IDEAS home Printed from https://ideas.repec.org/a/eee/corfin/v68y2021ics0929119921000857.html
   My bibliography  Save this article

Which buy-side institutions participate in public earnings conference calls? Implications for capital markets and sell-side coverage

Author

Listed:
  • Call, Andrew C.
  • Sharp, Nathan Y.
  • Shohfi, Thomas D.

Abstract

We examine the participation of analysts from different buy-side institutions (hedge funds, mutual funds, and RIAs) in public earnings conference calls and the associated capital market implications. Using 81,652 conference call transcripts for 3346 companies from 2007 to 2016, we find that buy-side analysts ask questions on approximately 18% of calls. Relative to sell-side analysts, buy-side analysts' interactions with management are shorter, convey less favorable tone, and exhibit more uncertainty. Buy-side activity on earnings calls is also associated with subsequent reductions in sell-side coverage, and buy-side tone is associated with sell-side analysts' price target revisions after the call. Importantly, our findings suggest that buy-side analysts representing a hedge fund play an important and unique role on conference calls. Specifically, hedge fund analysts represent nearly half (47%) of all buy-side appearances. In addition, when short interest in the firm is high, analysts representing a hedge fund are less likely to be permitted to ask the first question on the call, to ask lengthy questions, or to ask additional follow-up questions. Relatedly, relative to other buy-side analysts, the information conveyed by hedge fund analysts during the call is more strongly associated with both stock returns and investor uncertainty following the call.

