IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v60y2025i4p1415-1435.html

Tone Distance: Managerial Tone Divergence and Market Reaction to Earnings Announcements

Author

Listed:
  • Ben Angelo
  • Mitchell Johnston
  • Atul Singh
  • Yun Qing Wan

Abstract

We evaluate the market reaction to the between‐manager variance of tone within an earnings call, which we term Tone Distance. We find that greater differences in Tone Distance are negatively associated with event period returns surrounding earnings announcements. Consistent with the notion that Tone Distance is informative, we show that Tone Distance is a positive predictor of stock volatility, information uncertainty, and operational risks. Tone Distance is inversely related to future growth prospects. Tone Distance also positively predicts monthly stock returns following the earnings announcement. We find that Tone Distance is robust to a variety of alternative constructions and after accounting for analyst tone. Overall, the results are consistent with investors interpreting greater Tone Distance as an information leakage related to the future performance of the firm.

Suggested Citation

  • Ben Angelo & Mitchell Johnston & Atul Singh & Yun Qing Wan, 2025. "Tone Distance: Managerial Tone Divergence and Market Reaction to Earnings Announcements," The Financial Review, Eastern Finance Association, vol. 60(4), pages 1415-1435, November.
    • Handle: RePEc:bla:finrev:v:60:y:2025:i:4:p:1415-1435
    DOI: 10.1111/fire.70002
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/fire.70002
    Download Restriction: no
    File URL: https://libkey.io/10.1111/fire.70002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jason V. Chen & Venky Nagar & Jordan Schoenfeld, 2018. "Manager-analyst conversations in earnings conference calls," Review of Accounting Studies, Springer, vol. 23(4), pages 1315-1354, December.
    2. Tim Loughran & Bill Mcdonald, 2016. "Textual Analysis in Accounting and Finance: A Survey," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 54(4), pages 1187-1230, September.
    3. Anne Beyer & Ilan Guttman, 2012. "Voluntary Disclosure, Manipulation, and Real Effects," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 50(5), pages 1141-1177, December.
    4. Stephan Hollander & Maarten Pronk & Erik Roelofsen, 2010. "Does Silence Speak? An Empirical Analysis of Disclosure Choices During Conference Calls," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 48(3), pages 531-563, June.
    5. Frerich Buchholz & Reemda Jaeschke & Kerstin Lopatta & Karen Maas, 2018. "The use of optimistic tone by narcissistic CEOs," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 31(2), pages 531-562, February.
    6. Brian J. Bushee & Ian D. Gow & Daniel J. Taylor, 2018. "Linguistic Complexity in Firm Disclosures: Obfuscation or Information?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 56(1), pages 85-121, March.
    7. Kristian D. Allee & Matthew D. Deangelis, 2015. "The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 53(2), pages 241-274, May.
    8. Blau, Benjamin M. & DeLisle, Jared R. & Price, S. McKay, 2015. "Do sophisticated investors interpret earnings conference call tone differently than investors at large? Evidence from short sales," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 203-219.
    9. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    10. Angela K. Davis & Isho Tama†Sweet, 2012. "Managers’ Use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus MD&A," Contemporary Accounting Research, John Wiley & Sons, vol. 29(3), pages 804-837, September.
    11. Price, S. McKay & Doran, James S. & Peterson, David R. & Bliss, Barbara A., 2012. "Earnings conference calls and stock returns: The incremental informativeness of textual tone," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 992-1011.
    12. Li, Feng, 2008. "Annual report readability, current earnings, and earnings persistence," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 221-247, August.
    13. John L. Campbell & Hye Seung “Grace” Lee & Hsin‐Min Lu & Logan B. Steele, 2020. "Express Yourself: Why Managers' Disclosure Tone Varies Across Time and What Investors Learn From It," Contemporary Accounting Research, John Wiley & Sons, vol. 37(2), pages 1140-1171, June.
    14. Kellermanns, Franz W. & Walter, Jorge & Floyd, Steven W. & Lechner, Christoph & Shaw, John C., 2011. "To agree or not to agree? A meta-analytical review of strategic consensus and organizational performance," Journal of Business Research, Elsevier, vol. 64(2), pages 126-133, February.
    15. Francois Brochet & Kalin Kolev & Alina Lerman, 2018. "Information transfer and conference calls," Review of Accounting Studies, Springer, vol. 23(3), pages 907-957, September.
    16. repec:eme:aaaj00:aaaj-11-2015-2292 is not listed on IDEAS
