Identifying Signs of Corporate Distress and Deception through Language: Evidence from the United Kingdom

Student thesis: Doctoral Thesis


This research project aimed to identify signs of corporate distress and deception through language, as applied to the UK corporate reporting environment. The first objective of this study was to identify signs of corporate performance decline by analysing language cues indicative of emotional distress. The second objective focused on identifying signs of corporate performance decline through the presence of language strategies associated with deception, across UK corporate narrative disclosures. The study employed a novel methodology to evaluate free-form market communications for early warnings signs of adverse firm performance outcomes, across the three corporate communicative contexts of strategically written communications, prepared spoken, and unprepared spoken UK narrative disclosures.
The research questions focused on distinguishing language patterns between long-term well- performing FTSE-350 firms, and future moderately and future severely underperforming peer firms. The research included a sample of one hundred and three FTSE-350 firms, who had experienced long- term moderate or severe performance decline, or long-term good performance across 2009-2017.
The findings contribute to the fields of accounting, auditing, and psychology. Where this study presents a novel methodology for the early identification of adverse firm performance outcomes through language techniques, in the context of the UK corporate reporting environment. The results revealed that language cues of emotional distress and deception can be identified across UK corporate narrative disclosures to reveal warning signs of adverse firm performance outcomes, ahead of time and in the moment. Whilst simultaneously providing empirical support for key theories associated with managerial motivation characteristics and expectations of deceptive behaviour. The study's main contributions lie in offering a valuable methodology for evaluating free-form market communications as an early warning system for detecting financial vulnerability or distress across the UK corporate reporting environment. This study also addresses gaps in the literature by exploring ongoing underperforming firms, whilst analysing both formal and informal corporate disclosures. Overall, the findings of this study are relevant to auditors, regulators, and stakeholders with a keen interest in monitoring firms for signs of potential corporate distress or deceptive practices.
Date of Award11 Mar 2024
Original languageEnglish
Awarding Institution
  • University of Portsmouth
SupervisorAhmed Aboud Mohamed Aboud (Supervisor) & Sonia Brandon (Supervisor)

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