The effect of conscientiousness on managerial learning from stock prices

We examine whether and how CEOs’ conscientiousness affects managerial learning from stock prices. We use a deep learning-based natural language processing model to detect personality from textual records of an individual’s spoken language. Following personality psychologists’ description of the personality trait of conscientiousness, we hypothesize that conscientious CEOs are more willing and able to collect comprehensive decision-relevant information compared to others, and to the extent that they possess more relevant information prior to the arrival of news in the stock market, they have less to learn from it. From the sample of large U.S. public firms for which earnings call transcripts are available, we replicate the well-stylized investment-to-price relationship while reporting a weaker relationship for firms with conscientious CEOs. This finding supports the hypothesis that conscientious managers learn less from stock prices.