Working Paper | HBS Working Paper Series | 2015

The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms

by Francois Brochet, Patricia L. Naranjo and Gwen Yu


We examine how language barriers affect the capital market reaction to information disclosures. Using transcripts from the English-language conference calls of non-U.S. firms, we find that the calls of firms in countries with greater language barriers are more likely to contain non-plain English and erroneous expressions. For non-U.S. firms that hire an English-speaking manager, we find less use of non-plain English and fewer erroneous expressions. Calls that have greater use of non-plain English and more erroneous expressions show lower intraday price movement and trading volume. The capital market responses to non-plain English and erroneous expressions are more negative when the firm is located in a non-English-speaking country and has more English-speaking analysts participating in the call. Our results highlight that when disclosure takes the form of verbal communication, language barriers between speaker and listener affect the transparency of the narrative which in turn impacts the market reaction to the disclosure.

Keywords: complexity; Voluntary Disclosure; Capital market consequences; Non-plain English; Communication Intention and Meaning; Spoken Communication; Capital Markets; Complexity; Outcome or Result; Cross-Cultural and Cross-Border Issues;


Brochet, Francois, Patricia L. Naranjo, and Gwen Yu. "The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms." Harvard Business School Working Paper, No. 13-033, October 2012. (Revised March 2014, June 2015.)