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http://ssrn.com/abstract=1153450
 
 

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The Impact of Credibility on the Pricing of Managerial Textual Content


Elizabeth A. Demers


University of Virginia - Darden School of Business

Clara Vega


Board of Governors of the Federal Reserve System

June 6, 2014


Abstract:     
The conditions under which managerial textual content that has the potential to be “cheap talk” is more influential in the price formation process have not been previously investigated. We document that investors respond more to unexpected managerial net optimism in settings where our numerous proxies for credible communications are more strongly present. The market impact of this soft information is also higher when the simultaneously released earnings are less informative signals about firm value. Further investigations reveal that a second dimension of managerial communication, textual uncertainty, is incrementally useful in predicting firm-specific abnormal return volatility.

Number of Pages in PDF File: 52

Keywords: Textual analysis; textual content; cheap talk; earnings quality; earnings announcement; information uncertainty; stock price volatility; media coverage; voluntary disclosure; communication credibility

JEL Classification: G14; D82; M41

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Date posted: June 30, 2008 ; Last revised: June 7, 2014

Suggested Citation

Demers, Elizabeth A. and Vega, Clara, The Impact of Credibility on the Pricing of Managerial Textual Content (June 6, 2014). Available at SSRN: http://ssrn.com/abstract=1153450 or http://dx.doi.org/10.2139/ssrn.1153450

Contact Information

Elizabeth A. Demers (Contact Author)
University of Virginia (UVA) - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
Clara Vega
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
HOME PAGE: http://www.federalreserve.gov/research/staff/vegaclarax.htm
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