The Effect of Manager-Specific Optimism on the Tone of Earnings Conference Calls

Abstract

The use of more or less optimistic language in corporate disclosures has been the subject of increased interest in the academic literature. We add to this stream of research by examining the manager-specific component in the tone of earnings-announcement related conference calls. We find that the tone of conference calls that is not explained by current performance, future performance, and strategic incentives has a significant manager-specific component. We also find that tone is significantly associated with manager-specific factors such as early career experiences, and involvement in charitable organizations. Taken together, our findings indicate that, in addition to reflecting current and future performance, the use of more or less optimistic language in conference calls is significantly influenced by a manager-specific tendency to be optimistic or pessimistic. We also find some evidence of a manager-specific component to conference call returns, which is consistent with manager-specific optimism impacting investors’ interpretation of disclosures made in conference calls.

Keywords: managerial style, conference call, tone

JEL Classification: M41