IDEAS home Printed from https://ideas.repec.org/a/eee/jaecon/v75y2023i1s0165410122000416.html
   My bibliography  Save this article

Fixed income conference calls

Author

Listed:
  • De Franco, Gus
  • Shohfi, Thomas
  • Xu, Da
  • Zhu, Zhiwei (Vivi)

Abstract

We study the determinants and the informational role of firms' fixed income conference calls, a unique form of voluntary disclosure that deviates from the traditional multi-purpose firm disclosures intended for all stakeholders. We find that fixed income calls are more likely to be held by firms that have more debt, lack credit ratings or have publicly traded equity, are foreign, or are experiencing losses. In a content analysis using a sample of public firms, we find that these calls discuss debt-equity conflict events, such as share repurchases, to a greater degree relative to a matched sample of earnings conference calls. Finally, we document that credit markets react to these calls, consistent with the calls providing investors new information. Overall, these results are consistent with fixed income calls meeting the differential informational demands of debt versus equity investors.

Suggested Citation

  • De Franco, Gus & Shohfi, Thomas & Xu, Da & Zhu, Zhiwei (Vivi), 2023. "Fixed income conference calls," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    • Handle: RePEc:eee:jaecon:v:75:y:2023:i:1:s0165410122000416
    DOI: 10.1016/j.jacceco.2022.101518
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165410122000416
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jacceco.2022.101518?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vikrant Vig, 2013. "Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment," Journal of Finance, American Finance Association, vol. 68(3), pages 881-928, June.
    2. Francis A. Longstaff & Sanjay Mithal & Eric Neis, 2005. "Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market," Journal of Finance, American Finance Association, vol. 60(5), pages 2213-2253, October.
    3. Steve Fortin & Jeffrey A. Pittman, 2007. "The Role of Auditor Choice in Debt Pricing in Private Firms," Contemporary Accounting Research, John Wiley & Sons, vol. 24(3), pages 859-896, September.
    4. Call, Andrew C. & Sharp, Nathan Y. & Shohfi, Thomas D., 2021. "Which buy-side institutions participate in public earnings conference calls? Implications for capital markets and sell-side coverage," Journal of Corporate Finance, Elsevier, vol. 68(C).
    5. Badertscher, Brad & Shroff, Nemit & White, Hal D., 2013. "Externalities of public firm presence: Evidence from private firms' investment decisions," Journal of Financial Economics, Elsevier, vol. 109(3), pages 682-706.
    6. Paolo Colla & Filippo Ippolito & Kai Li, 2013. "Debt Specialization," Journal of Finance, American Finance Association, vol. 68(5), pages 2117-2141, October.
    7. Dirk Hackbarth & Christopher A. Hennessy & Hayne E. Leland, 2007. "Can the Trade-off Theory Explain Debt Structure?," The Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1389-1428, 2007 04.
    8. Barclay, Michael J & Smith, Clifford W, Jr, 1995. "The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-631, June.
    9. Kim, O & Verrecchia, Re, 1991. "Trading Volume And Price Reactions To Public Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 302-321.
    10. Gus De Franco & Florin P. Vasvari & Regina Wittenberg‐Moerman, 2009. "The Informational Role of Bond Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 47(5), pages 1201-1248, December.
    11. Krinsky, Itzhak & Lee, Jason, 1996. "Earnings Announcements and the Components of the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 51(4), pages 1523-1535, September.
    12. William F. Maxwell & Clifford P. Stephens, 2003. "The Wealth Effects of Repurchases on Bondholders," Journal of Finance, American Finance Association, vol. 58(2), pages 895-920, April.
    13. Johnston, Rick & Markov, Stanimir & Ramnath, Sundaresh, 2009. "Sell-side debt analysts," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 91-107, March.
    14. Shan, Chenyu & Tang, Dragon Yongjun & Winton, Andrew, 2019. "Do banks still monitor when there is a market for credit protection?," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    15. Michael J. Jung & M. H. Franco Wong & X. Frank Zhang, 2018. "Buy‐Side Analysts and Earnings Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 56(3), pages 913-952, June.
    16. William F. Maxwell & Clifford P. Stephens, 2003. "The Wealth Effects of Repurchases on Bondholders," Journal of Finance, American Finance Association, vol. 58(2), pages 895-919, April.
    17. Datta, Sudip & Iskandar-Datta, Mai & Patel, Ajay, 1999. "Bank monitoring and the pricing of corporate public debt," Journal of Financial Economics, Elsevier, vol. 51(3), pages 435-449, March.
