Companies have better financials with CEOs who admit mistakes: Canadian study

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A recent study from researchers at the University of British Columbia shows that when CEOs admit their mistakes and take responsibility for unfavorable actions, it positively impacts the company's value.

The study, titled “The Role of CEO Accounts and Perceived Integrity in Analysts’ Forecasts,” conducted an analysis of data derived from 35,000 CEO conference calls with investors.

The data shows that when a company performed poorly and the CEO took responsibility, analysts' forecasts were notably higher compared to instances where the CEO attributed the poor performance to external factors. “Again we found that CEO accounts didn’t matter a whole lot when the company performed favourably,” UBC professor Daniel Skarlicki said in a press release.

Skarlicki brings an example of Microsoft CEO Satya Nadella. In 2014, Microsoft acquired Nokia's mobile phone division for over $7 billion in an effort to compete with Apple and Google, which ultimately turned out to be a failure. Nevertheless, when faced with this challenge, Nadella took prompt responsibility and initiated a significant restructuring, focusing on cloud computing and productivity software. This strategic move led to a significant increase in Microsoft's stock price.

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