Incongruent CEO facial expressions and analyst forecast dispersion

55 Pages Posted: 8 Nov 2023

See all articles by Elizabeth Blankespoor

Elizabeth Blankespoor

University of Washington - Michael G. Foster School of Business; University of Washington - Department of Accounting

Mingming Ji

The Hong Kong Polytechnic University

Jeffrey Ng

The University of Hong Kong - Faculty of Business and Economics

Jingran Zhao

Hong Kong Polytechnic University

Date Written: June 23, 2024

Abstract

Facial expressions convey emotions that can affect how the delivered message is perceived. We ask whether CEOs' facial expressions during interviews near earnings announcements affect analysts' processing of earnings information. Specifically, we investigate whether incongruence between a firm's earnings news and its CEO's facial expressions during earnings-related interviews increases analyst disagreement about the firm's earnings prospects. We find that analyst forecast dispersion increases after interviews in which the CEO's facial expressions are positive (negative) but the earnings news is negative (positive). This association is stronger when analysts are more likely to pay attention to the interview and when they have less alternative information available. In addition, analysts ask more questions during conference calls after interviews with facial-signal incongruence, relative to calls before incongruent interviews. Overall, our study offers novel insights into how incongruence in corporate communications due to facial expressions might affect market participants' information search and level of disagreement.

Keywords: facial expressions, analyst dispersion, incongruent signals JEL Classification: G14, D81, D82, D83, D91, M41

JEL Classification: G14, D81, D82, D83, D91, M41

Suggested Citation

Blankespoor, Elizabeth and Ji, Mingming and Ng, Jeffrey and Zhao, Jingran, Incongruent CEO facial expressions and analyst forecast dispersion (June 23, 2024). Available at SSRN: https://ssrn.com/abstract=4598747 or http://dx.doi.org/10.2139/ssrn.4598747

Elizabeth Blankespoor (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States

Mingming Ji

The Hong Kong Polytechnic University ( email )

Hung Hom
Kowloon
Hong Kong

Jeffrey Ng

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Jingran Zhao

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

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