    18. Jorion, Philippe & Liu, Zhu & Shi, Charles, 2005. "Informational effects of regulation FD: evidence from rating agencies," Journal of Financial Economics, Elsevier, vol. 76(2), pages 309-330, May.
    19. Mark H. Lang & Russell J. Lundholm, 2000. "Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock?," Contemporary Accounting Research, John Wiley & Sons, vol. 17(4), pages 623-662, December.
    20. Stephan Hollander & Maarten Pronk & Erik Roelofsen, 2010. "Does Silence Speak? An Empirical Analysis of Disclosure Choices During Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 531-563, June.
    21. William J. Mayew, 2008. "Evidence of Management Discrimination Among Analysts during Earnings Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 627-659, June.
    22. Brad A. Badertscher & Dan Givoly & Sharon P. Katz & Hanna Lee, 2019. "Private Ownership and the Cost of Public Debt: Evidence from the Bond Market," Management Science, INFORMS, vol. 65(1), pages 301-326, January.
    23. Bushee, Brian J. & Matsumoto, Dawn A. & Miller, Gregory S., 2003. "Open versus closed conference calls: the determinants and effects of broadening access to disclosure," Journal of Accounting and Economics, Elsevier, vol. 34(1-3), pages 149-180, January.
    24. Andrew Bird & Stephen A. Karolyi, 2016. "Do Institutional Investors Demand Public Disclosure?," The Review of Financial Studies, Society for Financial Studies, vol. 29(12), pages 3245-3277.
    25. Frankel, R & Johnson, M & Skinner, DJ, 1999. "An empirical examination of conference calls as a voluntary disclosure medium," Journal of Accounting Research, Wiley Blackwell, vol. 37(1), pages 133-150.
    26. Loughran, Tim & McDonald, Bill, 2013. "IPO first-day returns, offer price revisions, volatility, and form S-1 language," Journal of Financial Economics, Elsevier, vol. 109(2), pages 307-326.
    27. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 109-126, March.
    28. William F. Maxwell & Ramesh P. Rao, 2003. "Do Spin‐offs Expropriate Wealth from Bondholders?," Journal of Finance, American Finance Association, vol. 58(5), pages 2087-2108, October.
    29. Asquith, Paul, 1948- & Wizman, Thierry A., 1990. "Event risk, covenants, and bondholder returns in leveraged buyouts," Working papers WP 3173-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    30. repec:oup:revfin:v:29:y:2016:i:12:p:3245-3277. is not listed on IDEAS
    31. Hendrik Bessembinder & Kathleen M. Kahle & William F. Maxwell & Danielle Xu, 2009. "Measuring Abnormal Bond Performance," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4219-4258, October.
    32. T. Clifton Green, 2004. "Economic News and the Impact of Trading on Bond Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1201-1234, June.
    33. Michael J. Barclay & Erwan Morellec, 2006. "On the Debt Capacity of Growth Options," The Journal of Business, University of Chicago Press, vol. 79(1), pages 37-60, January.
    34. Boone, Audra L. & White, Joshua T., 2015. "The effect of institutional ownership on firm transparency and information production," Journal of Financial Economics, Elsevier, vol. 117(3), pages 508-533.
    35. Hagit Levy & Ron Shalev & Emanuel Zur, 2018. "The Effect of CFO Personal Litigation Risk on Firms’ Disclosure and Accounting Choices," Contemporary Accounting Research, John Wiley & Sons, vol. 35(1), pages 434-463, March.
    36. Matthew T. Billett & Tao‐Hsien Dolly King & David C. Mauer, 2007. "Growth Opportunities and the Choice of Leverage, Debt Maturity, and Covenants," Journal of Finance, American Finance Association, vol. 62(2), pages 697-730, April.
    37. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    38. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2019. "Managing the narrative: Investor relations officers and corporate disclosure✰," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 58-79.
    39. Verrecchia, Robert E, 1982. "Information Acquisition in a Noisy Rational Expectations Economy," Econometrica, Econometric Society, vol. 50(6), pages 1415-1430, November.
    40. Grossman, Sanford J & Stiglitz, Joseph E, 1976. "Information and Competitive Price Systems," American Economic Review, American Economic Association, vol. 66(2), pages 246-253, May.
    41. Jung, Kooyul & Yong-Cheol, Kim & Stulz, Rene M., 1996. "Timing, investment opportunities, managerial discretion, and the security issue decision," Journal of Financial Economics, Elsevier, vol. 42(2), pages 159-185, October.
    42. Asquith, Paul & Wizman, Thierry A., 1990. "Event risk, covenants, and bondholder returns in leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 195-213, September.
    43. Jonathan A. Milian & Antoinette L. Smith, 2017. "An Investigation of Analysts' Praise of Management During Earnings Conference Calls," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(1), pages 65-77, January.
