Monetary Policy and Corporate Communication: Evidence From Conference Calls

Abstract

Using a dataset that is comprised of conversations between managers and analysts during corporate conference calls and natural-language-processing techniques, we document that macroeconomic issues are frequently discussed in conference calls and convey monetary policy information. By examining short-time windows centered on monetary-policy communication days, we find that the linguistic tone of Fed communication drives the tone of macro-related dialogues in conference calls which in turn affects contemporaneous stock returns. Additional analyses reveal that the tone-transmission effect is stronger in more recent years. Our results highlight the importance of conference calls as venues that help managers convey to analysts and investors how the macroeconomy affects their corporations.

Keywords: Corporate communication; Earnings conference calls; Monetary policy.

JEL Classification: M41; E52; E58; D83