Shaping expectations, losing flexibility: A study of CEO promises as strategic communication tools
CEO public promises steer investor expectations but lock in the firm; failing to deliver raises dismissal risk, and CEOs hedge with vague promises under uncertainty.
Summary
The authors analyse more than 69,000 earnings-call transcripts of S&P 1500 firms from 2010 to 2022, using large language models to identify over 74,000 CEO promises, the first dataset of its kind at this scale. CEOs promise more when they need legitimacy, such as early in their tenure, after missing targets or under scrutiny, and under uncertainty they shift to broader, vaguer promises with longer horizons. Promises steer investor expectations but reduce the firm's flexibility, since they create a form of strategic debt and make shortfalls reputationally costly, and failing to deliver significantly raises the likelihood that the CEO is dismissed.
Editor's opinion
A public promise is a strategic instrument with a price: it shapes what investors expect, but it locks the firm into a path and puts the CEO's job on the line if it is missed. Leaders and boards should calibrate their commitments, promising precisely where the path is clear and keeping deliberate room for adaptation where it is not.
Key concepts
CEO promises · strategic communication · legitimacy · strategic ambiguity · earnings calls