Confident-Sounding CEOs More Likely to Sell their Shares, Study Finds

And they tend to buy more company stock when they're downbeat.

Quitting while you’re ahead is a golden rule in gambling circles. And it also appears to be a key tactic adopted by CEOs when managing their investment portfolios.

CEOs who sound more optimistic about their business’ prospects at results briefings are more likely to go ahead and sell their company’s shares, rather than buy more, a new survey suggests.

Researchers from Lehigh University, University of Central Missouri and Hong Kong University tested their hypothesis by gauging the tone managers used during 65,000 conference calls conducted between 2002 and 2012. Their analysis involved using a computer program to scan transcripts for words identified as positive, such as “approve”, and negative, such as “never”.

“Our univariate results show that corporate insiders buy company shares following negative-tone conference calls, and sell shares following positive-tone conference calls,” their research, which will appear in the upcoming issue of Financial Management, found.


The inverse call tone and trading pattern held for both managers’ introductory sessions and subsequent question and answer sessions with analysts and journalists, they added.

The reasoning may not be altogether concerning: it’s always better to sell your shares when a company’s doing well, rather than when it’s doing poorly. And the study didn’t appear to distinguish between whether its CEO subjects only sold a portion of their shares or dumped their entire holding–a move that would spark far greater alarm.

Investors can be guilty of adopting a heard mentality and will often punish companies severely should they miss earnings guidance, offering CEOs an opportunity to get in cheap—or at least show the market they’re confident in their ability to improve a company’s fortunes.

Still, selling shares at any time indicates that managers aren’t 100% sure they’ll keep heading north. And just because they sound upbeat on a conference call doesn’t necessarily mean all is well.

Interestingly, the researchers found that analysts weren’t the only ones to gain some investment insights.

“Our findings suggest that managers learn from analyst feedback and adjust their post-call trades accordingly,” they said.


  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events