It’s not what you say, but how you say it – Charismatic rhetoric in earnings conference calls

74 Pages Posted: 16 May 2022 Last revised: 15 May 2023

See all articles by Wolfgang Breuer

Wolfgang Breuer

RWTH Aachen University

Andreas Knetsch

Leibniz Institute for Financial Research SAFE; RWTH Aachen University

Sami Uddin

RWTH Aachen Department of Finance

Date Written: February 1, 2023

Abstract

Using a commercially available pre-trained neural network for natural language processing, this paper proposes a measure of the extent of charisma in the rhetoric of managers in the question-and-answer (Q&A) part of earnings conference calls. Our empirical results shows that more charismatic communication by managers leads to more favorable stock market reactions, to more positive analyst recommendations, and to higher trading activity. In fact, the effects of charismatic rhetoric are stronger than those of tone measures based on previously established business-specific word lists. Contrary to these business-specific tone measures, charismatic rhetoric does however not truthfully reveal information on the firm’s future performance. This indicates that charismatic rhetoric is only a rhetorical means for impression management. In order to remedy the black box character of the neural network underlying our measurement, we identify phrases typical for (un)charismatic rhetoric in conference call. We use these phrases to construct a fully transparent wordcount-based measure of charisma in rhetoric, which produces similar results as the neural network approach. Overall, our results demonstrate that market participants are highly susceptible to purely rhetorical means.

Keywords: Textual Analysis, Managerial Rhetoric, Managerial Affective States, Stock Market Reactions, Earnings Management

Suggested Citation

Breuer, Wolfgang and Knetsch, Andreas and Uddin, Sami, It’s not what you say, but how you say it – Charismatic rhetoric in earnings conference calls (February 1, 2023). Available at SSRN: https://ssrn.com/abstract=4098568 or http://dx.doi.org/10.2139/ssrn.4098568

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Andreas Knetsch (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Sami Uddin

RWTH Aachen Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
285
Abstract Views
1,159
Rank
218,051
PlumX Metrics