The Role of Analyst Style in Earnings Conference Calls

How much do individual analysts matter for firm behavior, investor behavior, and economic performance? Research in finance, economics, and related fields so far has given little consideration to this question. Existing empirical studies typically examine how analyst coverage and recommendations influence investor behavior and firm performance but largely ignore the possible role that individual analysts may play in shaping these outcomes. We seek to investigate whether analysts have their own “styles” when requesting information during earnings conference calls. The novel contribution of this project is to explicitly introduce such an analyst effect in an empirical study of investor and firm behavior. Intuitively, we seek to quantify how much of the observed variation in firm information disclosure, as well as in firm strategy and performance is attributed to analyst style. To do so, we examine whether analysts express a persistent interest in the choice of topics they inquire about, i.e., the analyst style. Across analysts we examine the distribution of analyst style within firm, i.e., the analyst style diversity. We are interested in whether there exists an analyst style effect, and whether firm strategy and performance is conditional on analyst style and analyst style diversity. The methodological tool underlying this research is a dictionary-based textual analysis and topic modeling approach. Our findings will help inform the discussion of the role of analysts in firm disclosure decisions, the role of voluntary disclosure in earnings conference calls, and firm (managed) responsiveness to analyst requests.