Number of Numbers: Does Quantitative Disclosure Reduce Uncertainty in Quarterly Earnings Conference Calls?

49 Pages Posted: 2 Feb 2021

See all articles by John L. Campbell

John L. Campbell

University of Georgia - J.M. Tull School of Accounting

Xin Zheng

University of British Columbia

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: December 25, 2020

Abstract

Theoretical research argues that numbers convey more precise information than words. Based on this work, we hypothesize that when managers provide disclosure with a greater proportion of quantitative information in an earnings conference call, investor uncertainty around the call will be lower and, thus, short-window returns around the call will be higher. We offer three main findings. First, we find a positive association between the extent of hard information (i.e., numerical disclosure) in earnings conference calls and short-window stock returns around the call. This result suggests that investor uncertainty is lower when managers provide greater numerical disclosure. Second, we find that this positive association is larger when firms are smaller and have larger stock volatility or analyst forecast dispersion. These results suggest that the effect of numerical disclosure in reducing investor uncertainty is greater when the firm’s information environment is otherwise more uncertain. Finally, we find that this positive association is larger when firms issue a negative earnings surprise. This result suggests that the effect of numerical disclosure in reducing investor uncertainty is greater when the uncertainty of a firm’s performance is greater. Overall, our results suggest that investors react to the extent of hard information (i.e., numerical disclosure) in earnings conference calls.

Keywords: Quantitative Disclosure, Numerical Information, Earnings Conference Calls, Voluntary Disclosure, Textual Analysis

JEL Classification: G14, G12, M41, G10

Suggested Citation

Campbell, John L. and Zheng, Xin and Zhou, Dexin, Number of Numbers: Does Quantitative Disclosure Reduce Uncertainty in Quarterly Earnings Conference Calls? (December 25, 2020). Available at SSRN: https://ssrn.com/abstract=3775905 or http://dx.doi.org/10.2139/ssrn.3775905

John L. Campbell

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706.542.3595 (Phone)
706.542.3630 (Fax)

Xin Zheng (Contact Author)

University of British Columbia ( email )

2053 Main Mall
Vancouver, B.C. V6T 1Z2
Canada

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Avenue
New York, NY 10010
United States

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