TY - JOUR
T1 - Which buy-side institutions participate in public earnings conference calls? Implications for capital markets and sell-side coverage
AU - Call, Andrew C.
AU - Sharp, Nathan Y.
AU - Shohfi, Thomas D.
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/6
Y1 - 2021/6
N2 - 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.
AB - 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.
KW - Buy-side analysts
KW - Buy-side institutions
KW - Earnings conference calls
KW - Financial analysts
KW - Hedge funds
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U2 - 10.1016/j.jcorpfin.2021.101964
DO - 10.1016/j.jcorpfin.2021.101964
M3 - Article
AN - SCOPUS:85105598381
SN - 0929-1199
VL - 68
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 101964
ER -