Suggested Citation

  • Call, Andrew C. & Sharp, Nathan Y. & Shohfi, Thomas D., 2021. "Which buy-side institutions participate in public earnings conference calls? Implications for capital markets and sell-side coverage," Journal of Corporate Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:corfin:v:68:y:2021:i:c:s0929119921000857
    DOI: 10.1016/j.jcorpfin.2021.101964
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0929119921000857
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcorpfin.2021.101964?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. John R. Becker‐Blease & Donna L. Paul, 2010. "Does Inclusion in a Smaller S&P Index Create Value?," The Financial Review, Eastern Finance Association, vol. 45(2), pages 307-330, May.
    2. repec:bla:jfinan:v:59:y:2004:i:4:p:1901-1930 is not listed on IDEAS
    3. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2016. "The activities of buy-side analysts and the determinants of their stock recommendations," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 139-156.
    4. Steven Crawford & Wesley Gray & Bryan R. Johnson & Richard A. Price, 2018. "What Motivates Buy-Side Analysts to Share Recommendations Online?," Management Science, INFORMS, vol. 64(6), pages 2574-2589, June.
    5. Shuping Chen & Dawn A. Matsumoto, 2006. "Favorable versus Unfavorable Recommendations: The Impact on Analyst Access to Management‐Provided Information," Journal of Accounting Research, Wiley Blackwell, vol. 44(4), pages 657-689, September.
    6. Michael Firth & Chen Lin & Ping Liu & Yuhai Xuan, 2013. "The Client Is King: Do Mutual Fund Relationships Bias Analyst Recommendations?," Journal of Accounting Research, Wiley Blackwell, vol. 51(1), pages 165-200, March.
    7. Price, S. McKay & Doran, James S. & Peterson, David R. & Bliss, Barbara A., 2012. "Earnings conference calls and stock returns: The incremental informativeness of textual tone," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 992-1011.
    8. Frey, Stefan & Herbst, Patrick, 2014. "The influence of buy-side analysts on mutual fund trading," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 442-458.
    9. John M. Griffin & Jin Xu, 2009. "How Smart Are the Smart Guys? A Unique View from Hedge Fund Stock Holdings," The Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2331-2370, July.
    10. Michael J. Jung & M. H. Franco Wong & X. Frank Zhang, 2018. "Buy‐Side Analysts and Earnings Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 56(3), pages 913-952, June.
    11. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    12. David Solomon & Eugene Soltes, 2015. "What Are We Meeting For? The Consequences of Private Meetings with Investors," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 325-355.
    13. Agarwal, Vikas & Boyson, Nicole M. & Naik, Narayan Y., 2009. "Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(2), pages 273-305, April.
    14. Stephan Hollander & Maarten Pronk & Erik Roelofsen, 2010. "Does Silence Speak? An Empirical Analysis of Disclosure Choices During Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 531-563, June.
    15. William J. Mayew, 2008. "Evidence of Management Discrimination Among Analysts during Earnings Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 627-659, June.
    16. Brown, Stephen & Hillegeist, Stephen A. & Lo, Kin, 2004. "Conference calls and information asymmetry," Journal of Accounting and Economics, Elsevier, vol. 37(3), pages 343-366, September.
    17. Cheng, Yingmei & Liu, Mark H. & Qian, Jun, 2006. "Buy-Side Analysts, Sell-Side Analysts, and Investment Decisions of Money Managers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(1), pages 51-83, March.
    18. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2019. "Managing the narrative: Investor relations officers and corporate disclosure✰," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 58-79.
    19. Michael Rebello & Kelsey D. Wei, 2014. "A Glimpse Behind a Closed Door: The Long‐Term Investment Value of Buy‐Side Research and Its Effect on Fund Trades and Performance," Journal of Accounting Research, Wiley Blackwell, vol. 52(3), pages 775-815, June.
    20. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    21. Boris Groysberg & Paul Healy & George Serafeim & Devin Shanthikumar, 2013. "The Stock Selection and Performance of Buy-Side Analysts," Management Science, INFORMS, vol. 59(5), pages 1062-1075, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Call, Andrew C. & Emett, Scott A. & Maksymov, Eldar & Sharp, Nathan Y., 2022. "Meet the press: Survey evidence on financial journalists as information intermediaries," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    2. Setterberg, Hanna & Sjöström, Emma, 2021. "Action Lab: Integrated Communications on Financial and ESG Performance in the Earnings Call," Misum Working Paper Series 2021-1, Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum).
    3. Duan, Lini & Li, Lingyi & Park, Kyung-Hye & Wu, Di, 2023. "Muddy the waters to conceal information? Evidence from firms' inconsistent answers during Q&As," Finance Research Letters, Elsevier, vol. 51(C).
    4. Wu, Di & Gao, Shenghao & Chan, Kam C. & Cheng, Xiaoke, 2022. "Do firms strategically respond to retail investors on the online interactive information disclosure platform?," Finance Research Letters, Elsevier, vol. 47(PA).
