The effect of manager-specific optimism on the tone of earnings conference calls
- 2.6k Downloads
The use of more or less positive language in corporate disclosures has been the subject of increased interest in the academic literature. We add to this stream of research by examining whether there is a manager-specific component in the tone of earnings-announcement related conference calls. We find that the tone of conference calls that is not explained by current performance, future performance, and strategic incentives has a significant manager-specific component. We also find that tone is significantly associated with manager-specific factors such as early career experiences and involvement in charitable organizations. Taken together, our findings indicate that, in addition to reflecting current and future performance, the tone of conference calls is significantly influenced by a manager-specific tendency to be optimistic or pessimistic. We also find some evidence of a manager-specific component to conference call returns, which is consistent with manager-specific optimism impacting investors’ interpretation of disclosures made in conference calls.
KeywordsConference call Tone Managerial style
Ge and Matsumoto would like to thank the Moss Adams Professorship and the Emmett S. Harrington Professorship, respectively, at the University of Washington for financial support. Zhang acknowledges the financial support from the Social Sciences and Humanities Research Council of Canada (SSHRC). We thank Kyle Peterson for his help with Python programming and Darren Bernard, Roy Chow, Vlada Edwards, Liling Gao, Karlyn Kurokawa, Gladys Lengkong, Zhen Liu, Lungyun Lou, Norbert Ma, Ashley Matsumoto, Anyi Sun, Cecilia Velazquez-Chavez, Yiran Wang for their valuable research assistance. We appreciate the comments and suggestions of our FARS discussant, Sarah Zechman, as well as workshop participants at Boston College, the University of Chicago, the University of Florida, Massachusetts Institute of Technology, Nanyang Technological University, Singapore Management University, the University of Southern California, and the UBCOW Accounting Conference.
- Anik, L., Aknin, L., Norton, M., & Dunn, E. (2009). Feeling good about giving: the benefits (and costs) of self-interested charitable behavior. Working paper, Harvard Business School.Google Scholar
- Demers, E., & Vega, C. (2014). Understanding the role of managerial optimism and uncertainty in the price formation process: evidence from the textual content of earnings announcements. Working paper, Univeristy of Virginia.Google Scholar
- Graham, J., Harvey, C., & Puri, M. (2009). Managerial attitudes and corporate actions. Working paper, Duke University and National Bureau of Economic Research.Google Scholar
- Halpern, D. (2000). Sex differences in cognitive abilities (3rd ed.). New York: Psychology Press.Google Scholar
- Hambrick, D. C., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational outcomes. In L. L. Cummings & B. Staw (Eds.), Research in organizational behavior (Vol. 9, pp. 369–406).Google Scholar
- Hambrick, D. C., & Mason, P. A. (1984). The seasons of a CEO’s tenure. Academy of Management Review, 9, 193–206.Google Scholar
- Hart, R. P. (1984). Verbal style and the presidency: A computer-based analysis. Orlando, FL: Academic Press.Google Scholar
- Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10-Ks. Journal of Finance, LXVI(1), 35–65.Google Scholar
- Maccoby, E., & Jacklin, C. (1974). The psychology of sex differences. Stanford, CA: Stanford University Press.Google Scholar
- Reber, A. S. (1995). Dictionary of psychology. Penguin Books.Google Scholar
- Schoar, A., and Zuo, L. (2011). Shaped by booms and busts: how the economy impacts CEO careers and management style. Working paper, Massachusetts Institute of Technology.Google Scholar