An Investigation of Analysts' Praise of Management During Earnings Conference Calls

Journal of Behavioral Finance, 2017, Volume 18, Issue 1, Pages 65-77.

Posted: 4 Nov 2015 Last revised: 1 Apr 2017

Jonathan A. Milian

Florida International University (FIU)

Antoinette L. Smith

Florida International University (FIU)

Date Written: February 8, 2017

Abstract

Through the textual analysis of a large sample of earnings conference calls, the authors find that analysts praise management on over half of earnings conference calls by saying complimentary phrases such as “congratulations on the great quarter.” The results show that analysts’ complimentary phrases reflect the nature of the information released at the earnings announcement. The authors find that the amount of praise by analysts on an earnings conference call is strongly associated with the earnings surprise and to a greater extent the earnings announcement stock return. They also find that there is value to investors in tracking analysts’ flattery of management during earnings conference calls, as it predicts abnormal stock returns over the following quarter. The findings, which are incremental to prior research on the tone of earnings conference calls, highlight a previously ignored aspect of analyst feedback.

Keywords: Earnings conference calls, textual analysis, analyst feedback, compliments, praise, flattery

JEL Classification: G14, M41

Suggested Citation

Milian, Jonathan A. and Smith, Antoinette L., An Investigation of Analysts' Praise of Management During Earnings Conference Calls (February 8, 2017). Journal of Behavioral Finance, 2017, Volume 18, Issue 1, Pages 65-77.. Available at SSRN: https://ssrn.com/abstract=2685437

Jonathan A. Milian (Contact Author)

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Antoinette L. Smith

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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