Does environmental and social performance affect pricing efficiency? Evidence from earnings conference call tones

Jared DeLisle, Andrew Grant and Ruiqi Mao

Journal of Corporate Finance, 2024, vol. 86, issue C

Abstract: This paper examines how environmental and social (ES) performance, proxied by related incidents, affect the managerial and analyst tones in quarterly earnings conference calls and its incremental effect on post-earnings call returns. We document that firms experiencing poor ES performance in the quarter prior to the earnings call exhibit more negative management tone after controlling for quarterly financial performance metrics. Tone difference in conference calls between managers and analysts predicts negative abnormal returns in the three-day window around the call. In the 60-day post-call period, we show that firms with poor ES performance exhibit returns negatively related to the tone difference on the conference call – low tone difference leads to return continuation and high tone difference predicts reversals for firms with positive earnings surprises. These results are consistent with an increase in information asymmetry and lower transparency for firms following poor ES performance.

Keywords: Earnings conference call tone; Textual analysis; Price efficiency; Environmental and social incidents; Environmental and social performance; ESG scores (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000476

DOI: 10.1016/j.jcorpfin.2024.102585

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