The internet has an odd way of teasing out social behaviors that have always existed but have never been given a name. The “subtweet,” for instance, refers to a tweet “that mentions a Twitter member without using their actual username, usually employed for negative or insulting tweets.” The term has metastasized into broader, non-Twitter usage, e.g., “Warren Buffett basically just subtweeted President Donald Trump.”
An equally inelegant web portmanteau has now been deemed useful enough to be the subject of some scholarly finance research: the humblebrag. Oxford English Dictionary (really) defines it as “an ostensibly modest or self-deprecating statement whose actual purpose is to draw attention to something of which one is proud.” Example: “My garage is too puny to hold all my Beamers.”
Humblebragging is dumb and obnoxious, so it should come as no surprise that, as science can now confirm, it's not something CEOs should do when communicating with investors. In an experiment involving accounting students at a large public university, researchers presented examples of a fictitious executive alternately acting modest, bragging, and humblebragging in the context of an earnings call. They then probed the subjects' willingness to invest in the company.
“We extend prior literature examining humblebragging,” the researchers wrote, finding that “investors are least willing to invest in the firm when the CEO humblebrags.” As an example of what that looks like in the wild, they cite this tweet from T-Mobile CEO John Legere:
“He attributes T-Mobile’s positive performance to an external factor (other carriers do not focus on their customers),” the paper explains, “but ends the statement with a hidden brag (the implication that TMobile “gets it” and focuses on their customers).”
What's more surprising is the way boasts and shows of modesty impact investor dispositions across mediums, social media vs conference call. Conference calls are stuffy, ritual affairs where bragging isn't just allowed but expected. The whole point is for the boss to talk up his book. Social media, meanwhile, “is a venue for CEOs to interact with investors and other stakeholders on a more personal level,” a sort of salon where thousands of investors can entertain the illusion that they're gabbing mono e mono with corporate executives.
Due to these differing expectations, straight-up boasting comes across differently on social media than it does on a call. When investors read bragging done on a call, they're more likely to invest; when they see boastful tweets, they're less likely to invest. It's the opposite with modesty: Humble calls make investors bearish, while humble tweets make them bullish.
But no medium can redeem the lowly humblebrag: “Regardless of the disclosure medium of the CEO’s comments, we find that investors are least willing to invest in the firm when the CEO humblebrags.” The logical next step is to devise an algo that can detect humblebrags – which, given the current state of algos, might be a ways off.
How Disclosure Medium Affects Investor Reactions to CEO Bragging, Modesty, and Humblebragging [Stephanie Grant, Frank Hodge, Roshan Sinha]