Pressure from words: The tone of investors in Chinese earnings communication conferences and managerial myopia

Abstract This study examines whether and how the negative tone of investors in earnings communication conferences (ECCs) held by Chinese listed companies influences managerial myopia. We use the bidirectional encoder representations from transformers (BERT) model to construct sentence‐level emotional tone and find that the negative tone of investors in ECCs leads to greater myopic behaviour by managers. The positive relationship between the negative tone of investors and managerial myopia is stronger when more investors participate in ECCs, investors ask more questions, and managers respond with longer statements. However, this positive relationship becomes weaker when managers have positions in other companies, managers are more competent, and managers display a more positive tone in ECCs. Additionally, this positive relationship weakens when listed companies that hold ECCs have more institutional investors and strengthens when the media reports these companies more frequently. Our results prove that individual investors can have a voice and influence the decision‐making behaviour of managers through ECCs.