Deception is everywhere. We know we hear it from our politicians. Never is the truth fully employed. And, we know we hear it from banking executives, who have managed to rob the coffers and blame it on everyone but themselves. But, it’s not just them. CEO’s and CFO’s engage in these canards as they present their financial results.
Well, it’s not just us that have inquiring minds. Drs. Larker and Zakolyukina (Stanford University) found this to be a valid research study. And, in a paper, Detecting Deceptive Discussions in Conference Calls, they set out to detect deception on earnings conference calls.
One of the key differences between this research and previous approaches is in the absence- the absence of study of the financial and accounting data. Instead, they analyzed almost 30,000 transcripts of quarterly earning calls from 2003 to 2007. But, after all that, their approach is about 16% more accurate than random detection. Some of the key findings included the use of phrases such as “everybody knows”, “you know” that were associated with deception. Also, the deceivers were less likely to evoke “shareholder value” in their discourse.
But, deceptive CEO’s were more likely to use terms such as “great”, “fantastic”, and “definitely”. (I guess these will have to removed from my lexicon, now.)
The liars (oh, wait, deceivers) rarely employed self-references, third person personal pronouns, and the like. These terms tend to affirm our ownership of statements we make- and the deceivers wanted to be able to walk away from their pronouncements.
Given all these factors, one would hope that we could improve the accuracy of prediction to 90%. Maybe we should include the use of the Ugail device (about which I reported last month) to augment our ability to discern the financial deceptions.
Why am I not surprised that many CEOs and CFOs are deceptive about their financial reports? These bad apples have been in the news so much that we are automatically suspect of the good guys. We don’t trust any of them.
I definitely think this was a fantastic post, Roy! lol
Thanks for dropping in and sharing your thoughts, Janette.
This will continue until there are criminal or financial consequences to these situations.
Roy
Great post Roy – pursuit of the truth is critical in all areas of life! Tweeted!!
Yes, Tor, we need the truth. And, WE CAN HANDLE IT!
The problem is that no one (the ones providing the “truth”) want to suffer the consequences.
Roy
Ah, lying. A rather frequent sin. And one, that in some circumstances, like banking, can have devastating effects. Learning to detect could be a great protective measure.
Thanks.
Melinda,
Thanks for your comments. You are absolutely right.
Roy
Roy, aloha. That those folks are less than 100% forthcoming is not too big a shock, I hope.
Recently I had learned about “everybody knows” and “always” being red flags. How on earth I am going to removed great, fantastic and definitely is a challenge, to be sure.
Roy, those happen to be 3 of my most used words. My challenge to myself is to note how many times I use them this week and cut them down. Now what am I going to say in the comments section?
Best wishes for a most excellent week ahead. Until next time, aloha. Janet
Janet:
That’s what ticked me off, too! I have to learn new habits- fast. I don’t want folks to assume I am a politician 🙂
Thanks for your note.
Roy
This is such an interesting study, Roy! I’m *definitely* the type to exaggerate in my speech, but I feel that it’s more representative of my energy rather than a marker of deception. =) I also want to be more conscious about saying things like “everybody knows” or “you know.” I’ll be on the lookout for people that speak this way and especially those that almost never use self-references. =)
Yes, Samantha, those two expressions are going to scare a whole bunch of us!
Roy
Just a thought – maybe its not lying per se but the need to protect one’s ass as long as possible. If CEOs etc told the truth how long would the hold their cushy jobs? If politicians told what they knew would their party support them? If sales people, bank managers etc told the full truth, would they have a job? Why have we created a world where deception keeps us working where truth and honour get us fired?
And, the thought would be a problem. It is ILLEGAL to provide wrong information on those calls to investors. How often are they prosecuted- oh, never comes to mind.
And, I’m not sure politicians are as worried about the party support as they are the voter support. Which is why they lie so often.
One would hope sales people tell the truth.
I, for one, would like it to be de rigeur everywhere, Roberta.
Roy
Everybody knows people in politics are always far too fantastic to lie right? 😉
You know what’s sad for me is that first it has become so common place to expect the deceptions that we are not even a tiny bit surprised anymore. In fact I think we suspect those who have not been caught even more so than those we already KNOW lie. Crazy. The other part is that we accept it as a give so much now that we are studying the affects.
My two-year old nephew understands what it is to tell the truth. He knows it hurts others and himself. I hope he never starts using lies to start creating his life as so many higher ups have done.
Bonnie:
It’s our job to insure your two year old keeps his perspective. If there are more like him, we have hope for the future.
Roy
Hi Roy, what you said is true. The ones who’s on the higher place really has the chance to be deceptive just to be comfortable and get the high paying job available. Deception is everywhere as what you said even in political arena. Promises, promises.
Thanks for your comments.
We need to be alert. i just read today that many folks were convinced to buy stock in firms about to file bankruptcy or already in bankruptcy- because they will make a killing. Really? Assuming the firm exits bankruptcy- the existing stockholders get nothing. Maybe the new investors will make money, but not the folks bamboozled into buying stocks of the bankrupt.
Roy
Amen to that..
Thanks for dropping in! Please come back often.
Roy