Engagement in earnings conference calls

Research on conference calls documents that the question and answer (Q&A) portion is informative to markets. However, prior studies focus on the attributes of the participating individuals , primarily managers and analysts. We instead use the conversation as our unit of analysis, and examine whether conversational engagement between managers and analysts in earnings calls is informative to market participants. Using an experiment, we first demonstrate that linguistic style matching (LSM), a form of verbal coordination, is a reasonable empirical proxy for conversational engagement. We next use a quasi-experiment to confirm that investors can detect differences in engagement. Finally, using a hand-collected archival dataset comprised of audio recordings and textual transcripts from over 2400 earnings calls, we show that LSM in manager-analyst conversations during the Q&A is positively associated with absolute stock returns during the conversation, suggesting that conversations with greater engagement are more informative to capital markets and facilitate price formation. • Conversational engagement between managers and analysts during conference calls is informative to markets. • We introduce linguistic style matching (LSM), a form of verbal coordination between individuals, as a proxy for measuring conversational engagement in corporate settings. • We use experimental methods to validate the use of LSM as a proxy for engagement and demonstrate that investors can detect differences in engagement. • We use a novel hand-collected dataset of audio recordings and textual transcripts from conference calls to study engagement in real-world manager-analyst conversations. • OLS-based market microstructure analysis documents that conversational engagement between managers and analysts during earnings calls facilitates price formation in markets.