Advertisement

Review of Accounting Studies

, Volume 23, Issue 4, pp 1315–1354 | Cite as

Manager-analyst conversations in earnings conference calls

  • Jason V. Chen
  • Venky Nagar
  • Jordan SchoenfeldEmail author
Article
First Online:
  • 755 Downloads

Abstract

Prior research finds that intraday stock prices move considerably during the discussion period of earnings conference calls. In this study, we explore what features of the manager-analyst dialogue during the discussion drive these price movements. We textually analyze the tone of managers and analysts and find that intraday prices react significantly to analyst tone, but not to management tone, for the full duration of the discussion. This effect strengthens when analyst tone is relatively negative. We then present intraday visual evidence that analysts are more neutral than managers over the call and that the tones of both parties drift downward as the call progresses. Overall, our findings illustrate how manager-analyst information exchanges evolve on earnings calls and indicate that analysts are the participants on earnings calls whose comments move stock prices during the discussion.

Keywords

Conference calls Corporate disclosure Financial analysts 

JEL Classification

G14 G20 D83 
This is a preview of subscription content, log in to check access.

Notes

Acknowledgments

We appreciate the helpful comments and suggestions from two anonymous reviewers, Patricia Dechow (the editor), Andrei Shleifer, and seminar participants at Arizona State University, Carnegie Mellon University, HKUST, London Business School, and the University of Michigan. We also thank Justin Lahart for profiling this study in The Wall Street Journal.

