Social evaluations of (in)congruence between CEOs’ verbal content and delivery: A multimodal perspective

Maintaining favorable analyst recommendations is important to organizations and their management, as these recommendations provide stakeholders with expert opinions about organizations’ well-being. Hence, there is a strong impetus for CEOs to prevent analysts downgrading their organization. In verbal communication, such as in earnings calls, CEOs not only try to influence analysts via the words that they use, but also via the tone in which CEOs speak (i.e., paraverbal communication). Paraverbal communication is both an extra channel of information for analysts, and a strategic tool CEOs can use to exert influence. On the one hand, CEOs want to signal trustworthiness through congruency in their communication, but on the other hand are inclined to offset negative information by speaking positively, or downplay expectations by using a negative tone when discussing positive information. Leveraging several state-of-the-art Natural Language Processing algorithms, using earnings calls’ audio and textual data, we analyze analysts’ responses to the incongruence in CEOs’ communication. We find that paraverbal communication affects analysts’ recommendations and show that analysts punish incongruence because of apparent augmentation, not due to downplaying. Our study therefore contributes to the literature on corporate communication, demonstrating the importance of how different verbal communication modes interact and affect audience’s perceptions of the communicator. Furthermore, this is one of the first studies in management that utilizes audio data quantitatively.

Keywords: Verbal communication, Speech, Audio analysis, Machine Learning, Financial distress, Chief Executive Officer, Earnings calls, Multimodality.