Task-Oriented Speech in Earnings Conference Calls and Information Processing

Abstract

We examine the impact of task-oriented speech (TOS) on market participants’ ability to process information, where TOS quantifies a more direct method of communication. Conference calls with greater TOS are associated with lower ex-post total and idiosyncratic volatility and abnormal trading volume, even after controlling for ex-ante implied volatility. TOS also impacts financial analysts: forecast error, magnitude of revisions, forecast dispersion and disagreement are lower during the subsequent quarter. Overall, greater use of TOS increases the ability of financial markets to effectively evaluate the information within an earnings conference call.

Keywords: Information Processing, Conference Calls, Natural Language Processing, Financial Markets

JEL Classification: G00, G10, G12, G14