Do Managers’ Foreign Accents Influence Investment Decisions?

• In Event: Investor Reactions to Management Disclosures

Abstract

Reactions to earnings calls are sensitive to subtle features of managers’ speech, but little is known about the effect of foreign accents in this setting. Foreign-accented CEOs may avoid holding calls in English for fear of punishments from investors with negative stereotypes. We provide theory and supporting experimental evidence that this concern is not valid. We find that investors who listen to a nonnative- (versus native-) accented CEO’s call are more willing to invest in a firm, but only when the disclosure contains bad news. Theory indicates that nonnative accents and the CEO position give rise to conflicting stereotypes. Because bad news stimulates further processing of management’s disclosure, investors receiving bad news are motivated to engage in effortful processing to reconcile these stereotypes. This reconciliation leads investors to ascribe exceptional characteristics to nonnative accented CEOs, increasing the attractiveness of the company. Results of a second experiment support the theorized process.

Authors

• Leonardo Portugal Barcellos, Emory University

• Kathryn Kadous, Emory University