Rich language for poor firms: The symbolic management of bankruptcy

Mary Hunter McDonnell*, Franz Wohlgezogen, Edward J. Zajac

*Corresponding author for this work

Research output: Contribution to conferencePaperpeer-review

3 Scopus citations

Abstract

While recent research has documented how firms effectively use language and appearance to manage audience reactions to major corporate activities, little is known about the potential for bankrupt firms to employ such symbolic management strategies. Moreover, the specific elements of symbolic management have been under-theorized. This study addresses both of these issues by theorizing and testing the notion that firms that engage in symbolic management across four key questions (why, who, how, and what) can generate positive bankruptcy outcomes. Specifically, we hypothesize and find that that bankrupt companies can mitigate bankruptcy's stigma by i) strategically attributing blame for their failure, ii) publicly acknowledging their alignment with and concern for crucial external stakeholders, iii) proffering specific plans to address their organization's weaknesses, and iv) framing the bankruptcy as a deliberately chosen strategic opportunity. We argue that these sense-giving strategies can be effective in accentuating management's competence and control over the organization's fate, thus making crucial audiences more inclined to continue supporting the organization post-filing. We test our hypothesis with data on 250 bankruptcy cases spanning three years, employing a careful content analysis of these companies' rich language surrounding the bankruptcy filing. Our supportive results highlight the importance of active impression management for bankrupt firms, adding to our knowledge of symbolic management and the bankruptcy process.

Original languageEnglish (US)
DOIs
StatePublished - Jan 1 2011
Event71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011 - San Antonio, TX, United States
Duration: Aug 12 2011Aug 16 2011

Other

Other71st Annual Meeting of the Academy of Management - West Meets East: Enlightening, Balancing, Transcending, AOM 2011
CountryUnited States
CitySan Antonio, TX
Period8/12/118/16/11

Keywords

  • Bankruptcy
  • Impression management
  • Sensegiving

ASJC Scopus subject areas

  • Management Information Systems
  • Management of Technology and Innovation
  • Industrial relations

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