Abstract

http://ssrn.com/abstract=2154948
 
 

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The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms


Francois Brochet


Boston University - Department of Accounting

Patricia L. Naranjo


Rice University

Gwen Yu


Harvard Business School

June 2015

Harvard Business School Research Paper No. 2154948

Abstract:     
We examine how language barriers affect the capital market reaction to information disclosures. Using transcripts from the English-language conference calls of non-U.S. firms, we find that the calls of firms in countries with greater language barriers are more likely to contain non-plain English and erroneous expressions. For non-U.S. firms that hire an English-speaking manager, we find less use of non-plain English and fewer erroneous expressions. Calls that have greater use of non-plain English and more erroneous expressions show lower intraday price movement and trading volume. The capital market responses to non-plain English and erroneous expressions are more negative when the firm is located in a non-English-speaking country and has more English-speaking analysts participating in the call. Our results highlight that when disclosure takes the form of verbal communication, language barriers between speaker and listener affect the transparency of the narrative which in turn impacts the market reaction to the disclosure.

Number of Pages in PDF File: 63

Keywords: Linguistic complexity; Non-plain English; Voluntary disclosure; Capital market consequences; Language barriers

JEL Classification: G14, G15, M41


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Date posted: October 3, 2012 ; Last revised: June 17, 2015

Suggested Citation

Brochet, Francois and Naranjo, Patricia L. and Yu, Gwen, The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms (June 2015). Harvard Business School Research Paper No. 2154948. Available at SSRN: http://ssrn.com/abstract=2154948 or http://dx.doi.org/10.2139/ssrn.2154948

Contact Information

Francois Brochet
Boston University - Department of Accounting ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
Patricia L. Naranjo
Rice University ( email )
6100 South Main Street
McNair Hall - Room 343
Houston, TX 77005-1892
United States
7133485386 (Phone)
Gwen Yu (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 383
Boston, MA 02163
United States
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