    5. Fang, Wei & Liu, Zhen & Surya Putra, Ahmad Romadhoni, 2022. "Role of research and development in green economic growth through renewable energy development: Empirical evidence from South Asia," Renewable Energy, Elsevier, vol. 194(C), pages 1142-1152.
    6. Chen, Haosi (Chelsea) & Puckett, Andy, 2023. "Do Hedge Funds Value Sell-Side Analysts Differently?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    7. Andrew C. Call & Rachel W. Flam & Joshua A. Lee & Nathan Y. Sharp, 2024. "Managers’ use of humor on public earnings conference calls," Review of Accounting Studies, Springer, vol. 29(3), pages 2650-2687, September.
    8. Wei, Xiaobo & Mohsin, Muhammad & Zhang, Qiongxin, 2022. "Role of foreign direct investment and economic growth in renewable energy development," Renewable Energy, Elsevier, vol. 192(C), pages 828-837.
    9. Liu, Wenjun & Chen, Aoyun, 2024. "Institutional ownership and analysts’ earnings forecasts," Finance Research Letters, Elsevier, vol. 61(C).
    10. De Franco, Gus & Shohfi, Thomas & Xu, Da & Zhu, Zhiwei (Vivi), 2023. "Fixed income conference calls," Journal of Accounting and Economics, Elsevier, vol. 75(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bingxu Fang & Ole-Kristian Hope & Zhongwei Huang & Rucsandra Moldovan, 2020. "The effects of MiFID II on sell-side analysts, buy-side analysts, and firms," Review of Accounting Studies, Springer, vol. 25(3), pages 855-902, September.
    2. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2019. "Managing the narrative: Investor relations officers and corporate disclosure✰," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 58-79.
    3. Steven Crawford & Wesley Gray & Bryan R. Johnson & Richard A. Price, 2018. "What Motivates Buy-Side Analysts to Share Recommendations Online?," Management Science, INFORMS, vol. 64(6), pages 2574-2589, June.
    4. Devrimi Kaya & Christian Maier & Tobias Böhmer, 2020. "Empirische Kapitalmarktforschung zu Conference Calls: Eine Literaturanalyse [Empirical Capital Market Research on Conference Calls: A Literature Review]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 183-212, June.
    5. Allee, Kristian D. & Do, Chuong & Sterin, Mikhail, 2021. "Product market competition, disclosure framing, and casting in earnings conference calls," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    6. Michael J. Jung & M. H. Franco Wong & X. Frank Zhang, 2018. "Buy‐Side Analysts and Earnings Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 56(3), pages 913-952, June.
    7. Michał Dzieliński & Alexander F. Wagner & Richard J. Zeckhauser, 2017. "Straight Talkers and Vague Talkers: The Effects of Managerial Style in Earnings Conference Calls," NBER Working Papers 23425, National Bureau of Economic Research, Inc.
    8. De Franco, Gus & Shohfi, Thomas & Xu, Da & Zhu, Zhiwei (Vivi), 2023. "Fixed income conference calls," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    9. Do, Chuong, 2024. "Financial analysts' information discovery: A study of manager-analyst interactions in conference calls," Advances in accounting, Elsevier, vol. 64(C).
    10. Rennekamp, Kristina M. & Sethuraman, Mani & Steenhoven, Blake A., 2022. "Engagement in earnings conference calls," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    11. Rahul Deb & Mallesh M. Pai & Maher Said, 2019. "Dynamic Incentives for Buy-Side Analysts," Working Papers 19-01, New York University, Leonard N. Stern School of Business, Department of Economics.
    12. Duan, Lini & Li, Lingyi & Park, Kyung-Hye & Wu, Di, 2023. "Muddy the waters to conceal information? Evidence from firms' inconsistent answers during Q&As," Finance Research Letters, Elsevier, vol. 51(C).
    13. Ryan P. McDonough, 2023. "Corporate communication and shareholder base retention: evidence from spin-offs," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1283-1327, May.
    14. Mansouri, Sasan, 2021. "Does firm's silence drive media's attention away?," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242433, Verein für Socialpolitik / German Economic Association.
    15. Bhagwat, Vineet & Shirley, Sara E. & Stark, Jeffrey R., 2024. "Task-oriented speech and information processing," Journal of Banking & Finance, Elsevier, vol. 161(C).
    16. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2016. "The activities of buy-side analysts and the determinants of their stock recommendations," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 139-156.
    17. Tiana Lehmer & Ben Lourie & Devin Shanthikumar, 2022. "Brokerage trading volume and analysts’ earnings forecasts: a conflict of interest?," Review of Accounting Studies, Springer, vol. 27(2), pages 441-476, June.
    18. Zhang, Rachel Xi, 2023. "Do Managers learn from institutional investors through direct interactions?," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    19. Borochin, Paul A. & Cicon, James E. & DeLisle, R. Jared & Price, S. McKay, 2018. "The effects of conference call tones on market perceptions of value uncertainty," Journal of Financial Markets, Elsevier, vol. 40(C), pages 75-91.
    20. Rees, Lynn & Sharp, Nathan Y. & Wong, Paul A., 2017. "Working on the weekend: Do analysts strategically time the release of their recommendation revisions?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 104-121.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:68:y:2021:i:c:s0929119921000857. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcorpfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.