    44. Harris, Milton & Raviv, Artur, 1993. "Differences of Opinion Make a Horse Race," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 473-506.
    45. Dominique C. Badoer & Christopher M. James, 2016. "The Determinants of Long-Term Corporate Debt Issuances," Journal of Finance, American Finance Association, vol. 71(1), pages 457-492, February.
    46. Roberto Blanco & Simon Brennan & Ian W. Marsh, 2005. "An Empirical Analysis of the Dynamic Relation between Investment‐Grade Bonds and Credit Default Swaps," Journal of Finance, American Finance Association, vol. 60(5), pages 2255-2281, October.
    47. Matthew T. Billett & Tao-Hsien Dolly King & David C. Mauer, 2004. "Bondholder Wealth Effects in Mergers and Acquisitions: New Evidence from the 1980s and 1990s," Journal of Finance, American Finance Association, vol. 59(1), pages 107-135, February.
    48. 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.
    49. I. Krinsky & J. Lee, 1996. "Earning Announcements and the Components of the Bid-Ask Aspread," Quantitative Studies in Economics and Population Research Reports 313, McMaster University.
    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. Reisel, Natalia, 2014. "On the value of restrictive covenants: Empirical investigation of public bond issues," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 251-268.
    2. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.
    3. Luc Renneboog & Peter G. Szilagyi, 2008. "Corporate Restructuring and Bondholder Wealth," European Financial Management, European Financial Management Association, vol. 14(4), pages 792-819, September.
    4. 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.
    5. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    6. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    7. Maul, D. & Schiereck, D., 2017. "The bond event study methodology since 1974," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 80723, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    8. Imbierowicz, Björn & Wahrenburg, Mark, 2013. "Wealth transfer effects between stockholders and bondholders," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 23-43.
    9. Duan, Lini & Li, Lingyi & Park, Kyung-Hye & Wu, Di, 2023. "Muddy the waters to conceal information? Evidence from firms' inconsistent answers during Q&As," Finance Research Letters, Elsevier, vol. 51(C).
    10. Murray, Benjamin & Svec, Jiri & Wright, Danika, 2017. "Wealth transfer, signaling and leverage in M&A," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 203-212.
    11. Tsai, Hui-Ju & Wu, Yangru, 2015. "Bond and stock market response to unexpected dividend changes," Journal of Empirical Finance, Elsevier, vol. 30(C), pages 1-15.
    12. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    13. Liebmann, Michael & Orlov, Alexei G. & Neumann, Dirk, 2016. "The tone of financial news and the perceptions of stock and CDS traders," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 159-175.
    14. Khalil, Samer & Mansi, Sattar & Mazboudi, Mohamad & Zhang, Andrew (Jianzhong), 2019. "Information asymmetry and the wealth appropriation effect in the bond market: Evidence from late disclosures," Journal of Business Research, Elsevier, vol. 95(C), pages 49-61.
    15. Steve Janner & Daniel Schmidt, 2015. "Are economically significant bond returns explained by corporate news? An examination of the German corporate bond market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(3), pages 271-298, August.
    16. Ryan P. McDonough, 2023. "Corporate communication and shareholder base retention: evidence from spin-offs," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1283-1327, May.
    17. Francois Brochet & Kalin Kolev & Alina Lerman, 2018. "Information transfer and conference calls," Review of Accounting Studies, Springer, vol. 23(3), pages 907-957, September.
    18. Ramona Westermann, 2018. "Measuring Agency Costs over the Business Cycle," Management Science, INFORMS, vol. 64(12), pages 5748-5768, December.
    19. Hong Li & Yuan Wang, 2016. "How do Corporate Governance Decisions Affect Bondholders?," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 1-23, September.
    20. Li, Yuanzhi, 2018. "Dissecting bidder security returns on payment methods," Journal of Banking & Finance, Elsevier, vol. 96(C), pages 207-220.

    More about this item

    Keywords

    Conference calls; Corporate bonds; Corporate debt; Debt-equity conflict events; Debt investors; Fixed income;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

    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:eee:jaecon:v:75:y:2023:i:1:s0165410122000416. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jae .

    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.