AAA Spark Meeting of Regions

Executive Disclosure Behaviors in Earnings Conference Calls around Actual Share Repurchases

• In Event: Disclosures and Analytst Forecasts

Abstract

We apply textual analysis to corporate earnings conference calls to examine whether managers strategically change their disclosure behaviors in the call prior to an actual share repurchase. Our findings suggest that in the call immediately prior to an actual repurchase, managers tend to use a more negative tone, rely more on scripted responses, and pay more attention towards negative questions from analysts. Such strategic disclosure behaviors lower the market expectation about repurchasing firms and allow repurchasing firms to repurchase their shares at a lower cost. A one unit decrease in tone is associated with 18.94% of repurchasing cost saved. After a share repurchase completion, managers’ tone reverses to be more positive. We also find that in an anticipation of a price drop, managers of repurchasing firms adjust their insider trades accordingly by reducing their net sale volume to avoid personal wealth loss.

Authors

• Hong Kim Duong, Old Dominion University

• Chuong Do, University of Nevada Reno