Incongruent CEO facial expressions and analyst dispersion


Facial expressions convey emotions that can affect how the delivered message is perceived. In this study, we ask whether CEOs’ facial expressions during post-earnings-announcement CEO interviews affect analysts’ processing of earnings information. Specifically, we investigate whether incongruence between earnings news and CEO facial expressions during earnings-related interviews increases analyst disagreement about the firm’s earnings prospects. We find that analyst forecast dispersion increases after CEO interviews in which the CEO’s facial expressions are positive (negative) but the earnings news is negative (positive). We further find that this association is stronger when analysts are more likely to pay close attention to the interviews and when analysts have less alternative information available (e.g., when CEOs speak less during interviews or when firms do not provide bundled earnings guidance). Overall, our study provides novel insight into how incongruence in corporate communications due to facial expressions might increase market participants’ uncertainty and thus disagreement.