Making sense of letters to shareholders during the Covid-19 crisis: The effect of readability, tones and sentiment

Abstract

Letters to shareholders are crucial in corporate communication, influencing stakeholder perceptions. This study investigates how crisis events affected the readability, tones and sentiment of these letters from the JSE Top 40 South African listed companies during the COVID-19 pandemic, emphasising the importance of ethical and transparent communication as a hallmark of good business. Letters to shareholders for 2018 to 2021 were analysed. Findings suggest that letters to shareholders during the crisis showed increased use of negative, uncertain, constraining, and weak modal words and fewer positive and strong modal words. Readability remained consistently low throughout all years. Sentiment became markedly less positive in 2020 but picked up again. Our study contributes to the literature on narrative styles affecting readability, tones and sentiment, especially during a crisis. Shareholders could benefit from considering tone and sentiment in their investment decisions. Regulators could consider enhanced guidance for corporate disclosures to protect report users.