Engagement in Earnings Conference Calls: A Multi-Method Examination
37 Pages Posted: 14 Feb 2019
Date Written: February 5, 2019
Research on earnings conference calls documents that the question and answer (Q&A) portion is informative to market participants, noting the role of analyst involvement. However, prior studies on earnings calls focus on the behavior of managers and analysts individually. In this study, we use the interaction itself as our unit of analysis, and examine whether characteristics of the interaction provide information to market participants. Drawing on research in psychology and sociolinguistics, we provide experimental and archival evidence that conversational engagement between managers and analysts in earnings calls is a signal of the importance of the interaction. We use linguistic style matching (LSM), a form of verbal coordination, as our proxy for conversational engagement. Using a controlled experiment with MBA students, we first demonstrate that LSM is a reasonable proxy for conversational engagement between managers and analysts. That is, LSM is greater when managers have more incentives to engage with analysts. Next, using a unique hand-collected archival dataset comprised of audio recordings and textual transcripts from over 2,400 earnings calls, we show that engagement is informative to market participants. Our findings contribute to the literature on the information content of earnings calls.
Keywords: Conference Calls, Linguistic Style Matching, Engagement, Price Formation, Market Microstructure
JEL Classification: M40, M41
Suggested Citation: Suggested Citation