Global Investing

Words matter less

February 6, 2009

Colin McLean, Managing Director of SVM Asset Management, has done striking research on how much positive spin corporates can put in their annual report.

McLean analysed an annual report of a British life insurer in 2007. The report contained the following words:

underperform 2
disappointed 0
bad/worse/worst 8
poor/poorly 1
weak/weakness 5
challenges 7
————————–
achieve/achievement 85
good/better/best 150
excellent 15
grow/growing/growth 207
improve/improvement 73
strong/stronger/strength 150

The insurer’s shares lost 17 percent in 2007, then a further 42 percent in 2008, along with its peers.

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