Managers display distinctive word choice styles when they conduct earnings conference calls. Some CEOs and CFOs are straight talkers. Others, by contrast, are vague talkers. Vague talkers routinely use words such as “approximately”, “probably”, or “maybe”. Analysts and the stock market attend to the style of managerial talk. They respond more slowly, and ultimately less, to earnings news when managers are vague. In effect, quantitative information and straightforward contextual information are complements. Firms with vague CFOs receive lower valuations relative to their book value.
Authors:
Michał Dzieliński (Stockholm University), Alexander Wagner (University of Zurich), Richard Zeckhauser (Harvard University)
Discussant:
Karthik Balakrishnan (London Business School)