TY - JOUR
T1 - Cheap talk? Strategy presentations as a form of chief executive officer impression management
AU - Whittington, Richard
AU - Yakis-Douglas, Basak
AU - Ahn, Kwangwon
N1 - Publisher Copyright:
Copyright © 2015 John Wiley & Sons, Ltd.
PY - 2016/12/1
Y1 - 2016/12/1
N2 - Research summary: We develop and test a set of hypotheses on investors' reactions to a specific form of impression management, public presentations of overall strategy by Chief Executive Officers (CEOs). Contrary to expectations from a “cheap talk” perspective, we suggest that such strategy presentations convey valuable information to investors, especially in conditions of heightened information asymmetry associated with varying types of new CEOs. Broad empirical support for our theoretical arguments is shown in a sample of strategy presentations carried out by NYSE and NASDAQ listed organizations over 10 years. Our research contributes to literature on new CEOs and impression management. We draw out implications both for management and for further research. Managerial summary: We examine the impact of public presentations on company strategy by Chief Executive Officers (CEOs) on company stock prices. Adjusting for market movements in general, on average stock prices rose by 1.6 percent following these strategy presentations. Strategy presentations received larger reactions the more the CEO was unfamiliar to investors. Thus, stock price gains for new CEOs in general were 5.3 percent; for external, within-industry new CEOs, they were 9.3 percent; and for external, outside-of-industry new CEOs, they were 12.4 percent. Given that only 40 percent of new CEOs present on strategy in their first 200 days post-appointment, we suggest that new CEOs pay more attention to this potential means of communicating, especially if they are unfamiliar to investors.
AB - Research summary: We develop and test a set of hypotheses on investors' reactions to a specific form of impression management, public presentations of overall strategy by Chief Executive Officers (CEOs). Contrary to expectations from a “cheap talk” perspective, we suggest that such strategy presentations convey valuable information to investors, especially in conditions of heightened information asymmetry associated with varying types of new CEOs. Broad empirical support for our theoretical arguments is shown in a sample of strategy presentations carried out by NYSE and NASDAQ listed organizations over 10 years. Our research contributes to literature on new CEOs and impression management. We draw out implications both for management and for further research. Managerial summary: We examine the impact of public presentations on company strategy by Chief Executive Officers (CEOs) on company stock prices. Adjusting for market movements in general, on average stock prices rose by 1.6 percent following these strategy presentations. Strategy presentations received larger reactions the more the CEO was unfamiliar to investors. Thus, stock price gains for new CEOs in general were 5.3 percent; for external, within-industry new CEOs, they were 9.3 percent; and for external, outside-of-industry new CEOs, they were 12.4 percent. Given that only 40 percent of new CEOs present on strategy in their first 200 days post-appointment, we suggest that new CEOs pay more attention to this potential means of communicating, especially if they are unfamiliar to investors.
KW - event study methodology
KW - impression management
KW - new CEOs
KW - open strategy
KW - strategy presentations
KW - voluntary disclosures
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U2 - 10.1002/smj.2482
DO - 10.1002/smj.2482
M3 - Article
AN - SCOPUS:84960344123
SN - 0143-2095
VL - 37
SP - 2413
EP - 2424
JO - Strategic Management Journal
JF - Strategic Management Journal
IS - 12
ER -