Skip to main content
Nov 09, 2023

Earnings are no laughing matter, but funny senior management drives better returns

Researchers find managers who kid around get more positive results for their companies

Can a good sense of comedy convince investors and analysts that your company is worth sticking with? According to researchers, absolutely – as long as it’s your senior managers who are joking around.

I was fascinated to read in a paper published in the Review of Accounting Studies earlier this year – and shared on LinkedIn this week – that when senior managers use humor on an earnings call, their earnings and analyst forecasts are more positive.

Using some machine learning, artificial intelligence-powered algorithms, the paper’s authors – Andrew Call of Arizona State University, London Business School’s Rachel Flam, Brigham Young University’s Joshua Lee and Nathan Sharp of Texas A&M University – find that managers who use humor well give the market a ‘favorable signal of future firm performance’.

‘Consistent with managers’ successful use of humor being a favorable signal of future firm performance, we find no evidence of a return reversal over the subsequent quarter, and managers’ use of humor predicts more favorable news at the subsequent quarter’s earnings announcement,’ the authors write.

The findings come at a time when analysts are increasingly using tools like natural language processing to examine earnings transcripts – alongside speeches from the Fed or newspaper reports – for information carried in tone or language use. But CEOs are not known for their good senses of humor. Indeed, even the paper’s authors struggle to come up with any humdingers.

For example, they pick out how, on Honeywell’s third-quarter 2016 earnings call, Steve Tusa, an analyst with JPMorgan, asked: ‘Who’s making the call on the buyback at this stage?’ And Dave Cote, Honeywell’s chairman and CEO, responded: ‘Well, consistent with our policy over the last 15 years, I try to make all of these decisions with no input from anybody.’

Live at the Comedy Cellar, it ain’t. But I can also imagine that analysts are pretty starved of laughs in their day-to-day lives, and the research bears this out. The paper’s authors report that the two-day market reaction after earnings calls is likely to be more positive if the call features wisecracking executives. More significantly, any negative reaction to disappointing numbers is tempered by a jokey earnings call.

In other words, cracking a few gags makes bad news less scary, and does not have much impact on good news. A follow-up after 30 days and 60 days shows that the effect doesn’t wear off, either.

‘Humor has a significant association with immediate stock market reaction, subsequent analyst behavior and future firm performance,’ the researchers write. ‘Taken together, our evidence suggests humor can soften the disclosure of negative news and signal relatively stronger future firm performance.’

I’m not sure what the takeaways are for IR teams. I always suspected IROs might make for good stand-ups, so maybe they should do a little punching-up of their executive’s comments for their next earnings call? Or maybe they should prioritize recruiting new senior management figures who have a well-developed sense of comic timing?

I’m keen to hear any tales of the funniest CEOs in the usual places, however, so please share any side-splitting tales with us on our LinkedIn page, or email me at