Can Investors Detect Managers' Lack of Spontaneity? Adherence to Predetermined Scripts during Earnings Conference Calls

• 成果类型: Article
• 署名作者: Lee, Joshua
• 署名单位: State University System of Florida; Florida State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51135
• 发表日期: 2016
• 页码: 229-250
• 关键词: md-and-a; information-content; authorship attribution; SHAREHOLDER LITIGATION; disclosure; forecasts; analysts; language; DISCRIMINATION; determinants

摘要

This paper examines whether market participants infer negative information about future unexpected firm performance when managers adhere to predetermined scripts when responding to questions during earnings conference calls. I argue that managers respond to questions from prepared scripts to avoid the disclosure of bad news. Using a measure of the adherence to predetermined language, I provide evidence that a lack of spontaneity is negatively associated with the market reaction to the call and with the abnormal returns in the subsequent quarter. I further find that analysts downgrade their forecasts following these calls. I also provide evidence that adherence to predetermined language is negatively associated with future unexpected firm accounting performance, supporting investors' negative response to it. Finally, I find that bid-ask spreads increase and firms are less likely to guide future earnings when managers adhere to the predetermined language of a script, suggesting that firms provide less information, not more, during these calls.