Words versus Deeds: Evidence from Post‐Call Manager Trades

Abstract

We examine the impact of conference call tones on the direction and magnitude of subsequent manager trades. Our univariate results show that corporate insiders buy company shares following negative‐tone conference calls and sell shares following positive‐tone conference calls. This inverse call tone–trading pattern holds for both managers’ introductory sessions and subsequent question‐and‐answer (Q&A) sessions. Our multivariate results confirm the univariate call tone–trading patterns and show that contrarian manager trades are mostly driven by managerial selling activity. In contrast to the consistent and strong evidence of managers trading in the opposite direction of their call tones, we find no evidence of managers trading in the same direction of their call tones. We also examine the impact of analyst Q&A challenges on post‐call manager trades. Our findings suggest that managers learn from analyst feedback and adjust their post‐call trades accordingly.

Earnings Conference Calls and Institutional Monitoring: Evidence From Textual Analysis

“…That is, managers may be opportunistic and sell shares following a conference call with inflated tone. For example, Brockman et al () document that managers conduct contrarian trades in the postcall periods using different sources of data. We contribute to the literature by examining the role of institutional ownership on this relation.…”

Private communication and management forecasts: Evidence from corporate site visits

“…Managers can learn from investors indirectly through stock prices which convey information possessed by investors (Chen et al, 2007; Dow & Gorton, 1997; Luo, 2005; Zuo, 2016), or directly through their interactions with investors (Bowen et al, 2018; Brockman et al, 2017), or both.…”

“…This is related to a recent literature about firms' direct interaction with outsiders, including investors, financial analysts, and other intermediaries. Brockman et al (2017) show that managers make more post‐call trades if analysts' tone during Q&A sessions of conference calls are in accordance with management's tone, indicating that managers learn from analysts through Q&A interactions in the conference call. Also, Bowen et al (2018) show that insiders conduct one‐half of their stock sales during in‐house meetings with analysts and that such insider trading outperforms the SZSE market index by 19% during the 180 trading days after the meetings.…”

“…Prior literature has documented that outsiders, such as analysts, have information advantages after private interactions with managers via conference calls, private phone calls, non‐deal roadshows, and face‐to‐face meetings (Bushee et al, 2011, 2017; Green et al, 2014; Solomon & Soltes, 2015). Managers also benefit from private interactions by utilizing the information they have acquired from investors (Brockman et al, 2017; Bowen et al, 2018; Chapman & Green, 2017). Consistent with the previous literature showing that investors have private information (Zuo, 2016), our results add to this strand of literature by documenting that managers can acquire useful information from site visitors to improve forecast accuracy.…”

Empirische Kapitalmarktforschung zu Conference Calls: Eine Literaturanalyse

“…Die in Conference Calls vermittelte Stimmung könnte neben den Handlungen der Investoren auch die des Managements beeinflussen. Wie die Studie von Brockman et al (2017) zeigt, betreiben Manager des durchführenden Unternehmens einen dem Ton des Conference Calls entgegengesetzten Handel mit eigenen Aktien. Daraus folgern die Autoren, dass die hauptsächlich für den Ton verantwortlichen Manager entgegen ihrer eigens vermittelten Stimmung handeln.…”