Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls

Abstract

Using a set of proprietary records, we examine who consumes quarterly earnings conference calls and under which circumstances the calls are consumed. While there is significant interest in calls by institutional investors and sell-side analysts, we find that investors who do not hold a position in the firm are a leading consumer. We show that buy-side non-holders who consume calls are more likely to hold positions in competitors and to purchase the stock in the future. In addition, many investors who hold large positions only consume calls periodically. We also document a benefit of consuming calls by finding that the consumption of calls is associated with more informed trading decisions. Overall, our investigation illuminates the actual consumption of conference calls by different consumers and the potential benefits of consuming additional firm disclosures.

Analyst Coverage and Corporate Environmental Policies

“…The first channel--earnings conference calls--suggests that decreases in analyst coverage lead to higher levels of corporate pollution by reducing direct monitoring by analysts during conference calls. Earnings conference calls are an important platform for firms to disclose information to capital markets and are informative to stakeholders of the firm (Heinrichs, Park, and Soltes (2019)).…”

To read or to listen? Does disclosure delivery mode impact investors' reactions to managers' tone language?

“…Third, investors may face choices about how they consume conference calls. Little is known about who consumes the calls, when, and by what mode, excepting an analysis of a private sample of Thomson Reuters subscribers by Heinrichs et al (2019). Historically, conference calls were experienced in the oral delivery mode, with written transcripts available only to investors who purchased them through third‐party providers, like Thompson Reuters.…”

“…The percentage of live conference call participants who are professional versus nonprofessional investors is unknown because conference call consumption is typically unobserved, beyond the sell-side analysts who ask questions during the live calls (Heinrichs et al, 2019). However, Reg FD was motivated by the demand for equal access to information for all parties.…”

Buy‐Side Analysts and Earnings Conference Calls

“…It is important to note that participation by any type of analyst on a company's earnings conference call is not a random or first-come, first-serve occurrence. An analyst who wants to ask a question calls a specific phone number (Heinrichs, Park, and Soltes [2015]) and enters a question queue using a touch-tone keypad, and then management has discretion over whom to select from the queue to ask the next question (Skinner [2003], Mayew [2008], Mayew, Sharp, and Venkatachalam [2013]). Hence, our observations of buy-side analysts asking a question is a joint outcome of analysts wanting to ask a question and management selecting them to ask a question.…”

“…We posit that, for either reason, buy-side 2 Call, Sharp, and Shohfi [2016] superseded Shohfi [2014]. Another study of the conference call setting that includes buy-side analysts is Heinrichs, Park, and Soltes [2015], which uses proprietary data on institutional clients of Thomson Reuters who accessed audio recordings and transcript records of earnings conference calls to shed light on the different types of market participants who "consume" the calls. They find that 57% of timely consumers (those who access on the day of the call) are buy-side analysts and slightly more than half of them do not own the company's stock prior to the call (as of the most recent calendar quarter-end).…”