Which buy-side institutions participate in public earnings conference calls? Implications for capital markets and sell-side coverage

Andrew C. Call, Nathan Y. Sharp, Thomas D. Shohfi

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the participation of analysts from different buy-side institutions (hedge funds, mutual funds, and RIAs) in public earnings conference calls and the associated capital market implications. Using 81,652 conference call transcripts for 3346 companies from 2007 to 2016, we find that buy-side analysts ask questions on approximately 18% of calls. Relative to sell-side analysts, buy-side analysts' interactions with management are shorter, convey less favorable tone, and exhibit more uncertainty. Buy-side activity on earnings calls is also associated with subsequent reductions in sell-side coverage, and buy-side tone is associated with sell-side analysts' price target revisions after the call. Importantly, our findings suggest that buy-side analysts representing a hedge fund play an important and unique role on conference calls. Specifically, hedge fund analysts represent nearly half (47%) of all buy-side appearances. In addition, when short interest in the firm is high, analysts representing a hedge fund are less likely to be permitted to ask the first question on the call, to ask lengthy questions, or to ask additional follow-up questions. Relatedly, relative to other buy-side analysts, the information conveyed by hedge fund analysts during the call is more strongly associated with both stock returns and investor uncertainty following the call.

Original languageEnglish (US)
Article number101964
JournalJournal of Corporate Finance
Volume68
DOIs
StatePublished - Jun 2021

Keywords

  • Buy-side analysts
  • Buy-side institutions
  • Earnings conference calls
  • Financial analysts
  • Hedge funds

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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