Study: CEO-speak an indicator

A company's capacity for innovation can be foretold by parsing the words of its chief executive, according to researchers at the University of Minnesota.

If the CEO gives the future tense a serious workout in public statements such as annual reports and letters to shareholders, the chances are that such forward-looking verbiage is a veritable crystal ball in predicting a positive track record for innovation over the next few years.

So concluded Professor Rajesh Chandy at the University of Minnesota's Carlson School of Management, who worked on the project with Manjit Yadav of Texas A&M University and Jaideep Prabhu of Imperial College, London University; they plan to publish their research in a paper titled "Managing the Future: CEO Attention and Innovation Outcomes."

To investigate their theory, Chandy and his co-authors studied data from the online banking industry over an eight-year period, looking to measure statements by CEO's against the subsequent behavior of their companies.

The study emboldened Chandy to say in a statement, "By simply counting the number of future oriented sentences in annual reports we can predict future innovation by the firm."
(By Chris Reidy, Globe staff)