Managers’ Body Expansiveness, Investor Perceptions, and Firm Forecast Errors and Valuation

Journal of Accounting Research

72 Pages Posted: 19 May 2020 Last revised: 8 Feb 2022

See all articles by Tony Davila

Tony Davila

University of Navarra - IESE Business School

Martí Guasch

ESADE Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2022

Abstract

We examine the relation between a measure of managers’ physical display—body expansiveness—and favorable reporting practices (in firm forecasts and valuation information) and performance (survival and funding success). We videotape 154 entrepreneurs pitching their business ideas and use computer vision software to obtain information about speakers’ movements. We show that physical expansiveness correlates with higher forecast errors and proposed firm valuations and lower survival rates yet higher likelihood of funding success. We argue that investors may incorrectly interpret nonverbal communication in their assessments of entrepreneurs and propose a behavioral explanation. We further corroborate the proposed mechanism by studying investor perceptions of entrepreneurs’ personal characteristics. Overall, we shed light on an overlooked source of information—nonverbal behavior—and relate it to firm forecasting, valuation, survival, and financing success, which are important factors in the assessment of investment opportunities, deal structure, and monitoring.

Keywords: Investor perceptions; financial projections; valuation; nonverbal communication; entrepreneurs; startups

JEL Classification: G41; G31; G12; M13; M12

Suggested Citation

Davila, Antonio and Guasch, Martí, Managers’ Body Expansiveness, Investor Perceptions, and Firm Forecast Errors and Valuation (January 31, 2022). Journal of Accounting Research, Available at SSRN: https://ssrn.com/abstract=3593478 or http://dx.doi.org/10.2139/ssrn.3593478

Antonio Davila

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Martí Guasch (Contact Author)

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

HOME PAGE: http://https://sites.google.com/view/marti-guasch

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