The Price of Silence: When No One Asks Questions During Conference Calls
University of Texas at Austin - Red McCombs School of Business
Tilburg University - Tilburg School of Economics and Management
January 9, 2015
We document unintended consequences – a temporarily higher bid-ask spread and a negative immediate stock price reaction – of providing conference calls when managers fail to elicit questions during the call’s question-and-answer (Q&A) session. Ceteris paribus, in comparison to a propensity score matched control group, the increase in bid-ask spread is 13% higher and next-day abnormal returns are 80 basis points lower (equivalent to $5-$6 million per call) for zero-question calls. Similar results hold using two alternative identification strategies: using a firm’s own history as its control and an instrumental variable approach. Our results further extend to conference calls in which the number of questions raised falls far below expectations. This study has important implications for managers in improving their investor relations programs post-Regulation Fair Disclosure.
Number of Pages in PDF File: 60
Keywords: conference calls, interactive communication, information asymmetry, investor relations
JEL Classification: M41, G12, G14working papers series
Date posted: June 14, 2014 ; Last revised: January 10, 2015
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