The power of signaling: presidential leadership and rhetoric over 20 years

The purpose of this paper is to explore the power of leadership rhetoric with a theoretical foundation of signaling theory. Past research mostly focus on followers and not other stakeholders and the authors attempt to fill that research gap.

The research explored nearly 20 years and 51,500 pages of information from US presidents and explored the impact on stock market volatility using generalized autoregressive conditional heteroscedasticity.

The research findings suggest that leaders can/do have a powerful impact on stakeholders. In particular negative statements will cause the greatest reaction due to risk adverse stockholders, neutral rhetoric will calm the market and decrease volatility and positive rhetoric was not significant.

Past research suggests that a focus on the consequences of leadership rhetoric be explored and the research suggests that people do respond to powerful leaders, even if they are not followers. Also the authors filled a gap in regard to the impact of leader communication about economic and marketplace events.

Practitioners benefit from the research as they can focus upon the US presidents’ rhetoric and strategically apply the research as they can predict the movement of the stock market immediately thereafter.

Very little research has ever explored the impact of a leader’s rhetoric and the subsequent economic impact, and no one has explored in particular the president’s rhetorical impact (who is considered by many the top leader in the USA).