'Stiff Business Headwinds and Uncharted Economic Waters': The Use of Euphemisms in Earnings Conference Calls

Forthcoming, Management Science

Posted: 17 Jul 2017 Last revised: 22 Jan 2021

See all articles by Kate Suslava

Kate Suslava

Bucknell University Freeman College of Management

Date Written: December 15, 2018

Abstract

This paper studies whether euphemisms obfuscate the content of earnings conference calls and cause investors to underreact. I argue that managers’ use of euphemisms can alleviate the impact of bad news and delay the market reaction to adverse information. Using a dictionary of corporate euphemisms, I find that their use by managers—but not by analysts—is negatively associated with both immediate and future abnormal returns, and their frequency moderates the negative market reaction to bad earnings news. Finally, stock underreaction is more pronounced on busy earnings announcement dates, when investor attention is distracted.

Keywords: Conference Calls, Euphemisms, Abnormal Returns, Content Analysis

JEL Classification: G12, G14, M41

Suggested Citation

Suslava, Kate, 'Stiff Business Headwinds and Uncharted Economic Waters': The Use of Euphemisms in Earnings Conference Calls (December 15, 2018). Forthcoming, Management Science, Available at SSRN: https://ssrn.com/abstract=2876819 or http://dx.doi.org/10.2139/ssrn.2876819

Kate Suslava (Contact Author)

Bucknell University Freeman College of Management ( email )

701 Moore Ave
Lewisburg, PA 18837
United States

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