How to Talk Down Your Stock Returns

37 Pages Posted: 8 Mar 2019 Last revised: 20 Apr 2020

See all articles by Andreas Barth

Andreas Barth

Goethe University Frankfurt - Department of Finance

Sasan Mansouri

Goethe University Frankfurt - Department of Finance

Fabian Woebbeking

Goethe University Frankfurt - Department of Finance

Severin Zörgiebel

Goethe University Frankfurt

Date Written: April 19, 2020

Abstract

We analyze two competing hypotheses of how markets perceive (a lack of) factual language when senior management verbally conveys information in earnings calls. On one hand, avoiding complex terminology in favor of a broader language could improve the accessibility of financial disclosures. On the other hand, markets could interpreted the absence of precise financial terminology as blathering, i.e. obfuscating information by ‘beating around the bush.’ We observe lower cumulative abnormal returns and a higher implied volatility following earnings calls where managers use a less precise language, supporting the argument that an excessive use of non-factual language is perceived as blathering that retards the reduction of information asymmetries. ‘Beating around the bush’ is particularly pronounced when earnings management is more likely, when analysts' questions are tougher, and when last quarters' return on equity was poor.

Keywords: conference calls, management blathering, corporate disclosure, stock returns

JEL Classification: D82, G12, G14, G30

Suggested Citation

Barth, Andreas and Mansouri, Sasan and Woebbeking, Fabian and Zörgiebel, Severin, How to Talk Down Your Stock Returns (April 19, 2020). Available at SSRN: https://ssrn.com/abstract=3336671 or http://dx.doi.org/10.2139/ssrn.3336671

Andreas Barth

Goethe University Frankfurt - Department of Finance ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60629
Germany

Sasan Mansouri

Goethe University Frankfurt - Department of Finance ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
+49(0)6979833727 (Phone)

HOME PAGE: http://www.sasanm.ir

Fabian Woebbeking (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany
+49 (69) 798 33731 (Phone)

Severin Zörgiebel

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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