Cheap talk? Strategy presentations as a form of chief executive officer impression management

Abstract

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.

Strategy as staged performance: A critical discursive perspective on keynote speeches as a genre of strategic communication

“…Furthermore, to gain a better understanding of how recipients of strategic communication may resist the consumption of conceptions of strategy (Laine & Vaara, 2007), for instance, by turning staged spectacles into carnival (e.g., Boje et al, 2004), future research may focus less on the production of discursive statements through keynote speakers and more on how audiences interpret and enact these statements. Another interesting question is whether the patterns that we found are also transferable to other staged genres of strategic communication, such as strategy updates (Whittington et al, 2016) and annual general meetings (Biehl-Missal, 2011). Here, dramaturgical analysis (Goffman, 1959) might be a promising methodological alternative.…”

“…In part, this gap may result from a general lack of understanding of genres of strategic communication and the discursive and bodily activities and practices through which they are produced and re-created (Balogun et al, 2014). Genres of strategic communication refer to "different ways of (inter)acting discoursally" (Fairclough, 2003, p. 26) through which actors accomplish their work in the strategy process (Balogun et al, 2014), such as strategic plans (Vaara et al, 2010), PowerPoint (Kaplan, 2011), and public speeches (Whittington et al, 2016). The few works that have begun to examine genres of strategic communication have mostly focused on document-based genres.…”

“…The burgeoning research on discourse in the strategy process in the strategy-as-practice field (Balogun, Jacobs, Jarzabkowski, Mantere, & Vaara, 2014;Vaara & Whittington, 2012) has led to a re-appreciation of Burgelman's (2002) observation that a significant part of strategy work consists of "strategy by speech." That is, firms increasingly stage large-scale events to articulate, raise awareness of, disseminate, rationalize, and mobilize internal and external support for their strategy (Whittington, Yakis-Douglas, & Ahn, 2016). As a result, strategists invest more and more time in preparing the enactment of staged genres of strategic communication, that is, institutionalized ways of communicating a firm's strategy that come into being through the embodied enactment of discursive practices (Biehl-Missal, 2011).…”

Making an Impression Through Openness: How Open Strategy-Making Practices Change in the Evolution of New Ventures

“…Benefits attributed to open strategy-making include improved understanding of strategic decisions, increased commitment to those decisions, and access to more diverse sources of information, which can result in better overall decision quality (Lakhani et al, 2013;Matzler et al, 2014;Whittington et al, 2011).Recent work, however, points to an additional function of open strategy-making as an impression management instrument seeking to manipulate the perceptions of external audiences. Drawing upon strategic disclosure literature, Whittington et al (2016) show how new CEOs openly communicating strategic plans in strategy presentations positively influences shareholder perceptions, then in turn, stock market prices (for a similar approach, see Yakis-Douglas et al, 2016).These studies convincingly establish the link between open strategy and impression management. However, these studies neither distinguish between separate modes of open strategy-making beyond increased transparency (e.g., including external audiences in decision-making) nor do they link those to various impression management strategies.…”

“…Essentially, openness in strategy-making implies increasing transparency and the scope of actors being involved at various stages of the strategy-making process (Whittington et al, 2011). Examples of open strategy include transparently communicating strategy through public presentations (Whittington and Yakis-Douglas, 2012;Whittington et al, 2016), voluntary merger and acquisitions announcements , utilizing social software (Cox et al, 2008;Haefliger et al, 2011;Whittington et al, 2011), as well as involving wider internal and external audiences into strategic decision-making (Aten and Thomas, 2016;Dobusch and Müller-Seitz, 2012;Haefliger et al, 2011;Luedicke et al, 2016;Matzler et al, 2014). Benefits attributed to open strategy-making include improved understanding of strategic decisions, increased commitment to those decisions, and access to more diverse sources of information, which can result in better overall decision quality (Lakhani et al, 2013;Matzler et al, 2014;Whittington et al, 2011).Recent work, however, points to an additional function of open strategy-making as an impression management instrument seeking to manipulate the perceptions of external audiences.…”