IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1713.html
   My bibliography  Save this paper

Straight Talkers and Vague Talkers: The Effects of Managerial Style in Earnings Conference Calls

Author

Listed:
  • Michał DZIELINSKI

    (Stockholm University)

  • Alexander F. WAGNER

    (University of Zurich)

  • Richard J. ZECKHAUSER

    (Harvard University)

Abstract

Managers conducting earnings conference calls display distinctive styles in their word choice. Some CEOs and CFOs are straight talkers. Others, by contrast, are vague talkers. Vague talkers routinely use qualifying words indicating uncertainty, such as “approximately”, “probably”, or “maybe”. Analysts and the stock market attend to the style of managerial talk. They find earnings news less informative when managers are vague; they respond less and more slowly as a result. Thus, quantitative information and straightforward contextual information prove to be complements. Vague communications have the potential benefit of tamping down over-optimistic analysts expectations.

Suggested Citation

  • Michał DZIELINSKI & Alexander F. WAGNER & Richard J. ZECKHAUSER, 2017. "Straight Talkers and Vague Talkers: The Effects of Managerial Style in Earnings Conference Calls," Swiss Finance Institute Research Paper Series 17-13, Swiss Finance Institute, revised Jun 2017.
    • Handle: RePEc:chf:rpseri:rp1713
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2965108
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David F. Larcker & Anastasia A. Zakolyukina, 2012. "Detecting Deceptive Discussions in Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 50(2), pages 495-540, May.
    2. Tim Loughran & Bill Mcdonald, 2014. "Measuring Readability in Financial Disclosures," Journal of Finance, American Finance Association, vol. 69(4), pages 1643-1671, August.
    3. Kristina Rennekamp, 2012. "Processing Fluency and Investors’ Reactions to Disclosure Readability," Journal of Accounting Research, Wiley Blackwell, vol. 50(5), pages 1319-1354, December.
    4. Green, T. Clifton & Jame, Russell & Markov, Stanimir & Subasi, Musa, 2014. "Access to management and the informativeness of analyst research," Journal of Financial Economics, Elsevier, vol. 114(2), pages 239-255.
    5. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    6. Eugene Soltes, 2014. "Private Interaction Between Firm Management and Sell‐Side Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 52(1), pages 245-272, March.
    7. Daniel, Kent, et al, 1997. "Measuring Mutual Fund Performance with Characteristic-Based Benchmarks," Journal of Finance, American Finance Association, vol. 52(3), pages 1035-1058, July.
    8. Li, Feng, 2008. "Annual report readability, current earnings, and earnings persistence," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 221-247, August.
    9. 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.
    10. Kristian D. Allee & Matthew D. Deangelis, 2015. "The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion," Journal of Accounting Research, Wiley Blackwell, vol. 53(2), pages 241-274, May.
    11. Gow, Ian D. & Kaplan, Steven N. & Larcker, David F. & Zakolyukina, Anastasia A., 2016. "CEO Personality and Firm Policies," Research Papers 3444, Stanford University, Graduate School of Business.
    12. Hwang, Byoung-Hyoun & Kim, Hugh Hoikwang, 2017. "It pays to write well," Journal of Financial Economics, Elsevier, vol. 124(2), pages 373-394.
    13. Stefano Dellavigna & Joshua M. Pollet, 2009. "Investor Inattention and Friday Earnings Announcements," Journal of Finance, American Finance Association, vol. 64(2), pages 709-749, April.
    14. Bushee, BJ & Noe, CF, 2000. "Corporate disclosure practices, institutional investors, and stock return volatility," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 171-202.
    15. Blau, Benjamin M. & DeLisle, Jared R. & Price, S. McKay, 2015. "Do sophisticated investors interpret earnings conference call tone differently than investors at large? Evidence from short sales," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 203-219.
    16. 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.
    17. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    18. Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, February.
    19. William J. Mayew & Mohan Venkatachalam, 2012. "The Power of Voice: Managerial Affective States and Future Firm Performance," Journal of Finance, American Finance Association, vol. 67(1), pages 1-44, February.
    20. David H. Solomon, 2012. "Selective Publicity and Stock Prices," Journal of Finance, American Finance Association, vol. 67(2), pages 599-638, April.
    21. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    22. David Hirshleifer & Sonya Seongyeon Lim & Siew Hong Teoh, 2009. "Driven to Distraction: Extraneous Events and Underreaction to Earnings News," Journal of Finance, American Finance Association, vol. 64(5), pages 2289-2325, October.
    23. Yang, Holly I., 2012. "Capital market consequences of managers' voluntary disclosure styles," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 167-184.
    24. 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.
    25. 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.
    26. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 6, pages 67-92.
    27. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    28. Frankel, R & Johnson, M & Skinner, DJ, 1999. "An empirical examination of conference calls as a voluntary disclosure medium," Journal of Accounting Research, Wiley Blackwell, vol. 37(1), pages 133-150.
    29. Loughran, Tim & McDonald, Bill, 2013. "IPO first-day returns, offer price revisions, volatility, and form S-1 language," Journal of Financial Economics, Elsevier, vol. 109(2), pages 307-326.
    30. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    31. C. Edward Fee & Charles J. Hadlock & Joshua R. Pierce, 2013. "Managers with and without Style: Evidence Using Exogenous Variation," The Review of Financial Studies, Society for Financial Studies, vol. 26(3), pages 567-601.
