Management Accounting Section Midyear Meeting

Strike the right tone: Financial analysts’ strategic tone in earnings conference calls

• In Event: Top Management and Earnings

Abstract

This study elaborates on the questions how and when financial analysts strategically phrase questions negatively during earnings conference calls in order to acquire more information from managers. We predict and find that financial analysts’ use of negative tone during earnings conference calls is negatively related to managerial deception and positively related to financial analysts’ consensus forecast accuracy. We provide evidence that financial analysts especially use negative tone at the beginning of their relationship with the CEO, where they arguably have a higher demand for information in order to generate accurate earnings forecasts. Consistently, our results suggest that negative tone is more effective in reducing the likelihood of managerial deception in the turnover year. Finally, we find that financial analysts more strongly make use of negative tone during earnings conference calls when firms are exposed to political risk. The study contributes to prior cross-disciplinary research on strategic questioning and information quality using archival data and textual analysis techniques. Since strategic information exchanges are a common means of communication in many business contexts, the study has important practical implications.

Authors

• Julia Katharina Haag, Ludwig-Maximilians-Universitaet

• Christian Hofmann, Ludwig-Maximilians-Universitaet

• Susanne Klausing, Ludwig-Maximilians-University Munich

• Nina Schwaiger, Ludwig-Maximilians-Universitaet