Investors don't like uncertainty, and research shows that even in times of transition, just talking about your company's strategy pays off on Wall Street. One study looked at over 900 public presentations on strategy by American CEOs, and the stock market reactions that followed. The average stock value rose by just over 2% on the same day of those presentations, and continued to rise over the following week to about 5%.
This is not to say that everyone did well. Of the presentations studied, about a quarter were negatively received, those stocks dropped. More companies saw positive reactions, however, and for them stock prices rose 4.5% on presentation day – the equivalent of about 2.4 billion dollars in average market value - and continued to drift upward to more than 10% over the following days.
The study also looked closely at announcements made specifically by new CEOs. While the negative reactions remained about the same, the positive impact of public presentations was nearly three times as valuable for new CEOs as for the sample at large, doubling the average. And the data shows that sooner is better. The longer new CEOs waited, the smaller the positive effects of a good strategy presentation, and the greater the consequences of a bad one.
Presentations on strategy seem to be the most beneficial for CEOs who are both new and coming from a different industry. For this group, negative reactions were only slightly worse than for the entire sample, while positive reactions raised stock market value by almost 20%, or 10.4 billion dollars. So it seems that companies undergoing the most dramatic changes are the ones who have the most to gain from being a little more open about their strategy.