CEOs’ Human Concern Translates into Higher Stock Price

myScience — 18 April 2024

A study led by the University of Zurich found a positive correlation between CEOs' expressions of empathy during the COVID-19 pandemic and their companies' stock performance. Researchers analyzed 510 conference calls from 448 U.S. companies, observing that just over half of the CEOs (51.8%) made at least one statement expressing concern for people. Although these expressions were often superficial and lacked concrete actions, companies whose CEOs acknowledged the human impact of the crisis experienced better stock returns.

The study highlighted that even brief, empathetic statements were linked to a 2.49% increase in cumulative returns, preserving approximately $78.9 million in company value for firms with median market capitalizations. Despite their lack of specific action, these statements positively impacted stock prices during the market crash caused by the pandemic.

Additionally, expressions of human care were associated with lower stock volatility, although they did not directly influence analysts’ future earnings expectations. The findings suggest that investors viewed companies with empathetic CEOs as less risky, despite the generic nature of the statements.

The study underscores the importance of CEOs showing humanity in their communications, even in a financial setting. The study argues that leadership is about both performance and people, and the ability to demonstrate empathy can positively influence investor confidence and market performance during crises like the COVID-19 pandemic.