    17. Paul Brockman & Xu Li & S. McKay Price, 2015. "Differences in Conference Call Tones: Managers vs. Analysts," Financial Analysts Journal, Taylor & Francis Journals, vol. 71(4), pages 24-42, July.
    18. Li, Feng & Minnis, Michael & Nagar, Venky & Rajan, Madhav, 2014. "Knowledge, compensation, and firm value: An empirical analysis of firm communication," Journal of Accounting and Economics, Elsevier, vol. 58(1), pages 96-116.
    19. William J. Mayew & Nathan Y. Sharp & Mohan Venkatachalam, 2013. "Using earnings conference calls to identify analysts with superior private information," Review of Accounting Studies, Springer, vol. 18(2), pages 386-413, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Devrimi Kaya & Christian Maier & Tobias Böhmer, 2020. "Empirische Kapitalmarktforschung zu Conference Calls: Eine Literaturanalyse [Empirical Capital Market Research on Conference Calls: A Literature Review]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 183-212, June.
    2. Christoph J. Sextroh & Juliane Wutzler, 2025. "Speaking with one voice? Individual preferences and managers’ personal communication style," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 52(1), pages 5-47, February.
    3. Wang, Yang & Chen, Xin & Zhang, Yifei, 2025. "Management tone and corporate information asymmetry in times of pandemic crisis," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 59(C).
    4. Chen, Yuan & Han, Dongmei & Zhou, Xiaofeng, 2023. "Mining the emotional information in the audio of earnings conference calls : A deep learning approach for sentiment analysis of securities analysts' follow-up behavior," International Review of Financial Analysis, Elsevier, vol. 88(C).
    5. Wenyao Hu & Thomas Shohfi & Runzu Wang, 2021. "What’s really in a deal? Evidence from textual analysis of M&A conference calls," Review of Financial Economics, John Wiley & Sons, vol. 39(4), pages 500-521, October.
    6. DeLisle, R. Jared & Grant, Andrew & Mao, Ruiqi, 2024. "Does environmental and social performance affect pricing efficiency? Evidence from earnings conference call tones," Journal of Corporate Finance, Elsevier, vol. 86(C).
    7. Zeckhauser, Richard, 2017. "Straight Talkers and Vague Talkers: The Effects of Managerial Style in Earnings Conference Calls," Working Paper Series rwp17-017, Harvard University, John F. Kennedy School of Government.
    8. Do, Chuong, 2024. "Financial analysts' information discovery: A study of manager-analyst interactions in conference calls," Advances in accounting, Elsevier, vol. 64(C).
    9. Andrew Todd & James Bowden & Yashar Moshfeghi, 2024. "Text‐based sentiment analysis in finance: Synthesising the existing literature and exploring future directions," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 31(1), March.
    10. Richard Frankel & Jared Jennings & Joshua Lee, 2022. "Disclosure Sentiment: Machine Learning vs. Dictionary Methods," Management Science, INFORMS, vol. 68(7), pages 5514-5532, July.
    11. Bhagwat, Vineet & Shirley, Sara E. & Stark, Jeffrey R., 2024. "Task-oriented speech and information processing," Journal of Banking & Finance, Elsevier, vol. 161(C).
    12. Andreas Barth & Sasan Mansouri & Fabian Wöbbeking, 2023. "“Let Me Get Back to You”—A Machine Learning Approach to Measuring NonAnswers," Management Science, INFORMS, vol. 69(10), pages 6333-6348, October.
    13. Angelo, Benjamin, 2025. "The private securities litigation reform act and post-earnings announcement drift," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    14. Allee, Kristian D. & Do, Chuong & Sterin, Mikhail, 2021. "Product market competition, disclosure framing, and casting in earnings conference calls," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    15. Kiridaran Kanagaretnam & Wen Li & Guifeng Shi & Zejiang Zhou, 2025. "Ambiguity of tone in annual reports and bank risk taking," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(1), pages 935-970, March.
    16. Senave, Elseline & Jans, Mieke J. & Srivastava, Rajendra P., 2023. "The application of text mining in accounting," International Journal of Accounting Information Systems, Elsevier, vol. 50(C).
    17. Bassyouny, Hesham & Abdelfattah, Tarek & Tao, Lei, 2022. "Narrative disclosure tone: A review and areas for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    18. Grande-Herrera, Cristina & Guillamon-Saorin, Encarna & Kapelko, Magdalena, 2026. "Operational performance and disclosure tone," Research in International Business and Finance, Elsevier, vol. 84(C).
    19. Jiang, Fuwei & Lee, Joshua & Martin, Xiumin & Zhou, Guofu, 2019. "Manager sentiment and stock returns," Journal of Financial Economics, Elsevier, vol. 132(1), pages 126-149.
    20. Frederic Lammers & Ulrich Pape, 2025. "CEO Narcissism and Linguistic Complexity in Earnings Conference Calls," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(3), pages 3081-3106, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:60:y:2025:i:4:p:1415-1435. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.