Managerial Attention to Financial Markets: Evidence from Managers' Own Discussion

Abstract

A long literature argues that corporate managers pay close attention to financial markets, yet attention itself is difficult to observe directly. I develop a novel measure of managerial attention using managers’ own discussions of market conditions during earnings calls for nearly all U.S. public firms from 2007-2024. Managers with greater financial-market attention exhibit higher investment-price sensitivity, respond more effectively to financing opportunities, and are more likely to withdraw acquisitions following adverse announcement returns. These findings are robust to controls for market conditions and cost of capital, identifying managerial attention as a key mechanism through which financial markets shape real decisions.

Keywords: Attention to Financial Markets, Earnings Calls, Machine Learning, Real Effects of Financial Markets, Big Data, Market Feedback Effects, Market Timing, Mergers and Acquisitions

JEL Classification: G14, G41, G32, C55, D82, D83, G31, G34