Can humour really make a difference in the corporate world?
This research finds that when managers use humour on earnings calls, stock-market returns and analyst forecast revisions following the call are more positive.
The challenge:
Research indicates that humour in the workplace is associated with perceptions of competence and status. One recent survey even found that 91% of executives believe that a sense of humour is important for career advancement. But the role of humour in the context of corporate communication is not well understood. To what extent does it influence corporate outcomes? And can managers’ successful use of humour influence external stakeholders, such as analysts and investors?
This research finds that when managers use humour on earnings calls, stock-market returns and analyst forecast revisions following the call are more positive.
The challenge:
Research indicates that humour in the workplace is associated with perceptions of competence and status. One recent survey even found that 91% of executives believe that a sense of humour is important for career advancement. But the role of humour in the context of corporate communication is not well understood. To what extent does it influence corporate outcomes? And can managers’ successful use of humour influence external stakeholders, such as analysts and investors?
The intervention:
We used a sophisticated machine-learning algorithm to analyse audio recordings of public earnings conference calls and identify occurrences of laughter in response to the use of humour. These calls are a key resource for investors and equity analysts, and the performance of company executives during the calls can have an immediate impact on company share price. This study enabled us to identify manager’s successful use of humour. When managers successfully used humour during calls, stock market returns and analyst forecast revisions are more positive. This is mainly due to a muted response to negative earnings news.
The impact:
The research showed that there is a significant association between humour and immediate stock-market reaction, subsequent analyst behaviour, and future firm performance. The evidence suggests that humour can also soften the disclosure of negative news and signal relatively stronger future firm performance. By identifying humour as an important communication tool that affects conference call outcomes, the study enriches the understanding of corporate disclosure and its economic effects.
