Soft information in public firms’ quarterly earnings calls: Isolating the effects of value-relevant information and linguistic tone in financial text
dc.contributor | Aalto University | en |
dc.contributor | Aalto-yliopisto | fi |
dc.contributor.advisor | Knüpfer, Samuli | |
dc.contributor.author | Kopra, Otto | |
dc.contributor.department | Rahoituksen laitos | fi |
dc.contributor.school | Kauppakorkeakoulu | fi |
dc.contributor.school | School of Business | en |
dc.date.accessioned | 2024-02-11T17:00:40Z | |
dc.date.available | 2024-02-11T17:00:40Z | |
dc.date.issued | 2023 | |
dc.description.abstract | In this thesis, I study the effects that the soft information in public firms’ quarterly earnings call transcripts have on stock returns. More specifically, I measure both the value-relevant information (sentiment) communicated in the earnings calls as well as the linguistic tone of the statements, by studying firms’ cumulative abnormal returns following quarterly earnings calls, both on portfolio-level and with a regression analysis on earnings call -level. My findings can be divided into methodological contributions and the uncovered financial phenomena. Firstly, I provide strong evidence in support of utilizing large language model -based solutions in extracting sentiment information from financial texts, as opposed to the dictionary-based methods that have been predominant in the financial academic literature so far. Furthermore, I show that using a tool like this together with a dictionary-based method that is designed to measure the linguistic tone of financial text makes it possible to isolate the two effects. Leveraging these benefits of my approach, I recognize three distinct stock return phenomena related to either earnings call sentiment or tone. Firstly, I find a strong positive relation between the sentiment of an earnings call Q&A session and the cumulative abnormal returns for that firm. Moreover, unlike some of the previous studies, I find that this stock price impact is nowadays practically immediate, with this information being incorporated into stock prices in the initial reaction period. Secondly, I find evidence that the sentiment information in the calls’ presentation section leads to a relatively similar immediate stock price reaction, but then to a subsequent reversal, that makes the long-term informational value in this section non-significant. Finally, I find that when controlling for the value-relevant information, a higher linguistic tone of the call’s presentation section predicts lower abnormal returns, in line with the theory of strategic communication, which states that managers use of a more positive tone constitutes bad news due to their incentives to downplay negative news. I find this negative stock price reaction to be immediate only for firms that reported a negative earnings surprise, whereas firms that reported positive earnings surprise this effect takes longer to be incorporated into share prices. | en |
dc.format.extent | 82 + 4 | |
dc.format.mimetype | application/pdf | en |
dc.identifier.uri | https://aaltodoc.aalto.fi/handle/123456789/126725 | |
dc.identifier.urn | URN:NBN:fi:aalto-202402112382 | |
dc.language.iso | en | en |
dc.location | P1 I | fi |
dc.programme | Finance | en |
dc.subject.keyword | earnings call | en |
dc.subject.keyword | sentiment analysis | en |
dc.subject.keyword | linguistic tone | en |
dc.subject.keyword | abnormal returns | en |
dc.title | Soft information in public firms’ quarterly earnings calls: Isolating the effects of value-relevant information and linguistic tone in financial text | en |
dc.title | Pehmeä tieto julkisten yritysten kvartaalitulosjulkistusten puhelinkonferensseissa: Arvorelevantin informaation ja kielellisen sävyn vaikutusten eriyttäminen rahoitusalan tekstissä | fi |
dc.type | G2 Pro gradu, diplomityö | fi |
dc.type.ontasot | Master's thesis | en |
dc.type.ontasot | Maisterin opinnäyte | fi |
local.aalto.electroniconly | yes | |
local.aalto.openaccess | yes |
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