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CEO Clarity

Dzielinski, Michal; Wagner, Alexander; Zeckhauser, Richard J (2021). CEO Clarity. Swiss Finance Institute Research Paper 17-13, University of Zurich.

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.

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Finance
Dewey Decimal Classification:330 Economics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:20 April 2021
Deposited On:14 Aug 2023 13:37
Last Modified:27 May 2024 15:23
Series Name:Swiss Finance Institute Research Paper
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.2139/ssrn.2965108
Other Identification Number:merlin-id:14770
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