Oh What a Beautiful Morning! Diurnal Influences on Executives and Analysts: Evidence from Conference Calls

Abstract

This study provides novel evidence that expert economic agents' work-related activities are systematically influenced by the time of day. We use archival data derived from time-stamped quarterly earnings conference calls together with linguistic algorithms to measure and track the moods of executives and analysts at different times of the day. The evidence indicates that the tone of conference call discussions deteriorates markedly over the course of the trading day, with both analysts' and executives' moods becoming more negative as the day wears on. Capital market pricing tests reveal that the time-of-day-induced negative tone leads to temporary stock mispricings. Our findings are relevant because the diurnal variations in behavior documented in the context of quarterly earnings calls are likely to extend across other important corporate communication, decision making, and performance situations, leading to potentially significant economic consequences.JEL Codes: G02, G14, M41 levels of happy tweets 1 (Mislove, Lehmann, Ahn, Onnela and Rosenquist (2010); Golder and Macy (2011)). Diurnal variations also have important consequences in the context of more professional decision making and performance situations, such as the judiciary and medicine.Danziger, Levav and Avnaim-Pesso (2011), for example, find that judges' parole decisions vary in a predictable manner over the course of the day, while Dai, Milkman, Hofmann, and Staats (2015) and Linder, Doctor, Friedberg, Nieva, Birks, Meeker and Fox (2014) respectively document the disturbing finding that each of nurses' and doctors' professional performances deteriorate as the day wears on.The influence of the time of day documented in these and other studies is explained in part by two lines of research in the fields of psychology and physiology: "personal resources" theory and the study of circadian rhythms' influence on human biology and behavior. A core underlying assumption of the personal resources framework is that individuals have a limited "reservoir" of resources from which to draw in order to adequately perform the variety of demands and activities that they face throughout the day. As these resources are depleted over the course of the workday, individuals exhibit poorer task performance, greater hostility, and more aggressive interaction and communication (DeWall, Baumeister, Stillman and Gailliot (2007); Hagger, Wood, Stiff and Chatzisarantis (2010); Stucke and Baumeister (2006)). In addition to our limited resources, humans (like most other living beings, including plants, animals, fungi, and cyanobacteria) are also significantly affected by the roughly 24-hour circadian (circa, about; diem, a day) cycle.Circadian rhythms affect human biology, emotions, and cognitive function, and the diurnal variations that they induce are not trivial; by some estimates, depending on the task, the

Are Managers 'Under-the-Weather' During Earnings Conference Calls?

“…As a result, we create a dummy variable (Afternoon) to distinguish calls held before or after 12 noon. In our study, we find there are less than 40% of calls that begin in the afternoon which is similar to the number reported by Chen et al (2018). Detailed definitions of all variables are provided in Appendix I.…”

Disclosure tone management and labor unions

“…(2018), and include two benchmarks that proxy for the complexity with which the firm exercises its daily practices: (i) number of geographical segments ( GeoSeg ) and (ii) number of business segments in which the firm is active ( BusSeg ). Following the literature (Chen, Demers, & Lev, 2018; Davis et al., 2012; Huang et al., 2014), we include firm size as the logarithm of the market capitalization ( Size ). We follow Arslan‐Ayaydin et al.…”

Linguistic tone of management discussion and analysis disclosures and the municipal debt market

“…The literature notes that positive and negative tone in disclosures can influence the cost of capital (Kothari et al , 2009), the amount of accruals (Li, 2010), future return on assets (Davis et al , 2012), abnormal returns (e.g. Feldman et al , 2010; Chen et al , 2018), bond rating downgrades (Agarwal et al , 2016) and the likelihood of missing analyst expectations (Allee and Deangelis, 2015). MD&A tone can also help to predict the likelihood of an auditor's going concern opinion and the probability of subsequent bankruptcy (Mayew et al , 2015).…”