The Power of Voice: Managerial Affective States and Future Firm Performance

55 Pages Posted: 23 Jul 2008 Last revised: 24 Jan 2011

See all articles by William J. Mayew

William J. Mayew

Duke University - Fuqua School of Business

Mohan Venkatachalam

Duke University - Fuqua School of Business

Date Written: January 20, 2011

Abstract

We measure managerial affective states during earnings conference calls by analyzing conference call audio files using vocal emotion analysis software. We hypothesize and find that when managers are scrutinized by analysts during conference calls, positive and negative affect displayed by managers are informative about the firm’s financial future. In particular, we find that positive (negative) managerial affect is positively (negatively) related to contemporaneous stock returns and future unexpected earnings. However, analysts do not incorporate the information when forecasting near term earnings. When making stock recommendation changes, however, analysts do incorporate positive affect but not negative affect. We observe market underreaction to negative affect as if market participants follow analyst recommendation changes. This study presents new evidence that managerial vocal cues contain useful information about firms’ fundamentals, incremental to both quantitative earnings information and qualitative “soft” information conveyed by the linguistic content.

Keywords: voice analysis, affective states, firm performance, conference calls

JEL Classification: M41, M43, M45, G29, G14

Suggested Citation

Mayew, William J. and Venkatachalam, Mohan, The Power of Voice: Managerial Affective States and Future Firm Performance (January 20, 2011). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1171102

William J. Mayew (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7781 (Phone)
919-660-7971 (Fax)

HOME PAGE: http://www.fuqua.duke.edu/faculty/alpha/mayew.htm

Mohan Venkatachalam

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7859 (Phone)
919-660-7971 (Fax)

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