Predicting Corporate Performance With UK And US CEOs' Risk Perception Discourse: A Structural Equation Modeling Study

Risk disclosures in annual reports are important forms and media for communicating information about risk management and performance outcomes to investors.Therefore,risk disclosures are deserved to be focused and studied.Previous researches on risk disclosure mainly focused on corporate risk behaviors and it is now recognized that there is an urgent need to examine risk disclosures from discourse perspective.This study responds to this call and combines theories about discourse appraisal and corporate governance to examine CEOs' risk perception discourse,intending to answer the following two questions: 1)Does discourse reflect CEOs' risk perceptions? 2)Does discourse reflect corporate performance?The study examined CEOs' risk perceptions from both corporate governance and discourse appraisal perspectives,constructing theoretical framework for research on CEOs' risk perception discourse.By reviewing the previous studies,an operational model and indicator systems were established to examine CEOs' risk perceptions.“Corporate risk decision features” and “CEOs' individual features” were chosen to represent CEOs' risk perceptions.Lexical markers from systemic appraisal theory,conceptual metaphors from cognitive metaphor theory,and semantic prosodies from phraseology were chosen as CEOs' “discourse appraisal indicators”.Professional features were chosen as CEOs' “governance appraisal indicators”,and the two appraisal indicator systems were put into one framework to examine to what extent can they predict CEOs' risk perceptions.Moreover,the research intends to find out how discourse appraisal indicators are used to predict corporate performance via CEOs' risk perceptions.Annual reports of 56 companies from 12 business sectors were collected and a risk discourse corpus of almost 3,000,000 words was established.The study adopted a cross-disciplinary design to analyze CEOs' risk perception discourse.Firstly,various corpus tools were adopted to collect discourse appraisal indicators.Secondly,structural equation modeling was adopted to study how does “discourse appraisal indicators”reflect CEOs' risk perceptions in a direct or indirect way,and how does “discourse appraisal indicators” reflect CEOs' risk perceptions via “governance appraisalindicators” in a direct or indirect way.Thirdly,multiple regression analysis was adopted to study “discourse appraisal indicators” of CEOs from good and poor performed companies,and then the structural equation modeling was further used to study correlation between discourse appraisal indicators and corporate performance.The study yields the following findings: firstly,discourse appraisal indicators have direct or indirect effects on CEOs' risk perceptions via various paths.The direct effects are in the frequency order of “semantic prosody appraisal”,“conceptual metaphor appraisal” and “lexical marker appraisal”.The indirect effects displayed different paths:a)“lexical marker appraisal” has indirect effects via “conceptual metaphor appraisal”;b)“semantic prosody appraisal” has indirect effects via “conceptual metaphor appraisal”;c)“lexical marker appraisal” has indirect effects first via “appraisal prosody and then via “appraisal metaphor”.Secondly,discourse appraisal indicators have indirect effects on CEOs' risk perceptions via governance appraisal indicators along various paths.a)“lexical marker appraisal” has indirect effects via “professional feature appraisal”;b)“conceptual metaphor appraisal” has indirect effects via “professional feature appraisal”;c)“semantic prosody appraisal” has indirect effects via “professional feature appraisal”;d)“lexical marker appraisal” has indirect effects first via “semantic prosody appraisal”and “conceptual metaphor appraisal”,and then via “professional feature appraisal”.The result of independent T-test further proves that CEOs with diverse working experience,from various companies,and of distinct income levels show great differences in their use of “appraisal lexis” and “conceptual metaphors”.Thirdly,CEOs from good and poor performed companies showed great differences in their use of “discourse appraisal indicators”.Therefore,“discourse appraisal indicators” could be used to predict corporate performance via CEOs' risk perceptions.“Lexical marker appraisal” could be used to predict “corporate performance” directly or indirectly via “conceptual metaphor appraisal” and“professional feature appraisal”.The more appraisal lexis the CEO used in CEOs' risk discourse,the worse the company performed.“Conceptual metaphor appraisal” could be used to predict “corporate performance” directly or indirectly via “professional feature appraisal”.The more conceptual metaphors the CEO used in CEOs' riskdiscourse,the better the company performed.The study has made theoretical,methodological and practical contributions in that firstly,from theoretical perspective,it has proposed a theoretical hypothesis on correlation between CEOs' appraisal discourse and corporate performance;Secondly,it has established a three dimensional appraisal framework to study appraisal patterns of CEOs' risk perception discourse;Thirdly,it has constructed a theoretical model to study CEOs' risk perceptions from appraisal discourse features.From methodological perspective,firstly,it adopted various corpus methods to study CEOs' discourse appraisal indicators;Secondly,it used structural equation modeling to testify crosslinguistic relations from macro perspective;Thirdly,it combined quantitative and qualitative methods to study CEOs' risk perception discourse from an all-round way.From practical perspective,firstly,it has implication for business English teaching and research in the future;Secondly,it helps developing Chinese enterprises' risk discourse system according to international standards;Thirdly,it provides more information for investors to observe and analyze corporate performance.Further study could be carried out from the following perspectives: firstly,corporate sample from various business sectors,of various scales could be selected;Secondly,more linguistic indicators could be added.