Earnings Conference Calls and Institutional Monitoring: Evidence from Textual Analysis

Abstract

We document the effects of institutional investors on the qualitative information disclosure of firms within earnings conference calls. Utilizing conference call and institutional ownership data between 2005 and 2016, we find that aggregate institutional ownership dampens conference call tone. The effects of institutional investors on tone are causal based on results from indexed firms. Consistent with hypotheses regarding investor’s horizon, short-term institutional investors are associated with greater conference call tone, as well as potentially opportunistic trading, while long-term investors decrease tone. Market participants can generally disentangle the impact of institutional investors on tone based on investor type.

Keywords: institutional investors, conference call, textual tone, indexing

JEL Classification: G14, G23, G30, O16