Does an Analyst's Access to Information Vary with the Favorableness of Their Language When Speaking to Management?

Posted: 6 Jun 2016 Last revised: 22 Dec 2019

See all articles by Jonathan A. Milian

Jonathan A. Milian

Florida International University (FIU)

Antoinette Smith

Florida International University (FIU)

Elio Alfonso

Florida International University

Date Written: March 22, 2017

Abstract

We examine whether analysts that use more favorable language during earnings conference calls subsequently issue more accurate earnings forecasts. Using a large sample of earnings conference calls from the 2004-2013 period for S&P 500 firms, we find a significantly positive relation between an analyst’s tone during a firm’s call and the accuracy of the analyst’s next quarterly earnings forecast for that firm. We find a similar relation for analysts that praise a firm’s management during the call. Our findings are consistent with the favorableness of an analyst’s language reflecting their access to a firm’s management. In additional analyses, we find that female analysts, analysts with less general experience, analysts at smaller brokerage firms, and analysts that cover more industries, on average, use significantly more favorable language during earnings conference calls. Overall, we contribute a new proxy, incremental to other proxies, for the analyst-manager relationship.

Keywords: Forecast Accuracy, Conference Calls, Textual Analysis, Regulation FD

JEL Classification: G10, M41

Suggested Citation

Milian, Jonathan A. and Smith, Antoinette and Alfonso, Elio, Does an Analyst's Access to Information Vary with the Favorableness of Their Language When Speaking to Management? (March 22, 2017). Accounting Horizons, December 2017, Volume 31, No. 4, pp 13-31, Available at SSRN: https://ssrn.com/abstract=2789780 or http://dx.doi.org/10.2139/ssrn.2789780

Jonathan A. Milian (Contact Author)

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Antoinette Smith

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Elio Alfonso

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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