New approaches to financial analysis measures executive evasion and candor to gauge a company’s outlook.
Did you know…
Audiogram software can assess tonal inflections, volume, and other vocal indicators to infer executive confidence or stress.
Forensic Accountants and Fund Managers are using this technology right now to assess the credibility of CEO and CFO commentary during earnings calls.
Executive judgement can play a bigger role in company valuations, profit and loss statements, and forecasts than data.
According to Jason Voss, Content Director at the CFA Institute, “Data is an outcome, but people create the data.” Mr. Voss helps train analysts and investors to probe deeper into CEO and CFO psyches.
Communication analysis can reveal unintended “tells” found in corporate spin.
Laura Rittenhouse, a leading researcher in forensic accounting, has found a close correlation between stock prices and executive candor. She uses a detection method called “FOG” – Fact-deficient, Obfuscating Generalities to cut through executive jargon and illogical statements. Such communication can reveal unexpected truths in strategy, leadership, accountability, and stakeholder relationships. Beware of “tortured grammar” and vague phrases.
Critical Take Aways
1. Investors are smart. They can see through illogical jargon.
2. Analysts are smart. They can see through illogical jargon.
3. Candor, “in the moment” critical thinking, and factual accuracy matter when reporting quarterly earnings. You better be in a state of Flow when the call starts.
4. Without authentic, honest communication you don’t have a shot at creating #AlignedValue.