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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 billion), and for new CEOs from outside the company’s home industry they were 12.4% (around $6.6 billion).
'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.'