The researchers, who include Stanford Graduate School of Business associate professor Larissa Tiedens and her former colleagues at the University of Michigan, studied 21 years' worth of annual reports from 14 major firms in three industries. They looked at how different companies in the pharmaceuticals, food and beverages, and industrial equipment industries used their annual report's letter to shareholders to explain company performance -- and whether the type of explanation correlated to the company's stock price the following year.

It did in surprising ways. For the period studied -- 1975 through 1995 -- companies that took personal responsibility for a bad year realized better stock performance the following year than did firms that blamed external, uncontrollable factors such as bad weather or the state of the economy.

"Only explanations for negative events mattered, but those explanations mattered a lot," said Tiedens. Typically, stocks of the five companies whose annual reports had the highest measures of internal, controllable, and specific attributions for negative events performed 14 to 19 percent better the following year than stocks of companies with the five lowest measures of these attribution patterns.

The study's findings go against the grain of a long tradition in social psychology, said Tiedens, a Ph.D. in psychology. "Lots of studies have shown that the way you explain things to yourself affects you in multiple ways." The self-serving attributional pattern of taking credit for good outcomes and blaming bad outcomes on external factors has been shown repeatedly to have positive effects on everything from one's motivation and self-esteem to physical health -- so deflecting blame for bad outcomes seems like a recipe for well-being.

But most of the previous research has looked at private, individual explanations for the causes of events, and Tiedens and her colleagues had reason to believe that the psychology of public communications in an organization might be different. Letters to shareholders, after all, are far from true confessions of inner feelings and are penned to create a public image.

"People probably wouldn't write these letters if they didn't make an impression on investors," said Tiedens.

In some cases, executives who blame external, uncontrollable causes for problems may seem less trustworthy. This might have been the public's verdict in 1988 when Merck blamed the decline in U.S. science and math education for its undermined technological leadership. That's a sharp contrast to the forthright statement Campbell Soup made in 1983 when it explained the company's reduced net earnings as resulting from a shutdown of a plant in Argentina and consolidation of operations in Europe.

Nonetheless, this study didn't try to get at the executives' private thoughts behind the attributional statements, so it's unclear whether their explanations of poor performance were candid or calculated. What mattered was the impression the letters apparently made on investors, who the researchers believe look for signs of power and control in the company's leaders. If an executive takes responsibility for negative outcomes, said Tiedens, "the reader thinks, 'Oh, this company knows what it's doing, they're in control of it, they can change it.'"

Whether the executives proclaiming mea culpa are actually in control is also unclear from this research, which did not analyze the companies' fundamentals to see if the year-to-year changes in stock price were justified. Nor is it concluclusive from this correlational study that the self-blaming letters actually caused the stock increases, though additional studies by Tiedens's team suggest that this might be the case. Still, even if the correlation between blaming company actions for the financial results and higher stock prices turns out to be spurious, Tiedens said she believes the connection could be useful.

Does that mean that studying the attributional phrases in annual reports can help investors up their odds of picking a winner? Tiedens thinks so.

"An investor could read public statements released by companies and invest in those that make internal and controllable attributions for negative events and avoid those that make external and uncontrollable attributions."

But beware of applying these ideas to tech stocks and other turbulent sectors Tiedens and her co-authors purposely avoided. By definition, the financials of companies in volatile industries are unpredictable -- no matter what their executives say.