More from these Authors

• Working Paper |

  Playing Favorites: How Firms Prevent the Revelation of Bad News

  Lauren Cohen, Dong Lou, Christopher J. Malloy, Lauren Cohen, Dong Lou and Christopher J. Malloy

  We explore a subtle but important mechanism through which firms manipulate their information environments. We show that firms control information flow to the market through their specific organization and choreographing of earnings conference calls. Firms that "cast" their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 95 basis points per month. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. Further, firms that cast their calls have higher accruals, barely exceed/meet earnings forecasts, and subsequently issue equity.

  Keywords: information; strategic release; firms; conference calls;

  Citation:

  Cohen, Lauren, Dong Lou, and Christopher J. Malloy. "Playing Favorites: How Firms Prevent the Revelation of Bad News." Working Paper.

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• Working Paper |

  Playing Favorites: How Firms Prevent the Revelation of Bad News

  Lauren Cohen, Dong Lou, Christopher J. Malloy, Lauren Cohen, Dong Lou and Christopher J. Malloy

  We explore a subtle but important mechanism through which firms manipulate their information environments. We show that firms control information flow to the market through their specific organization and choreographing of earnings conference calls. Firms that "cast" their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 95 basis points per month. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. Further, firms that cast their calls have higher accruals, barely exceed/meet earnings forecasts, and subsequently issue equity.

  Keywords: information; strategic release; firms; conference calls;

  Citation:

  Cohen, Lauren, Dong Lou, and Christopher J. Malloy. "Playing Favorites: How Firms Prevent the Revelation of Bad News." Working Paper.

  CiteView Details

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• Working Paper | 2013

  Resident Networks and Firm Trade

  Lauren Cohen, Umit G. Gurun, Christopher J. Malloy, Lauren Cohen, Umit G. Gurun and Christopher J. Malloy

  We demonstrate that simply by using the ethnic makeup surrounding a firm's location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarters. We use the formation of World War II Japanese Internment Camps to isolate exogenous shocks to local ethnic populations, and identify a causal link between local networks and firm trade links. Firms that exploit their local networks (strategic traders) see significant increases in future sales growth and profitability, and outperform other importers and exporters by 5%-7% per year in risk-adjusted stock returns. In sum, our results document a surprisingly large impact of immigrants' economic role as conduits of information for firms in their new countries.

  Keywords: Information networks; trade links; firm behavior;

  Citation:

  Cohen, Lauren, Umit G. Gurun, and Christopher J. Malloy. "Resident Networks and Firm Trade." Working Paper, March 2013.

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