CEO Clarity

64 Pages Posted: 9 May 2017 Last revised: 20 Apr 2021

See all articles by Michał Dzieliński

Michał Dzieliński

Stockholm Business School, Stockholm University

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2021

Abstract

A key task for CEOs is to communicate with analysts and investors about their companies' past performance and prospects in quarterly earnings conference calls. Some CEOs speak fuzzily, frequently using words such as "approximately", "probably", and "maybe." Others rarely use such tentative words. That is, they speak clearly. We show that CEO clarity is a matter of personal style; it is not driven by fundamental uncertainty in the companies' business activity. Analysts and the stock market respond more strongly to earnings news conveyed by clear CEOs. Past performance does not explain the style of a newly appointed CEO. However, when a firm does appoint a more clear-talking CEO, Tobin's Q increases and analyst recommendations become more favorable. Overall, investors and analysts appear to value clear talk.

Keywords: Communication style, Clarity, Earnings conference calls, Firm value, Textual analysis

JEL Classification: G14, G30

Suggested Citation

Dzieliński, Michał and Wagner, Alexander F. and Zeckhauser, Richard J., CEO Clarity (April 7, 2021). HKS Working Paper No. RWP17-017, Swiss Finance Institute Research Paper No. 17-13, Available at SSRN: https://ssrn.com/abstract=2965108 or http://dx.doi.org/10.2139/ssrn.2965108

Michał Dzieliński

Stockholm Business School, Stockholm University ( email )

Kräftriket 7
Stockholm, 106 91
Sweden

HOME PAGE: http://www.sbs.su.se/en/

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Richard J. Zeckhauser (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

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