It’s good to talk: new Oxford research shows benefits of new CEO strategy presentations

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Research by Saïd Business School, University of Oxford, has discovered that new CEOs, especially those appointed from outside the organisation, can see the stock price soar if they present their strategy to investors in their first one hundred days.

Source: Richard Whittington, Basak Yakis-Douglas, and Kwangwon Ahn. HBR.org

‘New CEOs should pay more attention to this means of communicating and, given that the effects are greater within the first 100 days than the next 100, they should remember that, in this case, waiting doesn’t pay

For immediate release: 6 January 2016

Press release

It’s good to talk: new Oxford research shows benefits of new CEO strategy presentations

New CEOs, especially those appointed from outside the organisation, can see the stock price soar if they present their strategy to investors in their first hundred days, new research from Oxford has discovered; but the effects are lessened if the CEO was an internal appointment or if the presentation is delayed too long.

The study of the effects on stock prices of more than 900 public presentations on strategy by the CEOs of leading American companies revealed that new CEOs who present their strategy within the first 100 days of their appointment can see stock prices rise by an average of 5.3% on presentation day (around $2.8 billion in market value). The average stock price gains for presentations by new CEOs appointed from outside the organisation were 9.3% (just under $5 bn), and for new CEOs from outside the company’s home industry they were 12.4% (around $6.6 bn).

‘Conventional wisdom has it that strategies are best kept within the organisation and that any public presentations are likely to be dismissed as content-free “cheap talk”,’ said Richard Whittington, Professor of Strategic Management at Saïd Business School, University of Oxford. ‘However, our research has shown that analysts and investors take them seriously, especially as a means of assessing new CEOs’ experience and competence. New CEO appointments are typically associated with strategic change, which means they set off a lot of investor uncertainty; the greater the uncertainty, the more sensitive the stock price will be to the presentations and to the timing of them.’

In articles published in Strategic Management Journal and Harvard Business Review (28/12/15), Prof. Richard Whittington and his co-authors, Dr. Basak Yakis-Douglas, Research Fellow at the Oxford Centre for Corporate Reputation at Oxford Saïd, and Dr. Kwangwon Ahn, Assistant Professor at Peking University HSBC Business School, analysed stock price responses to strategy presentations given by companies on the NYSE or NASDAQ exchange in the period from 1 January 2000 to 30 December 2010. These were general, forward-looking presentations talking about strategies such as internationalisation, innovation, and diversification; the researchers excluded both announcements of actual events (such as an acquisition) and presentations given the same day as earnings announcements or forecasts.

According to the article, in May 2015, just one week after his appointment as Chief Executive of Chinese ecommerce giant Alibaba, Daniel Zhang announced his proposed new “Let’s Go Global” strategy to his staff and the media. The strategy to expand its business internationally led to an immediate 1% rise in the company’s stock price (the equivalent of $2.2 billion), with further rises in the following days. On the other hand, when Twitter CEO Jack Dorsey admitted to investors that he didn’t yet have a strategy, he wiped $4 billion off his company’s stock value in a couple of days.

Dr. Yakis-Douglas commented: ‘Given the generally positive response to strategy presentations, it is surprising that they are so little used. In our sample, substantially less than half of new CEOs carried out strategy presentations in their first 200 days and less than a quarter did so in their first 100 days. These proportions are even lower for outsiders and inexperienced new CEOs.’ Dr. Yakis-Douglas further suggested that ‘New CEOs should pay more attention to this means of communicating and, given that the effects are greater within the first 100 days than the next 100, they should remember that, in this case, waiting doesn’t pay.’

To read the full HBR article click here

For more information or to speak with Professor Richard Whittington or Dr. Basak Yakis-Douglas please contact the press office:

Josie Powell, Senior Press Officer, Saïd Business School
Mobile +44 (0)7711 387215; Tel: +44 (0) 1865 288403
Email: josie.powell(at)sbs.ox.ac.uk or pressoffice(at)sbs.ox.ac.uk

Emily McDonnell, PR Coordinator
Tel: +44 (0)1865 614489
Email: emily.mcdonnell(at)sbs.ox.ac.uk

Notes to editors

About the authors

  •     Richard Whittington, Professor of Strategic Management, Saïd Business School, University of Oxford.
  •     Basak Yakis-Douglas, Research Fellow, the Oxford Centre for Corporate Reputation, Saïd Business School
  •     Kwangwon Ahn, Assistant Professor, Peking University HSBC Business School

About Saïd Business School

Saïd Business School at the University of Oxford blends the best of new and old. We are a vibrant and innovative business school, but yet deeply embedded in an 800 year old world-class university. We create programmes and ideas that have global impact. We educate people for successful business careers, and as a community seek to tackle world-scale problems. We deliver cutting-edge programmes and ground-breaking research that transform individuals, organisations, business practice, and society. We seek to be a world-class business school community, embedded in a world-class University, tackling world-scale problems.

In the Financial Times European Business School ranking (Dec 2015) Oxford Saïd is ranked 10th. It is ranked 10th worldwide in the FT’s combined ranking of Executive Education programmes (May 2015) and 22nd in the world in the FT ranking of MBA programmes (Jan 2015). The MBA is ranked 7th in Businessweek’s full time MBA ranking outside the USA (Nov 2014) and is ranked 5th among the top non-US Business Schools by Forbes magazine (Sep 2013). The Executive MBA is ranked 2nd worldwide in the Economist’s Executive MBA ranking (Sep 2015) and 9th worldwide in the FT’s ranking of EMBAs (Oct 2015). The Oxford MSc in Financial Economics is ranked 14th in the world in the FT ranking of Masters in Finance programmes (Jun 2015). In the UK university league tables it is ranked first of all UK universities for undergraduate business and management in The Guardian (Jun 2015) and 2nd in The Times (Sept 2015). For more information, see http://www.sbs.ox.ac.uk/

ENDS

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