Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls

Anne  Heinrichs; Jihwon  Park; Eugene F. Soltes

Article | Accounting Review | May 2019

Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls

by Anne Heinrichs, Jihwon Park and Eugene F. Soltes

Abstract

Using a set of proprietary records, we examine who consumes quarterly earnings conference calls and under which circumstances the calls are consumed. While there is significant interest in calls by institutional investors and sell-side analysts, we find that investors who do not hold a position in the firm are leading consumers. We show that buy-side non-holders who consume calls are more likely to hold positions in competitors and to purchase the stock in the future. In addition, many investors who hold large positions only consume calls periodically. We also document a benefit of consuming calls by finding that the consumption of calls is associated with more informed trading decisions. Overall, our investigation illuminates the actual consumption of conference calls by different consumers and the potential benefits of consuming additional firm disclosures.

Keywords: disclosure; conference calls; firm news; Corporate Disclosure; Business Earnings; Situation or Environment;

Format: Print

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Citation:

Heinrichs, Anne, Jihwon Park, and Eugene F. Soltes. "Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls." Accounting Review 94, no. 3 (May 2019): 205–231.

There are numerous restrictions against trading on material, nonpublic information (MNPI)—typically called “insider trading.” This note describes the limitations facing managers and investors as enforced civilly and criminally within the United States.

Managers expend significant time and effort preparing disclosures about firm performance and strategy. Although prior literature has explored how variation in the style and presentation of disclosures impacts investors' perceptions of firms, little is known about how firms actually create these disclosures and how this process impacts presentation. Based on field data collected from nearly 200 firms, we show that there is considerable variation in who prepares disclosures, when they are prepared, and the amount of effort expended by different types of managers (e.g., legal, public relations/marketing, finance, investor relations, senior leadership). We find that these differences in organizational processes are associated with differences in the structure, style, and tone of 10-Ks and conference calls. Ultimately, our investigation begins to illuminate how individual managerial efforts vary across firms and contribute to differences in public disclosures.

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Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls

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