How CEO’s compassion protects share prices during a crisis

Cambridge Network — 02 May 2024

A recent study found that CEOs who expressed concern for people during conference calls had a positive impact on their companies’ stock prices during the COVID-19 pandemic. The researchers analyzed 510 conference calls from 448 large U.S. companies. They found that firms whose CEOs made statements showing care for employees, customers, or others impacted by the virus saw better stock performance during the early 2020 market crash.

Even though many of these statements were generic and labeled as “cheap talk,” they still led to higher share prices and reduced stock volatility. While these expressions of care had little short-term effect on financial forecasts from analysts, investors appeared to discount future earnings less, perceiving these companies as less risky.

The study emphasizes the importance of CEOs balancing business performance with human concern, especially during crises. Co-authors Lauren Howe and Jochen Menges highlighted that demonstrating care for people can benefit companies, even in calls with analysts and investors typically focused on financial metrics.