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- Title
DO BOARDS AND THE MEDIA RECOGNIZE QUALITY? AN ASSESSMENT OF CEO CONTEXTUAL QUALITY USING PAY, DISMISSAL, AWARDS, AND LINGUISTICS.
- Authors
SHORT, COLE E.; HUBBARD, TIMOTHY D.
- Abstract
A critical issue in corporate governance is identifying, rewarding, and retaining high-quality CEOs. But, over time, do evaluators accurately assess a CEO's contextual quality? Further, which signals may be used to discern this quality? Through two studies, this paper seeks to address these long-standing questions. In Study 1, we explore how boards compensate and dismiss CEOs and the media grants awards over time based on contextual quality. We then discover that the language spoken by high- and low-quality CEOs on earnings calls differs in the absence of clear performance signals. In Study 2, we broaden this analysis and apply a deep learning-based natural language processing model to show that quality corresponds with the content of CEOs' speech to investors. Specifically, we show that contextual quality corresponds with a CEO's "unscripted novelty," which refers to their tendency to discuss new topics during the unscripted portion of earnings calls. We further show that unscripted novelty leads to positive stock market reactions. Taken together, these discoveries offer insights for scholars and practitioners into the accuracy of quality assessments and distinctive patterns underlying high- and low-quality CEOs' speech.
- Subjects
EARNINGS announcements; NATURAL language processing; FINANCIAL market reaction; INVESTORS; CHIEF executive officers
- Publication
Academy of Management Discoveries, 2023, Vol 9, Issue 4, p525
- ISSN
2168-1007
- Publication type
Article
- DOI
10.5465/amd.2021.0042