Investors react more favorably to disclosures containing self-inclusive language

Managers' Self-Inclusive Language in Conference Calls: Multi-Method Evidence. By Zhenhua Chen & Serena Loftus
Tulane University Working Paper, March 2017
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2950702

Abstract: We investigate whether a subtle, but common, element of managers’ language, self-inclusive language (SIL), influences investors’ reactions to earnings conference calls. SIL is language that explicitly includes the speaker, and includes first-person singular and plural pronouns. We predict that investors react positively to managers’ SIL regardless of firm performance because SIL increases investors’ impression that managers can influence firm outcomes. To isolate the ceteris paribus effect of SIL on investors’ reactions, we use an experiment where we vary SIL and firm performance. Results of the experiment suggest that investors react more favorably to disclosures containing SIL than disclosures without SIL regardless of firm performance, consistent with our prediction. In a supplemental experiment, we find evidence suggesting that investors may be unaware of the effect of SIL. We also use the archival method to analyze over 50,000 earnings conference call transcripts, and find that market reactions to SIL are consistent with our experiment results. Taken together, our findings contribute to a growing literature on the influence of managers’ language choices on investors by offering multi-method evidence of the impact of a subtle and easily-overlooked component of managers’ language on investors’ judgments and decisions.