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How vague language on company earnings calls affects stock performance

The language used by executives on post-earnings-report conference calls has a direct effect on share-price performance, according to a paper published Monday.

The stocks of companies led by executives who use vague language move far less than companies with straight-talking executives, irrespective of whether earnings were a positive or negative surprise, according to a National Bureau of Economic Research paper evaluating the effects of managerial style in earnings conference calls.

The paper, authored by economists from Stockholm University, Harvard University and the University of Zurich, found that the use of vague words such as “approximately,” “probably” or “maybe” on an earnings call leaves analysts with too little information to form a judgment, which makes them slower to revise forecasts.

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