounts in CEO-letters. No trend was identified, either up or down, for the number of Failure events mentioned in CEO-letters. Additionally, no trends were identified for the use of the individual Account types: Excuse, Concession, Wordification, and Refusal. The firm and CEO variables collected were deemed to not be explanations behind the trends identified. Other potential explanations not rooted in the study’s dataset, but rather in economic reasoning, are discussed by the authors. Conclusions: The combined picture given by the Account variables with upwards trends over time is that compared to before, firms increasingly downplay the negative consequences of Failure events and increasingly try to redirect focus towards other more positive aspects.