VALUE OF CONFERENCE CALLS: CONTENT AND TIMING Value of Conference Calls: Content and Timing

K Xu, Ke Xu
2017 unpublished
This dissertation consists of three essays investigating the information value of conference calls, the value implication in different trading periods, and the change in management disclosure behavior after shareholder litigation. The first essay studies the functional meaning of word usage in conference calls. I document evidence that managers' use of contrastive words improves disclosure informativeness as it provides more value-relevant information to investors. Further, the analyses show
more » ... t the use of contrastive words explains some of the instances in which share prices react positively to unfavorable earnings news. Finally, I find that disclosure reported after the contrastive word "but" is more informative than disclosure communicated before. Overall, the results support the conjecture that the informativeness of conference alls comes largely from its interpretation role. In the second essay, I document that conference calls significantly facilitate trading activity and improve price discovery in the after-hours market, which is characterized by extremely low liquidity and noisy information environment. Further, I show that informative signals of after-hours conference calls are largely incorporated into iii returns in after-hours as opposed to in the following regular hours, which suggests selective benefit for after-hours participants and underestimated effect of after-hours conference calls in the prior literature. Finally, I find that after-hours conference calls cause larger market reaction than regular hours conference calls, and this difference is attributable to more informed trades in after-hours. Overall, the results suggest that it is important to account for after-hours trading to understand the value and implication of the disclosed information in conference calls. The third essay examines how managers' qualitative disclosure changes after shareholder litigation. Qualitative information and forward-looking statements are often considered too soft to be material and actionable. However, I find evidence that after litigation managers use more negative tone in their overall and forward-looking statements, which suggests that managers concern that disclosure in optimistic tone will impose them to a higher litigation risk. In addition, as news media increase managers' exposure to litigation risk, I show that media coverage facilitates the changing process in qualitative disclosure, which provides additional evidence that outside information environment influences management disclosure behavior. iv