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  • November 2020
  • Article
  • Management Science

Casting Conference Calls

By: Lauren Cohen, Dong Lou and Christopher J. Malloy
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Abstract

We explore a subtle but important mechanism through which firms can control information flow to the markets. We find that firms that “cast” their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 149 basis points per month or almost 18 percent per year. We find similar evidence in an international sample of earnings call transcripts from the UK, Canada, France, and Japan. Firms with higher discretionary accruals, firms that barely meet/exceed earnings expectations, and firms (and their executives) that are about to issue equity, sell shares, and exercise options, are all significantly more likely to cast their earnings calls.

Keywords

Strategic Release; Firms; Conference Calls; Information; Strategy; Asset Pricing

Citation

Cohen, Lauren, Dong Lou, and Christopher J. Malloy. "Casting Conference Calls." Management Science 66, no. 11 (November 2020): 5015–5039. (Winner of the First Prize, Crowell Memorial Award for Best Paper in Quantitative Investments, PanAgora Asset Management, 2014.)
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About The Authors

Lauren H. Cohen

Finance
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Christopher J. Malloy

Finance
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More from the Authors
  • The 1,000-Year Plan: Lee Kum Kee and Sustaining a Family Culture By: Lauren Cohen, Dawn H. Lau and Billy Chan
  • Genomics in the Family Office By: Lauren Cohen, Ronnie Stangler and Spencer C. N. Hagist
  • The ESG-Innovation Disconnect: Evidence from Green Patenting By: Lauren Cohen, Umit G. Gurun and Quoc H. Nguyen
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