Shareholder letters on Oslo Børs : a textual analysis of shareholders letters from companies listed on Oslo Børs

Abstract

This study looks at the characteristics of the shareholder letter from companies listed on Oslo Børs and the relationship between sentiment and future financial performance. Regarding the characteristics, we have investigated the informativeness and the use of impression management by looking at sentiment development, similarity, writing style and the correlation between sentiment and past performance. Quintile portfolios sorted on the sentiment were created to investigate the relationship between sentiment and future performance. Our analysis shows that the shareholder letter usually follows the same structure and that the financial performance is reported honestly, to a certain degree. We also find evidence of impression management techniques, such as increased sentiment at the end of the letter. Regarding our second objective, do we not find any apparent relationship between the sentiment and future stock price. Therefore, we conclude that the shareholder letter may be a worthwhile read, but to blindly use the sentiment of the shareholder letter as an indicator of future performance, does not seem to be a good idea.