Nonverbal communication cues of bank CEOs and long term performance during financial crisis.

Abstract

This is a pilot study investigating insider information that CEOs may leak during interviews, from their non-verbal behaviour. The scope of this study covers 217 CNBC CEO interviews from banks and other financial institutions during the 2008 financial crisis. Standardised earnings surprise, amount of TARP money borrowed, duration of TARP money borrowed, as well as probability of getting into TARP, are used as long term performance measures to determine the predictability effect of each non-verbal observation on the financial performance of each company.

The regression results show 13 explanatory variables being significant in predicting the long term performance of companies. One of the most interesting results to highlight is that institutions with CEOs being perceived as competent took a longer duration to return borrowed TARP money, contrary to popular belief. Another interesting result obtained is that male CEOs with a lower voice pitch repaid TARP money faster, which may be due to testosterone levels, dominance and leadership.

The findings of this study also suggest that one can possibly predict the future profitability of companies just by observing the CEO during interview sessions. These open many possible areas for further studies and research.