The Information Role of Earnings Conference Call Tone: Evidence from Stock Price Crash Risk

42 Pages Posted: 1 Nov 2018

See all articles by Xi Fu

Xi Fu

University of Liverpool

Xiaoxi Wu

Bocconi University - Department of Accounting

Zhifang Zhang

Warwick Business School

Date Written: August 2018

Abstract

This paper investigates how the disclosure tone of earnings conference calls predicts future stock price crash risk. Using U.S. public firm earnings conference call transcripts from 2010 to 2015, we find that firms exhibiting more pessimistic tone during the current year-end call experience higher stock price crash risk in the coming year. Additional analyses suggest managerial truthful disclosure as a possible explanation underlying the predictability of conference call tone. Our results shed light on the long-term information role of the tone of corporate voluntary disclosure by exploring the setting of extreme future downside risk where managers may have incentives to communicate truthfully and disclose bad news.

Keywords: Stock price crash risk, Earnings conference calls, Tone, Textual analysis, Voluntary disclosure

JEL Classification: D80, G10, G12, G14, G30, M41

Suggested Citation

Fu, Xi and Wu, Xiaoxi and Zhang, Zhifang, The Information Role of Earnings Conference Call Tone: Evidence from Stock Price Crash Risk (August 2018). Available at SSRN: https://ssrn.com/abstract=3254134 or http://dx.doi.org/10.2139/ssrn.3254134

Xi Fu (Contact Author)

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Xiaoxi Wu

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136
Italy

Zhifang Zhang

Warwick Business School ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
163
Abstract Views
1,004
rank
183,580
PlumX Metrics