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Casting conference calls

Author

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  • Cohen, Lauren
  • Lou, Dong
  • Malloy, Christopher

Abstract

We explore a subtle but important mechanism through which firms can control information flow to the markets. We find that firms that “cast” their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. A long–short portfolio that exploits this differential firm behavior earns abnormal returns of up to 149 basis points per month or almost 18% per year. We find similar evidence in an international sample of earnings call transcripts from the United Kingdom, Canada, France, and Japan. Firms with higher discretionary accruals, firms that barely meet/exceed earnings expectations, and firms (and their executives) that are about to issue equity, sell shares, and exercise options are all significantly more likely to cast their earnings calls.

Suggested Citation

  • 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.
    • Handle: RePEc:ehl:lserod:101136
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    File URL: http://eprints.lse.ac.uk/101136/
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    References listed on IDEAS

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    More about this item

    Keywords

    information; strategic release; firms; conference calls;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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