Communication Strategy in Quarterly Earnings Calls

Download or read book Communication Strategy in Quarterly Earnings Calls written by Rich Berard and published by . This book was released on 2016 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aims to provide insight into communications strategy through the lens of agenda setting theory. Prior research finds that “positive tone” on an a company's quarterly earnings call (QEC) can offset a negative earnings surprise; however, the concepts of “Positive” and “Negative” are seldom unpacked and thus difficult to operationalize from a practitioner's point of view. Utilizing content analysis this paper disaggregates tone into 40 different verbal elements and measures the effectiveness (in terms of short term simple and abnormal returns of company market value) of the usage of these elements in situations when companies either met or underperformed their earnings targets. Additionally, these verbal elements are analyzed for both the prepared remarks and Q&A portions of verbal communication events between company management, analysts and investors. The empirical findings in this study show that communication strategy for the QEC event appears to not differ materially across either positive or negative earnings surprise contexts in either the prepared or spontaneous remarks. Thus, management does not appear to be using the call as a strategic communications opportunity. The results suggest that management is not actively employing agenda setting theory in the calls and as a result may be negatively impacting company value.