Review of Accounting Studies
December 2018 , Volume 23, Issue 4, pp 1315–1354 | Cite as
Manager-analyst conversations in earnings conference calls
Jason V. Chen
Venky Nagar
Jordan Schoenfeld
First Online: 11 July 2018
Prior research finds that intraday stock prices move considerably during the discussion period of earnings conference calls. In this study, we explore what features of the manager-analyst dialogue during the discussion drive these price movements. We textually analyze the tone of managers and analysts and find that intraday prices react significantly to analyst tone, but not to management tone, for the full duration of the discussion. This effect strengthens when analyst tone is relatively negative. We then present intraday visual evidence that analysts are more neutral than managers over the call and that the tones of both parties drift downward as the call progresses. Overall, our findings illustrate how manager-analyst information exchanges evolve on earnings calls and indicate that analysts are the participants on earnings calls whose comments move stock prices during the discussion.
Conference calls Corporate disclosure Financial analysts
G14 G20 D83
We appreciate the helpful comments and suggestions from two anonymous reviewers, Patricia Dechow (the editor), Andrei Shleifer, and seminar participants at Arizona State University, Carnegie Mellon University, HKUST, London Business School, and the University of Michigan. We also thank Justin Lahart for profiling this study in The Wall Street Journal.
Appendix A: Sample of Remarks from Earnings Conference Calls from 2002 to 2013
Positive words
Negative words
"... the inside the regional mall stores were the ones that were problematic. Can you break out the average weekly sales or confirm that and sort of give us a sense of that differential?"
California Pizza Kitchen, Oct. 23, 2003
"Al, you've done a great job of positioning the company to the future in terms of external changes ... Take us through your growth parameters, growth focus; what do you think you can do?"
H.B. Fuller Company, Sept. 24, 2003
Management Comment
"Looking forward, we see pullet placements, which is usually a good indicator, being at a small percentage increase, basically keeping up, it would seems to me, like with population growth. So I don't see any major supply increases going forward. Demand continues to be good."
Gold Kist, Inc., Feb. 9, 2005
"Thirdly, and this is probably the most honest thing I can give everybody who is on this telephone call, we've dropped the ball a little bit this last period. With the end of the overall refi period, our varying programs we usually emphasize in terms of kind of a guarding against prepayments seemed to disappear a little."
BankUnited, FSB, Jan. 19, 2005
The bolded words represent words from our positive and negative tone dictionaries.
Appendix B: Variable Definitions
Variable*
Tone and Returns Measures
Analyst Q&A Toneit
(Analyst positive wordsit - analyst negative wordsit) / (analyst positive wordsit + analyst negative wordsit)
Thomson Reuters Call Transcript
Management Presentation Toneit
(CEO & CFO positive wordsit - CEO &CFO negative wordsit) / (CEO & CFO positive wordsit + CEO & CFO negative wordsit)
Management Q&A Toneit
(CEO & CFO positive wordsit - CEO & CFO negative wordsit) / (CEO & CFO positive wordsit + CEO & CFO negative wordsit)
TAQ Abnormal Returnsit
Holding period return from the start to the end of the time interval being measured, net of the value weighted market return over the same time
Trade and Quote (TAQ) Database
Individual Analyst Outputs for Analysts Matched from Conference Call Transcript
Individual Δ EPS Forecastita
(Analyst EPS forecast for quarter t + 1 measured at end of day + 20 - analyst EPS forecast for quarter t + 1 measured at end of day 0), 0 if no change
I/B/E/S
Individual Δ Price Targetita
(Stock price target at end of day + 20 - stock price target at end of day 0) / stock price target at end of day 0, 0 if no change
Individual Δ Recommendationita
Indicator variable that equals 1 if analyst upgrades stock, -1 if analyst downgrades stock, and 0 for no recommendation change from end of day 0 to end of day + 20 (we do not distinguish between different types of upgrades and downgrades)
Time-Varying Firm Variables
Earnings Surpriseit
(Actual EPSit - analyst consensus mean forecast EPSit) / stock price at fiscal quarter end dateit
Large Positive Surpriseit
Indicator that equals 1 if earnings surprise is in top 20% of sample earnings surprisesit
Large Negative Surpriseit
Indicator that equals 1 if earnings surprise is in bottom 20% of sample earnings surprisesit
Meet/Beat Analyst Forecastit
Indicator that equals 1 if actual EPS equals or exceeds analyst consensus mean forecast EPSit
Sizeit
Log of total assetsit
Compustat
Market to Bookit
Market valueit / book value of assetsit
Compustat, CRSP
ROAit
Income before extraordinary itemsit / total assetsit
Log of Analyst Followingit
Log of outstanding analyst EPS forecasts at conference call dateit
S.D. of Analyst EPS Forecastsit
Standard deviation of analyst EPS forecasts scaled by stock price on conference call dateit
Institutional Ownershipit
Percentage of common stock held by institutional 13F filers at fiscal quarter end dateit
Thomson Reuters 13F Holdings Database
Cumulative Abnormal Returns (CAR)it
Firm returns from CRSP net of the value weighted market return
Abnormal Institutional Tradingit
Abnormal daily institutional trading imbalance (net of control period; see Section 2 for precise equations)
Ancerno
Conference Call Attribute Variables
Log of Total Wordsit
Log of total words spoken by CEO & CFO and analystsit
Log of Pres. Wordsit
Log of total words spoken by CEO & CFO during presentation portion of callit
Log of Mgmt. Q&A Wordsit
Log of total words spoken by CEO & CFO during Q&A portion of callit
Log of Analyst Q&A Wordsit
Log of total words spoken by analysts during Q&A portion of callit
Log of Mgmt. Pres. Fin. Wordsit
Log of total financially oriented words (Matsumoto et al., 2011) spoken by CEO & CFO during presentation portion of callit
Log of Mgmt. Q&A Fin. Wordsit
Log of total financially oriented words (Matsumoto et al., 2011) spoken by CEO & CFO during Q&A portion of callit
Log of Analyst Q&A Fin. Wordsit
Log of total financially oriented words (Matsumoto et al., 2011) spoken by analysts during Q&A portion of callit
Log of Mgmt. Pres. FLSit
Log of total forward-looking words (Matsumoto et al., 2011) spoken by CEO & CFO during presentation portion of callit
Log of Mgmt. Q&A FLSit
Log of total forward-looking words (Matsumoto et al., 2011) spoken by CEO & CFO during Q&A portion of callit
Log of Analyst Q&A FLSit
Log of total forward-looking words (Matsumoto et al., 2011) spoken by analysts during Q&A portion of callit
Morning Callit
Indicator variable that equals 1 if call starts before noon EST, 0 otherwise
*Balance sheet and income statement data are for the fiscal quarter that precedes the call date. Index it represents firm i's conference call for year-quarter t. Index a represents the individual analyst. Day 0 is the conference call day.
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© Springer Science+Business Media, LLC, part of Springer Nature 2018
Email authorView author's OrcID profile
1.University of IllinoisChicagoUSA
2.University of MichiganAnn ArborUSA
3.Georgetown UniversityWashingtonUSA
Chen, J.V., Nagar, V. & Schoenfeld, J. Rev Account Stud (2018) 23: 1315. https://doi.org/10.1007/s11142-018-9453-3
First Online 11 July 2018
DOI https://doi.org/10.1007/s11142-018-9453-3
Publisher Name Springer US
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