Strategic communication through the world wide web: an empirical model of effectiveness in the ceo’s letter to shareholders

Albert H. Segars and Gary F. Kohut

Journal of Management Studies, 2001, vol. 38, issue 4, 535-556

Abstract: Many organizations are devoting enormous amounts of financial and human resources to improve corporate communications. Among the many forms of communication produced by firms, the Chief Executive Officer’s (CEO) letter to shareholders is perhaps the most strategic in conveying the well‐being and future direction of the enterprise. These letters have become even more visible with the advent of World Wide Web and its use as a primary forum for communicating the CEO’s message. Surprisingly, there has been little research into dimensions that characterize the effectiveness of the CEO’s letter and how this communication may benefit the overall enterprise in terms of improved financial position. Utilizing both theoretic and practical perspectives as well as the web‐based letters of prominent organizations, this study frames CEO’s letter effectiveness (CLE) along dimensions of credibility, efficacy, commitment, and responsibility. These first‐order constructs appear to be statistically coaligned by a second‐order construct of CLE. In turn, CLE is shown to be directly associated with favourable financial performance in terms of share price and trading activity. This study provides a useful framework for assessing strategic communication through the CEO’s letter and for operationalizing a key dependent variable in future studies related to strategic corporate communications through digital media.

Date: 2001
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