Oh what a beautiful morning! The time of day effect on the tone and market impact of conference calls
Using textual analysis software, we examine whether and how the tone of the question and answer QA portion of earnings-related conference calls varies with the time of day. We find that the tone of the conversations between analysts and managers becomes significantly more negative as the day wears off. This continuous, hour-by-hour change is likely the result of mental and physical fatigue gradually and imperceptibly setting in. The same pattern holds for textual uncertainty, increasing as the day wears off, the conversational tone is more wavering and less resolute. We document that conversational tone has economic consequences; more negatively toned conversations are associated with more negative abnormal stock returns during the call period and immediately thereafter. Notwithstanding the negativity associated with later day calls, firms exhibit significant stickiness in their choice of call time; having initiated the earnings conference call in the afternoon in the prior quarter is the most significant determinant of their doing so in the current quarter, dominating the sign of the earnings news and alternative measures of the firms need for equity capital. Analysis of post-call 50 days returns indicates that there is an initial negative overreaction to bad news earnings information and, incrementally, to calls initiated in the afternoon, that eventually reverses. In contrast, the negative impact of tone deterioration on stock returns, documented here, does not reverse. To the best of our knowledge, this is the first study to document the effects of human physiological and mental factors on corporate communications with investors.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 616, 6200 MD Maastricht|
Phone: +31 (0)43 38 83 830
Web page: http://www.maastrichtuniversity.nl/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:unm:umagsb:2013038. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Bollen)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.