CEOs’ Human Concern Translates into Higher Stock Price

Informationsdienst Wissenschaft — 18 April 2024

A study led by the University of Zurich revealed that CEOs who expressed empathy during the COVID-19 pandemic positively impacted their companies' stock performance. Researchers analyzed 510 conference calls from 448 large U.S. companies during the pandemic and found that just over half of the CEOs made statements showing concern for people. Although most of these statements were superficial and lacked concrete actions, companies whose CEOs acknowledged the human impact of the pandemic saw better stock prices than those whose CEOs did not.

Surprisingly, even "cheap talk" or brief, generic statements of care correlated with a 2.49% increase in cumulative returns, translating into roughly $78.9 million in financial value preserved for companies with median market values. Furthermore, these human care statements were associated with lower stock volatility, though they did not directly influence analysts’ future earnings assessments. The findings highlight the importance of CEOs showing empathy and humanity, as investors responded positively to these expressions, even without specific action plans.

The study emphasizes that leadership involves both performance and people and that showing concern for others can enhance investor confidence and company stability during crises. CEOs focused solely on business performance missed an opportunity to connect on a human level, which the study suggests can be equally valuable for overall company performance.

Article by Barbara Simpson