Working Paper: NBER ID: w23425
Authors: Micha Dzielinski; Alexander Wagner; Richard J. Zeckhauser
Abstract: Managers conducting earnings conference calls display distinctive styles in their word choice. Some CEOs and CFOs are straight talkers. Others, by contrast, are vague talkers. Vague talkers routinely use qualifying words indicating uncertainty, such as “approximately”, “probably”, or “maybe”. Analysts and the stock market attend to the style of managerial talk. They find earnings news less informative when managers are vague; they respond less and more slowly as a result. Thus, quantitative information and straightforward contextual information prove to be complements. Vague communications have the potential benefit of tamping down over-optimistic analysts expectations.
Keywords: Managerial Communication; Earnings Conference Calls; Market Reactions; Vagueness; Investor Relations
JEL Codes: G14; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| earnings response coefficient (ERC) (M12) | stock prices react to earnings surprises (G14) |
| managerial vagueness in earnings conference calls (M12) | earnings response coefficient (ERC) (M12) |
| managerial vagueness in earnings conference calls (M12) | stock prices react to earnings surprises (G14) |
| vagueness in responses (C83) | market reactions (G10) |
| vagueness in responses (C83) | less informative earnings (G14) |