Multi-Method Evidence on Investors’ Reactions to Managers’ Self-Inclusive Language
51 Pages Posted: 13 Apr 2017 Last revised: 14 Nov 2017
Date Written: November 4, 2017
We investigate whether a common element of managers’ language, self-inclusive language (SIL), influences investors' reactions to accounting disclosures. We identify two types of SIL: individual SIL which includes first-person singular pronouns (e.g., I, me) and collective SIL which includes first-person plural pronouns (e.g., we, us). We predict that investors react more positively to individual SIL than collective SIL when the disclosure contains bad news. Specifically, we expect that individual SIL increases investors’ perceptions of managers’ credibility and control over firm outcomes, which are viewed favorably when the disclosure contains bad news. To test our hypothesis, we conduct an experiment and analyze market reactions to a large sample of earnings conference calls. The results from both methods support our hypothesis. Overall, our study provides multi-method evidence of the impact of a subtle and easily-overlooked component of managers’ language on investors’ judgments and decisions.
Keywords: Disclosure; Self-Inclusive Language; Pronouns; Investment Decision
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