CEOs should tell more jokes on earnings calls – stocks tend to perform better when they do, study finds

• CEOs can boost their company's share price by telling jokes, according to a paper published earlier this year.
• "When managers use humor on an earnings call, stock market returns… are more positive," researchers said.

It might be time for CEOs to start telling more jokes, according to a paper published in the Review of Accounting Studies earlier this year.

Researchers used machine-learning tools to analyze a sample of just under 12,000 earnings calls and found that when execs show a sense of humor, it can give their company's share price an immediate boost.

"When managers use humor on an earnings call, stock market returns and analyst forecast revisions following the call are more positive, primarily because of a muted response to negative earnings news," Andrew Call, Rachel Flam, Joshua Lee and Nathan Sharp said in the paper, published back in February.

"Humor has a significant association with immediate stock market reaction, subsequent analyst behavior, and future firm performance," they added.

Stocks tend to perform better in the two-day period after an earnings call if executives make jokes, according to the study. CEOs having a sense of humor "can soften the disclosure of negative news and signal relatively stronger future firm performance," the researchers said.

Despite the researchers' findings, the quarterly check-ins with analysts tend to be laughter-free affairs – with just 12% featuring any comedy at all, per the paper.

Perhaps one CEO who could have learnt something from February's study is Tesla boss Elon Musk.

The former "Saturday Night Live" host appeared decidedly downbeat on a third-quarter earnings call in October, warning about potential threats to the US economy and conceding that the EV maker had likely "dug [its] own grave" with the Cybertruck.

Analysts labeled the call a "mini disaster" and slammed Musk for acting like a "little baby" – and Tesla shares plummeted 13% in the two-day stretch after the nightmarish call, wiping out around $100 million in market value by Business Insider's calculations.

This article was originally published on October 31, 2023.