The Effects of Managers' Charismatic Visions on Securities Analysts' Responses to Buyback Non-Completion

• In Event: Economic Sociology Section Roundtables
  In Refereed Roundtable (60 minute): Roundtable 8: Organizational Strategies

Abstract

This paper explores the influence of management teams' emotional tone in earnings conference calls on analyst forecast revisions following earnings announcements in which share repurchase completion rates are disclosed. Classic sociological research showed that managers use share repurchase authorizations as a signal of commitment to shareholder value governance norms. Later research showed that securities analysts exhibited pluralistic ignorance. They had a negative opinion of share repurchases but underestimated how negative other analysts' opinions of them were. However, analysts' opinions of repurchases may depend on managers' social ability. Organizational scholars have shown that CEOs' "charismatic vision" projected in shareholders' letters influences the sentiment and variation in subsequent analyst recommendations. More recent sociological research has shown that managers' performances in earnings calls influence the variation in subsequent analyst earnings forecasts. Building on existing organizational theory, I define a measurement of charismatic vision in earnings conference calls. I theorize that managers' emotional framing of the results of the prior quarter and their expectations for the future will reduce the influence of low share repurchase completion rates on the direction and magnitude of changes in analyst sentiment.

Author

• John M. Towey, Harvard University