Changes in Disclosure Tone after an Incident - Quality and industry spill-over effects

Abstract

Background/Purpose: The focus of this report is how the concerned company BP and Oil and Gas (O&G) industry responded to the Deepwater Horizon oil spill in their Sustainability reports. This study examines changes in tone after the incident in order to detect changes in language. The purpose is to examine BP’s and the industry’s response in order to see if there is a spill-over effect. Research Design: This is done by analysing the tone in Sustainability reports by conducting a prepost study design where the computerized text analysis tool DICTION is used to analyse four master variables for tone; activity, optimism, certainty and realism. We use the control industry Food and Beverages (F&B) in order to control that the change is due to the Deepwater Horizon oil spill and nothing else that effects the whole economy. The sample consist of 51 O&G companies and 44 F&B companies. Resulting in 390 Sustainability reports. Findings: Certainty in Sustainability reports for Oil and Gas companies decreases after the Deepwater Horizon oil spill. Meaning that the industry responds with a less certain language after the incident. Since we expect certainty in the language to decrease, this implies that the sustainability disclosure quality decreases. The other three master variables do not generate statistically significant results. The results are compared to the control industry F&B. We found that industry, distance, age and text length affect the master variables. Contributions: This study contributes to previous research regarding incidents impact on sustainability disclosure quantity and quality. Moreover, this study contributes by using one of many methods to study disclosure tone. Also, this study contributes by examining if there is a spill-over effect to the industry. Conclusion/Implications: The tone changed as expected for one of the master variables, certainty. This means that we found small evidence that the industry responds with a less certain language in their Sustainability reports after the Deepwater Horizon oil spill. Indicating that the disclosure quality decreases. Moreover, since the quantity of disclosures increases, there is indication of information overload or corporate greenwashing. The fact that not all master variables changes as expected could be due to impression management.