There’s a good reason for investors to pay extra close attention to those quarterly-earnings conference calls. Researchers at Stanford University have developed a model that can help determine when company executives are lying. By studying the question and answer section of conference calls from firms that later substantially restated their earnings, researchers uncovered some tell-tale cues of deceitful behavior.
When lying, CEOs tend to speak with less hesitation (because they have more prepared answers or are answering planted questions), avoid using the word “I” and use more words expressing extreme emotion, like “fantastic.” They also avoid the phrase “shareholder value” and swear words. Lying CFOs, on the other hand, speak much more tentatively and avoid words that express extreme emotion. Both CFOs and CEOs share one trait: they often use phrases that reference general knowledge, like “you know.” So now, you know what they’re really saying.