Ah, the quarterly earnings conference call! A chance for corporate executives to carefully dance around the status of their companies, gently parry inquiries by curious analysts and otherwise act opaque about their business. Well, management be warned: A pair of academics has deciphered clues to help investors figure out when CEOs are fibbing.
Stanford Business School’s David Larcker and Anastasia Zakolyukina combed through around 30,000 corporate conference calls to detect patterns that correlate with subsequent restatements of results. The Economist summarizes:
Deceptive bosses, it transpires, tend to make more references to general knowledge (“as you know…”), and refer less to shareholder value (perhaps to minimise the risk of a lawsuit, the authors hypothesise). They also use fewer “non-extreme positive emotion words”. That is, instead of describing something as “good”, they call it “fantastic”. The aim is to “sound more persuasive” while talking horsefeathers.
Other tipoffs: Lying CEOs tend to avoid the first-person singular; they hem and haw less than their truthful counterparts, and they use curse words more often.