Abstract

Abstract: In this study, we measure managerial affective states during earnings conference calls by analyzing conference call audio files using vocal emotion analysis software. We hypothesize and find that when managers are scrutinized by analysts during conference calls, positive and negative affect displayed by managers are informative about the firm’s financial future. In particular, we find that managers exhibiting positive (negative) affect are positively (negatively) related to contemporaneous stock returns and future unexpected earnings. However, analysts do not incorporate the information when determining short term earnings forecasts. When making stock recommendation changes, however, analysts incorporate positive affect but not negative affect. We observe market underreaction to negative affect as if market participants follow analyst recommendation changes. Together, this study presents new evidence that managerial vocal cues contain useful information about firms ’ fundamentals, incremental to both quantitative earnings information and qualitative “soft ” information conveyed by the linguistic content. We appreciate the assistance of Amir Liberman and Albert De Vries of Nemesysco for helpful discussions and for

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