“…The average expressed positive sentiment by CEOs in their letter is as expected and in line with previous results in the literature. It confirms the general consensus that CEOs tend to be optimistic and overconfident and have an intrinsic interest of portraying a positive image about their firm (see, e.g., Heaton, ; Malmendier and Tate, ; Arslan‐Ayaydin et al., ).…”
Section: Intratextual Dynamics Of Ceo Sentimentsupporting
confidence: 89%
“…Finally, Arslan‐Ayaydin et al. () show that equity‐based incentives induce managers to inflate the sentiment of earnings press releases to increase the value of their stock and option portfolios.…”
Section: Literature Review and Hypothesis Developmentmentioning
This paper evidences the strategic positioning of positive and negative words within a CEO letter as a subtle form of impression management. We find that managers tend to present information in such an order that the reader of the CEO letter has a more positive perception of the underlying message. We uncover a smile in the frequency of positive words within the letter, and a half smile in the intratextual distribution of negative words, with a prevalence of negative words at the beginning of the letter. We also find a significant positive association between this qualitative impression management and the use of abnormal accruals in earnings management. We propose sentiment analytics that can compensate for the strategic management of narrative structure and find that the proposed position weighted sentiment has more predictive power for the firm performance over the next year.
“…The average expressed positive sentiment by CEOs in their letter is as expected and in line with previous results in the literature. It confirms the general consensus that CEOs tend to be optimistic and overconfident and have an intrinsic interest of portraying a positive image about their firm (see, e.g., Heaton, ; Malmendier and Tate, ; Arslan‐Ayaydin et al., ).…”
Section: Intratextual Dynamics Of Ceo Sentimentsupporting
confidence: 89%
“…Finally, Arslan‐Ayaydin et al. () show that equity‐based incentives induce managers to inflate the sentiment of earnings press releases to increase the value of their stock and option portfolios.…”
Section: Literature Review and Hypothesis Developmentmentioning
This paper evidences the strategic positioning of positive and negative words within a CEO letter as a subtle form of impression management. We find that managers tend to present information in such an order that the reader of the CEO letter has a more positive perception of the underlying message. We uncover a smile in the frequency of positive words within the letter, and a half smile in the intratextual distribution of negative words, with a prevalence of negative words at the beginning of the letter. We also find a significant positive association between this qualitative impression management and the use of abnormal accruals in earnings management. We propose sentiment analytics that can compensate for the strategic management of narrative structure and find that the proposed position weighted sentiment has more predictive power for the firm performance over the next year.
“…This is surprising since the AGM is a rare opportunity for a firm's management to get into direct contact with its shareholders (Martinez-Blasco et al, 2015) and since there is plenty of evidence on qualitative information inherent in the language of CEOs. Arslan-Ayaydin et al (2015) find that managers adjust their language to specific situations at hand and inflate the use of positive language the higher their fraction of equity-based compensation. Doran et al (2012) and Price et al (2012) report that conference calls' positive sentiment is a significant predictor of subsequent returns and trading volume.…”
Section: Informational Content Of the Annual General Meetingmentioning
confidence: 95%
“…For example, Arslan-Ayaydin et al (2015) find that incentivized managers use positive words more aggressively in an attempt to influence share prices. Similarly, Boudt and Thewissen (2016) report that CEOs strategically present negative and positive words in CEO letters in order to prompt a more positive perception by the reader.…”
“…In addition to the Tone variable, we consider the Tone Surprise of the conference call. Following Arslan‐Ayaydin, Boudt, and Thewissen (), we define Tone Surprise as the residual from a regression of tone on several explanatory variables that relate to firm performance and characteristics that plausibly influences tone. That is, Tone Surprise is the part of conference call tone that cannot be explained by performance and fundamentals .…”
We document the effects of institutional investors on the qualitative information disclosure of firms during earnings conference calls. Using conference call and institutional ownership data between 2005 and 2016, we find that aggregate institutional ownership dampens conference call tone. The effects of institutional investors on tone are causal based on results from indexed firms. Consistent with hypotheses regarding investors' horizons, short‐term institutional investors are associated with a more positive conference call tone, as well as more opportunistic trading, whereas long‐term investors are associated with a more negative tone. Market participants can generally disentangle the impact of institutional investors on tone based on investor type.
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