Executive cues of organizational virtue and market performance: Creating value during times of earnings uncertainty

Abstract

This study investigates whether cues of organizational virtue (conscientiousness, courage, empathy, integrity, warmth, and zeal) sent by top managers can create market value in the context of post-earnings announcement conference calls and earnings uncertainty. We contend that executive cues of organizational virtue embedded within earnings conference calls can mitigate shareholders' reactions to earnings surprises and use textual analysis to test for the effect of organizational virtue cues on market performance in a longitudinal sample of 1920 firm-quarter observations. The results suggest that cues of conscientiousness, courage, and zeal are capable of adding back firm value after the posting of earnings surprises, while empathy worsens the market's reaction to earnings surprises. Integrity and warmth were not found to have an effect.