    32. Christine Botosan, 2006. "Disclosure and the cost of capital: what do we know?," Accounting and Business Research, Taylor & Francis Journals, vol. 36(S1), pages 31-40.
    33. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    34. Lauren Cohen & Dong Lou & Christopher Malloy, 2013. "Playing Favorites: How Firms Prevent the Revelation of Bad News," NBER Working Papers 19429, National Bureau of Economic Research, Inc.
    35. Weili GE & Dawn Matsumoto & Jenny Li Zhang, 2011. "Do CFOs Have Style? An Empirical Investigation of the Effect of Individual CFOs on Accounting Practices," Contemporary Accounting Research, John Wiley & Sons, vol. 28(4), pages 1141-1179, December.
    36. Tim Loughran & Bill Mcdonald, 2016. "Textual Analysis in Accounting and Finance: A Survey," Journal of Accounting Research, Wiley Blackwell, vol. 54(4), pages 1187-1230, September.
    37. Lawrence D. Brown & Andrew C. Call & Michael B. Clement & Nathan Y. Sharp, 2015. "Inside the “Black Box” of Sell‐Side Financial Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 53(1), pages 1-47, March.
    38. Francois Brochet & Lucile Faurel & Sarah Mcvay, 2011. "Manager‐Specific Effects on Earnings Guidance: An Analysis of Top Executive Turnovers," Journal of Accounting Research, Wiley Blackwell, vol. 49(5), pages 1123-1162, December.
    39. Barker, Richard & Hendry, John & Roberts, John & Sanderson, Paul, 2012. "Can company-fund manager meetings convey informational benefits? Exploring the rationalisation of equity investment decision making by UK fund managers," Accounting, Organizations and Society, Elsevier, vol. 37(4), pages 207-222.
    40. 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.
    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. 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.
    2. Baochen Yang & Yifang Liu & Yunpeng Su, 2023. "Earnings communication conferences and post‐earnings‐announcement drift: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2145-2185, June.
    3. Suzanne Bijkerk & Josse (J.) Delfgaauw & Vladimir (V.A.) Karamychev & Otto (O.H.) Swank, 2018. "Need to Know? On Information Systems in Firms," Tinbergen Institute Discussion Papers 18-091/VII, Tinbergen Institute.
    4. Stewart, Christopher R., 2023. "Appraisal rights and corporate disclosure during mergers and acquisitions," 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. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    2. 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.
    3. Bhagwat, Vineet & Shirley, Sara E. & Stark, Jeffrey R., 2024. "Task-oriented speech and information processing," Journal of Banking & Finance, Elsevier, vol. 161(C).
    4. Tim Loughran & Bill Mcdonald, 2016. "Textual Analysis in Accounting and Finance: A Survey," Journal of Accounting Research, Wiley Blackwell, vol. 54(4), pages 1187-1230, September.
    5. Schnaubelt, Matthias & Seifert, Oleg, 2020. "Valuation ratios, surprises, uncertainty or sentiment: How does financial machine learning predict returns from earnings announcements?," FAU Discussion Papers in Economics 04/2020, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    6. Beattie, Vivien, 2014. "Accounting narratives and the narrative turn in accounting research: Issues, theory, methodology, methods and a research framework," The British Accounting Review, Elsevier, vol. 46(2), pages 111-134.
    7. Abraham, Santhosh & Bamber, Matthew, 2017. "The Q&A: Under surveillance," Accounting, Organizations and Society, Elsevier, vol. 58(C), pages 15-31.
    8. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    9. Hwang, Byoung-Hyoun & Kim, Hugh Hoikwang, 2017. "It pays to write well," Journal of Financial Economics, Elsevier, vol. 124(2), pages 373-394.
    10. 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.
    11. Brian J. Bushee & Ian D. Gow & Daniel J. Taylor, 2018. "Linguistic Complexity in Firm Disclosures: Obfuscation or Information?," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 85-121, March.
    12. 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.
    13. Cohen, Lauren & Lou, Dong & Malloy, Christopher, 2020. "Casting conference calls," LSE Research Online Documents on Economics 101136, London School of Economics and Political Science, LSE Library.
    14. Allen H. Huang & Reuven Lehavy & Amy Y. Zang & Rong Zheng, 2018. "Analyst Information Discovery and Interpretation Roles: A Topic Modeling Approach," Management Science, INFORMS, vol. 64(6), pages 2833-2855, June.
    15. Matthew Bamber & Santhosh Abraham, 2020. "On the “Realities” of Investor‐Manager Interactivity: Baudrillard, Hyperreality, and Management Q&A Sessions†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(2), pages 1290-1325, June.
    16. Danial Hemmings & Lynn Hodgkinson & Gwion Williams, 2020. "It's OK to pay well, if you write well: The effects of remuneration disclosure readability," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(5-6), pages 547-586, May.
    17. Dichev, Ilia D. & Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2013. "Earnings quality: Evidence from the field," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 1-33.
    18. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    19. Lauren Cohen & Dong Lou & Christopher J. Malloy, 2020. "Casting Conference Calls," Management Science, INFORMS, vol. 66(11), pages 5015-5039, November.
    20. Richard Frankel & Jared Jennings & Joshua Lee, 2022. "Disclosure Sentiment: Machine Learning vs. Dictionary Methods," Management Science, INFORMS, vol. 68(7), pages 5514-5532, July.

    More about this item

    Keywords

    Communication Style; Earnings Conference Calls; Straight Talk; Vagueness; Textual Analysis; Stock Analysts;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    Statistics

    Access and download statistics

    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:chf:rpseri:rp1713. 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: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

    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.