Fast Talking: CEOs, Verbal Intelligence, and Firm Value

I examine the role of CEO speaking style on market valuation of their firms. Analyzing and quantifying the speaking style of CEOs using Flesch Kincaid Grade Level, a measure of speech sophistication, I find that verbal ability is correlated to the education levels of CEOs. I also find that after controlling for industry specific differences in CEO speaking style, the market places a higher value on firms with CEOs with sophisticated speech patterns. Looking at abnormal returns surrounding earnings announcements and excess returns on standard market models, I determine that CEOs with higher verbal intelligence are fairly valued. ∗I am indebted to my thesis adviser Professor Owen Lamont, for his invaluable advice and guidance.