Influencing investment decisions through the CEO’s language

By | 09/08/2017

As my summer break is now over, I’m trying to find some time to highlight some of my corporate communication discoveries over the summer. One of the pieces certainly worth sharing is a recent study by researchers from Tulane University that looks at the relationship between a CEO’s language and word choice in earnings calls and investor attitude / investment decisions stock performance. The research involved an experimental part, in which a voice actor simulated earnings calls varying in the use of self-inclusive (‘I’, ‘We’) and non self-inclusive (‘the company’) language. For example:

As (I/we/Webtex’s managers) look ahead to the next quarter, (I am/we are/ management is) very optimistic about Webtex’s future.

About than 500 listeners were then surveyed for their impressions and likely investment reaction (given a hypothetical investment budget of $10,000). The analysis showed that (would-be) investors left with a more positive impression (regardless of the company’s results) personal pronouns (‘I’, ‘we’, ‘my’, ‘ours) were used and that subsequent investment decisions were more positive in scenarios with such self-inclusive language.

Observed likelihood to invest:

The team in addition ran a computer-based textual analysis of 50,000 real-life earnings-call transcripts, finding that indeed real-life market reactions to self-inclusive language were consistent with their experiment’s results.

The findings suggest that the use of pronouns in executive communication signals has effects on investors subconsciousness by not only signaling a more confident CEO and general management (who seems to be driving things – both in the past and future), but that self-inclusive language also decreases the perceived distance between managers and investors as it makes the announcement more personal, authentic and accessible.



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