Managers’ Cultural Background and Disclosure Attributes

57 Pages Posted: 9 Oct 2016 Last revised: 8 Aug 2018

See all articles by Francois Brochet

Francois Brochet

Boston University - Department of Accounting

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Patricia L. Naranjo

Rice University

Gwen Yu

University of Michigan

Date Written: July 25, 2018

Abstract

We examine how a manager’s ethnic cultural background affects their communication with investors. Using a sample of earnings conference call transcripts with 24,901 executives from 42 countries, we find that managers from ethnic groups that have a more individualistic culture use a more optimistic tone and exhibit greater self-reference in their disclosure narratives. Managers’ ethnic culture has a lasting effect on their narratives, an effect that persists even for executives whose work experience later exposes them to different ethnic cultures. The effect of ethnic heritage is observed in dialogues that reflect real time interactions (i.e., Q&As) and is less pronounced in the scripted, less spontaneous portion of the calls (i.e., management discussion). Analysts respond positively to an optimistic tone, but only those who share the manager’s ethnic background adjust their earnings forecasts for the cultural component of managerial tone. The findings suggest that managers’ ethnic background has a significant effect on how they communicate with the capital market and how the market responds to a disclosure event.

Keywords: Corporate culture, Disclosure tone, Individualism, Conference calls, Ethnic group

JEL Classification: G15; M41

Suggested Citation

Brochet, Francois and Miller, Gregory S. and Naranjo, Patricia L. and Yu, Gwen, Managers’ Cultural Background and Disclosure Attributes (July 25, 2018). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2848405 or http://dx.doi.org/10.2139/ssrn.2848405

Francois Brochet

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Patricia L. Naranjo

Rice University ( email )

6100 South Main Street
McNair Hall - Room 343
Houston, TX 77005-1892
United States
7133485386 (Phone)

Gwen Yu (Contact Author)

University of Michigan ( email )

701 Tappan Street
R3350
Ann Arbor, MI MI 48109
United States
7347635934 (Phone)

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