References

  1. Altinkilic, O., & Hansen, R. (2009). On the information role of stock recommendation revisions. Journal of Accounting and Economics, 48(1), 17–36.CrossRefGoogle Scholar
  2. Altinkilic, O., Hansen, R., Liyu, Y. (2016). Can analysts pick stocks for the long-run? Journal of Financial Economics, 119(2), 371–398.CrossRefGoogle Scholar
  3. Bradley, D., Clarke, J., Lee, S., Ornthanalai, C. (2014). Are analysts’ recommendations informative? intraday evidence on the impact of time stamp delays. The Journal of Finance, 69(2), 645–673.CrossRefGoogle Scholar
  4. Brav, A., & Lehavy, R. (2003). An Empirical Analysis of Analysts’ Target Prices: Short-term Informativeness and Long-term Dynamics. The Journal of Finance, 58(5), 1933–1968.CrossRefGoogle Scholar
  5. Brochet, F., Kolev, K., Lerman, A. (2018). Information Transfer and Conference Calls. Review of Accounting Studies. forthcoming.Google Scholar
  6. Brochet, F., Loumioti, M., Serafeim, G. (2015). Speaking of the short-term: disclosure horizon and managerial myopia. Review of Accounting Studies, 20(3), 1122–1163.CrossRefGoogle Scholar
  7. Brochet, F., Naranjo, P., Yu, G. (2016). The capital market consequences of language barriers in the conference calls of Non-U.S. Firms. The Accounting Review, 91(4), 1023–1049.CrossRefGoogle Scholar
  8. Brockman, P., Li, X., Price, S.M. (2015). Differences in conference call tones: Managers versus analysts. Financial Analysts Journal, 71(4), 24–42.CrossRefGoogle Scholar
  9. Brown, L., Call, A., Clement, M., Sharp, N. (2015). Inside the “black box” of sell-side financial analysts. Journal of Accounting Research, 53(1), 1–47.CrossRefGoogle Scholar
  10. Bushee, B., Jung, M., Miller, G. (2011). Conference presentations and the disclosure milieu. Journal of Accounting Research, 49(5), 1163–1192.CrossRefGoogle Scholar
  11. Cheng, Q., Du, F., Wang, X., Wang, Y. (2016). Seeing is believing: analysts’ corporate site visits. Review of Accounting Studies, 21(4), 1245–1286.CrossRefGoogle Scholar
  12. Davis, A.K., Ge, W., Matsumoto, D., Zhang, J.L. (2015). The effect of manager-specific optimism on the tone of earnings conference calls. Review of Accounting Studies, 20(2), 639–673.CrossRefGoogle Scholar
  13. Frankel, R., Johnson, M., Skinner, D. (1999). An empirical examination of conference calls as a voluntary disclosure medium. Journal of Accounting Research, 37(1), 133–150.CrossRefGoogle Scholar
  14. Frankel, R., Mayew, W.J., Sun, Y. (2010). Do pennies matter? Investor relations consequences of small negative earnings surprises. Review of Accounting Studies, 15(1), 220–242.CrossRefGoogle Scholar
  15. Ge, W., Matsumoto, D., Zhang, J.L. (2011). Do CFOs have style? an empirical investigation of the effect of individual CFOs on accounting practices. Contemporary Accounting Research, 28(4), 1141–1179.CrossRefGoogle Scholar
  16. Gintschel, A., & Markov, S. (2004). The effectiveness of Regulation FD. Journal of Accounting and Economics, 37(3), 293–314.CrossRefGoogle Scholar
  17. Gow, I.D., Ormazabal, G., Taylor, D.J. (2010). Correcting for Cross-Sectional and Time-Series dependence in accounting research. The Accounting Review, 85(2), 483–512.CrossRefGoogle Scholar
  18. Greene, W. (2004). The behaviour of the maximum likelihood estimator of limited dependent variable models in the presence of fixed effects. Econometrics Journal, 7(1), 98–119.CrossRefGoogle Scholar
  19. Griffin, J., Harris, J., Topaloglu, S. (2003). The dynamics of institutional and individual trading. The Journal of Finance, 58(6), 2285–2320.CrossRefGoogle Scholar
  20. Groysberg, B., Healy, P., Maber, D. (2011). What drives sell-side analyst compensation at high-status investment banks? Journal of Accounting Research, 49(4), 969–1000.CrossRefGoogle Scholar
  21. Huang, A., Zang, A., Zheng, R. (2014a). Evidence on the information content of text in analyst reports. The Accounting Review, 89(6), 2151–2180.CrossRefGoogle Scholar
  22. Huang, X., Teoh, S., Zhang, Y. (2014b). Tone management. The Accounting Review, 89(3), 1083–1113.CrossRefGoogle Scholar
  23. Irvine, P., Lipson, M., Puckett, A. (2006). Tipping. Review of Financial Studies, 20(3), 741–768.CrossRefGoogle Scholar
  24. Jung, M.J., Wong, M.H.F., Zhang, X.F. (2017). Buy-side analysts and earnings conference calls. Journal of Accounting Research. forthcoming.Google Scholar
  25. Kasznik, R., & Mcnichols, M. (2002). Does meeting expectations matter? evidence from analyst forecast revisions and share prices. Journal of Accounting Research, 40(3), 727–759.CrossRefGoogle Scholar
  26. Kirk, M., & Markov, S. (2016). Come on over: Analyst/investor days as a disclosure medium. The Accounting Review, 91(6), 1725–1750.CrossRefGoogle Scholar
  27. Kothari, S., Shu, S., Wysocki, P. (2009). Do managers withhold bad news? Journal of Accounting Research, 47, 241–276.CrossRefGoogle Scholar
  28. Larcker, D., & Zakolyukina, A. (2012). Detecting deceptive discussions in conference calls. Journal of Accounting Research, 50(2), 495–540.CrossRefGoogle Scholar
  29. Li, E., Ramesh, K., Shen, M., Wu, J. (2015). Do analyst stock recommendations piggyback on recent corporate news? an analysis of Regular-Hour and After-Hours revisions. Journal of Accounting Research, 53(4), 821–861.CrossRefGoogle Scholar
  30. Li, F. (2010). The information content of forward-looking statements in corporate filings-A naïve Bayesian machine learning approach. Journal of Accounting Research, 48(5), 1049–1102.CrossRefGoogle Scholar
  31. Li, K.H. (2015). What is the value of sell-side analysts? evidence from coverage initiations and terminations. Journal of Accounting and Economics, 60(2–3), 141–160.CrossRefGoogle Scholar
  32. Loh, R., & Stulz, R. (2010). When are analyst recommendation changes influential?. Review of Financial Studies, 24(2), 593–627.CrossRefGoogle Scholar
  33. Loughran, T., & Mcdonald, B. (2011). When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10-Ks. The Journal of Finance, 66(1), 35–65.CrossRefGoogle Scholar
  34. Lui, D., Markov, S., Tamayo, A. (2012). Equity analysts and the market’s assessment of risk. Journal of Accounting Research, 50(5), 1287–1317.CrossRefGoogle Scholar
  35. Lys, T., & Sohn, S. (1990). The association between revisions of financial analysts’ earnings forecasts and security-price changes. Journal of Accounting and Economics, 13, 341–363.CrossRefGoogle Scholar
  36. Madhavan, A. (2000). Market microstructure: a survey. Journal of Financial Markets, 3(3), 205–258.CrossRefGoogle Scholar
  37. Madhavan, A. (2015). Exchange-Traded Funds: an overview of institutions, trading, and impacts. Annual Review of Financial Economics, 6, 311–341.CrossRefGoogle Scholar
  38. Matsumoto, D., Pronk, M., Roelofsen, E. (2011). What makes conference calls useful? the information content of managers’ presentations and analysts’ discussion sessions. The Accounting Review, 86(4), 1383–1414.CrossRefGoogle Scholar
  39. Mayew, W. (2008). Evidence of management discrimination among analysts during earnings conference calls. Journal of Accounting Research, 46(3), 627–659.CrossRefGoogle Scholar
  40. Mayew, W., Sharp, N., Venkatachalam, M. (2012). Using earnings conference calls to identify analysts with superior private information. Review of Accounting Studies, 18(2), 386–413.CrossRefGoogle Scholar
  41. Minton, B., & Schrand, C. (2016). Institutional investments in pure play stocks and implications for hedging decisions. Journal of Corporate Finance, 37, 132–151.CrossRefGoogle Scholar
  42. Orie, B., Byard, D., Kile, C., Riedl, E. (2002). High-Technology Intangibles and analysts’ forecasts. Journal of Accounting Research, 40(2), 289–312.CrossRefGoogle Scholar
  43. Soltes, E. (2014). Private interaction between firm management and Sell-Side analysts. Journal of Accounting Research, 52(1), 245–272.CrossRefGoogle Scholar
  44. Tetlock, P. (2007). Giving content to investor sentiment: The role of media in the stock market. The Journal of Finance, 62(3), 1139–1168.CrossRefGoogle Scholar
  45. Tetlock, P., Saar-Tsechansky, M., Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. The Journal of Finance, 63(3), 1437–1467.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.University of IllinoisChicagoUSA
  2. 2.University of MichiganAnn ArborUSA
  3. 3.Georgetown UniversityWashingtonUSA

Personalised recommendations

Cite article

Buy options