Who Listens to Corporate Conference Calls? The Effect of 'Soft Information' on Institutional Trading

Abstract

Conference calls provide a public venue through which stock analysts simultaneously interact, in large numbers, with firm management. Using a comprehensive database of transcribed U.S. corporate conference calls, we find that institutional investors trade immediately and throughout the quarter in response to the “tone” (expressed sentiment) of calls. Institutional trading is especially related to the degree of information revealed during the calls; call information revelation drives subsequent analyst recommendation changes, further contributing to prolonged post-call institutional trading. Our results suggest that conference calls facilitate price discovery as an important conduit that shapes a stock’s information environment and motivates institutional trading.

Keywords: conference calls; institutional holdings; sentiment analysis

JEL Classification: G23; G12