What Makes Conference Calls Useful? The Information Content of Managers' Presentations and Analysts' Discussion Sessions

Abstract

Conference calls held in conjunction with an earnings release have become increasingly common in recent years, yet there is little evidence regarding the reasons that these calls are incrementally informative over the accompanying press release. Using a sample of more than 10,000 conference-call transcripts, we examine the information content of both segments of the call—the presentation and the discussion segment. We find that both segments have incremental information content over the accompanying press release. However, discussion periods are relatively more informative than presentation periods, and this greater information content is positively associated with analyst following. We also find that managers provide increased disclosures during the presentation segment when firm performance is poor, but relatively more information is released during discussion periods in these circumstances. Overall, our results are consistent with the notion that active analyst involvement in conference calls increases the information content of the calls, particularly when firm performance is poor.

Accounting narratives and impression management

“…• Conference calls (Matsumoto et al, 2011). Davis and Tama-Sweet (2012) find the news content / tone varies depending on the disclosure vehicle.…”

Predicting Fraud from Quarterly Conference Calls: A Small-Sample Study of Scripted Language

“…These calls generally contain information above what is contained in the accompanying press release of the company (Matsumoto et al 2011). Additional analyses of these calls includes voice patterns, such as cognitive dissonance (Hobson et al 2012;Mayew and Venkatachalam 2012).…”

“…Rehearsal is expected to make it more difficult for human judges to detect deceptive statements (deTurck and Miller 1990;Littlepage and Pineault 1985). One reason that investors follow conference calls is the disclosure of new information above press releases and financial statements (Matsumoto et al 2011); however, Lee (2014) found that when scripting was used, firms disclosed less information. Because the deceptive executives are attempting to convince the audience that what they say is true, I believe they will stick closer to a script to maintain consistency and to avoid inadvertently disclosing damaging information.…”

Value Creation in M&A Transactions, Conference Calls, and Shareholder Protection

“…They are mostly utilized in concordance with earnings announcements to provide detailed and additional information over the respective press release (Tasker 1998;Frankel et al 1999;Matsumoto et al 2011;Bassemir et al 2013;Mayew et al 2013;Green et al 2014a;Cicon 2017). Confronted by the adverse selection and undervaluation problem arising from perceived information asymmetry, the management can try to enhance the investors' understanding of the firm's current situation and future perspectives through voluntary disclosure and thereby signal value creation (Lev and Penman 1990;Verrecchia 2001;Healy and Palepu 2001).…”

“…The interaction between the management and the audience is thought to facilitate a customized information transfer adapted to the informational demand of capital market participants (Mayew and Venkatachalam 2012). Through the revelation of an incrementally higher informational content above the respective press release in combination with broad information dissemination through large-scale telephone conferences, conference calls are assumed to contribute to the reduction of information asymmetry (Tasker 1998;Frankel et al 1999;Matsumoto et al 2011). …”