I extend prior research on the information content of conference calls by examining whether they accelerate analysts' and investors' responses to the future implications of currently announced earnings. I find that the initiation of conference calls is associated with a significant reduction in the serial correlation in analyst forecast errors, a measure of initial analyst underreaction. I also find that the initiation of conference calls is associated with significant reductions in two measures of initial investor underreaction: (1) post‐earnings announcement drift and (2) the proportion of the total market reaction to firms' earnings announcements that is “delayed” (i.e., that is attributable to post‐earnings announcement drift). The reduction in post‐earnings announcement drift surrounding conference call initiation is concentrated in the set of sample firms where drift is most severe (i.e., the smallest, least heavily traded sample firms) while the largest, most heavily traded sample firms do not exhibit significant drift either before or after conference call initiation. Robustness tests, including analyses of matched samples of nonconference call firms, indicate that the results are not driven by general increases in analyst and investor sophistication over time or by contemporaneous increases in the information and trading environments of conference call initiators.
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1 January 2005
Research Article|
January 01 2005
The Effect of Conference Calls on Analyst and Market Underreaction to Earnings Announcements
Michael D. Kimbrough
Michael D. Kimbrough
Harvard University.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2005
The Accounting Review (2005) 80 (1): 189–219.
Citation
Michael D. Kimbrough; The Effect of Conference Calls on Analyst and Market Underreaction to Earnings Announcements. The Accounting Review 1 January 2005; 80 (1): 189–219. https://doi.org/10.2308/accr.2005.80.1.189
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