Tag Archives: trustworthiness

Perception of CEOs’ Non Verbal Leadership Behaviors Affect IPO Valuations, Predict Financial Performance

Elizabeth Blankespoor

Elizabeth Blankespoor

Favorable first impressions of CEOs can affect new companies’ valuations and can predict near-term performance.

Perception of CEO non-verbal behavior during IPO road show presentations was associated with higher valuations at each IPO stage, found Stanford’s Elizabeth Blankespoor, Greg Miller of University of Michigan, and University of North Carolina’s Brad Hendricks.
These findings underscore the importance of road show presentations and presenters’ credibility to investors, underwriters, analyst, and financial media.

Greg Miller

Greg Miller

Blankespoor’s team noted that for most investors, the road show is the first time they see the CEO in the two-week interval between setting the initial proposed price and determining the final offer price.
As a result, Blankespoor and colleagues posit “a tight link between perceptions and valuation.”

Participants in their investigation were hired through Amazon’s Mechanical Turk, a crowdsourcing task website, to view videotapes of CEOs presenting IPO roadshow, then to rate the speakers for competence, attractiveness, and trustworthiness.

Brad Hendricks

Brad Hendricks

At least 40 people viewed each series of 30-second video clips from 224 actual road show presentations between 2011 and 2013, with modified audio to muffle words while retaining vocal pitch and rhythm.

After controlling for other factors that could affect stock price like CEO age, experience, and education, companies with higher-rated CEOs on a composite score of competence, attractiveness, and trustworthiness ratings received a larger price increase for the proposed offering price and the revised price for secondary markets.

Mechanical TurkFor each 5% increase in CEO composite perception score, the final market price was 11% higher, and CEO perceived competence and attractiveness had a significant impact on firm valuation.
However, trustworthiness alone had no effect.

These initial perceptions also correlated with companies’ early performance, based on stock prices up to 12 months after the IPO, suggesting that “…investors … glean real additional information about the CEO from … nonverbal behavior and … perceptions of management are signals for firm value.”

Gotham Research GroupBloggers as well as traditional media outlets are important arbiters of CEO reputation.
In a commissioned analysis of 10 well-known institutional bloggers by the Gotham Research Group, perceptions of CEO authenticity were significantly related to bloggers’ evaluations of CEO competence and performance.

Candor, bluntness, fearlessness, specificity, plain words, examples from stories, warmth, frequent contact with customers and employees, and acknowledging challenges and worthy competitors are all essential to setting a credible tone, according to this report.

Weber ShandwickIn fact, Public Relations firm Weber Shandwick noted that 49% of company reputation is attributed to CEO reputation, and 60% of market value is attributed to company reputation.
Perception of a CEO, the firm argues, has significant influence on market value, underscoring empirical findings by Blankespoor’s team.

-*What non-verbal behaviors and attributes signal “leadership” and “executive presence” to you?

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Gender Differences in Emotional Expression: Smiling

Previous blog posts have outlined dilemmas women face in being seen as competent yet  “likeable” in negotiations.

Deborah Gruenfeld

Deborah Gruenfeld

Deborah Gruenfeld of Stanford and researcher Carol Kinsey Goman note that women can increase perceived authority. if they smile when situationally-appropriate instead of consistently.

Simine Vazire

Simine Vazire

They imply that observers assign different interpretations to women’s smiles than to men’s smiles.
Washington University in St. Louis’s
Simine Vazire teamed with Laura Naumann of University of California, Berkeley, University of Cambridge’s Peter Rentfrow, and Samuel Gosling of University of Texas to investigate gender differences in the meaning of smiling behavior.   

Jacob Miguel Vigil

Jacob Miguel Vigil

They drew on University of New Mexico professor Jacob Miguel Vigil‘s theory that emotional behaviors promote attraction and aversion, based on others’ perceived:

  • Power to provide resources or harm (dominant, masculine behaviors)
  • Trustworthiness to reciprocate altruism (submissive, feminine)
Laura Naumann

Laura Naumann

Vazire’s team reported that women’s smiles signal positive affect and warmth, which are seen as “trustworthiness cues” in Vigil’s model, and typically attract fewer, but closer relationships.
Gruenfeld and Goman argue that women’s smiling also signals low power in negotiation situations and interpersonal interactions.

Peter Rentfrow

Peter Rentfrow

In contrast, smiling among men indicates confidence and lack of self-doubt, seen as “capacity cues” to the ability to either help or hurt others.
These expressions usually attract numerous, but less-intimate relationships while
conveying a key element of power, self-assurance.

Samuel Gosling

Samuel Gosling

Team Vazire’s research validated Gruenfeld’s and Goman’s hypothesis that observers interpreted women’s smiles differently than men’s, even if the underlying, subjective emotional experience is similar.

Their work supports  Gruenfeld’s and Goman’s recommendation that women balance smiling, a signal of interpersonal warmth, with powerful non-verbal behaviors to achieve best outcomes in negotiations and workplace performance.

-*How has smiling helped establish your warmth?
-*When has smiling undermined your credibility and power?

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