Earnings conference calls and stock returns: The incremental informativeness of textual tone

Quarterly earnings conference calls are becoming a more pervasive tool for corporate disclosure. However, the extent to which the market embeds information contained in the tone (i.e. sentiment) of conference call wording is unknown. Using computer aided content analysis, we examine the incremental informativeness of quarterly earnings conference calls and the corresponding market reaction. We find that conference call linguistic tone is a significant predictor of abnormal returns and trading volume. Furthermore, conference call tone dominates earnings surprises over the 60 trading days following the call. The question and answer portion of the call has incremental explanatory power for the post-earnings-announcement drift and this significance is primarily concentrated in firms that do not pay dividends, illustrating differences in investor behavior based on the level of cash flow uncertainty. Additionally, we find that a context specific linguistic dictionary is more powerful than a more widely used general dictionary (Harvard IV-4 Psychosocial).     

Gibrat’s Law with Mild Nonrandom Growth

Gibrat’s Law (GL) has repeatedly failed to gain full empirical confirmation in specific industries. This study offers a deliberately favorable opportunity for full confirmation in the truckload sector of the U.S. trucking industry where firms are highly homogeneous. As such, most nonrandom determinants of growth remain very similar for all firms, so significant differences in growth rates are not expected. Still, there is only incomplete support: (1) long term growth rates are not equal for all firms, but the differences are small and not size-related except for the smallest firms, and (2) the size distributions better approximate lognormal when the smallest firms are excluded, but in no case does the variance rise over time. This suggests that for most other industries, where nonrandom growth should be much stronger, GL would seem unlikely to play more than a minor role in portraying actual firm growth or the evolution of market structure.     

Customer value propositions in business markets

Examples of consumer value propositions that resonate with customers are exceptionally difficult to find. When properly constructed, value propositions force suppliers to focus on what their offerings are really worth. Once companies become disciplined about understanding their customers, they can make smarter choices about where to allocate scarce resources. The authors illuminate the pitfalls of current approaches, then present a systematic method for developing value propositions that are meaningful to target customers and that focus suppliers' efforts on creating superior value. When managers construct a customer value proposition, they often simply list all the benefits their offering might deliver. But the relative simplicity of this all-benefits approach may have a major drawback: benefit assertion. In other words, managers may claim advantages for features their customers don't care about in the least. Other suppliers try to answer the question, Why should our firm purchase your offering instead of your competitor's? But without a detailed understanding of the customer's requirements and preferences, suppliers can end up stressing points of difference that deliver relatively little value to the target customer. The pitfall with this approach is value presumption: assuming that any favorable points of difference must be valuable for the customer. Drawing on the best practices of a handful of suppliers in business markets, the authors advocate a resonating focus approach. Suppliers can provide simple, yet powerfully captivating, consumer value propositions by making their offerings superior on the few elements that matter most to target customers, demonstrating and documenting the value of this superior performance, and communicating it in a way that conveys a sophisticated understanding of the customer's business priorities.     

The Role of Ownership in Managing Interfirm Opportunism: A Dyadic Study

We extend research on transaction cost theory that shows that vertical integration enables firms to protect their investments in exchange relationships better than market mechanisms. However, extant research finds ownership to exacerbate, rather than limit, exchange partner opportunism. Hence, the purpose of this study is to investigate conditions under which ownership can be effective for constraining an exchange partner's opportunism. Using matched dyadic data for 296 hotel brands, we conduct multi-level hierarchical linear modeling and identify conditions under which common ownership limits hotel opportunism. Findings indicate that ownership can limit hotel opportunism when brand headquarters can easily monitor the hotel's activities.     

Completion deadlines,adaptive learning assignments,and student performance

The authors examine effects on student performance, from applying different deadline strategies to online assignments in face-to-face principles of macroeconomics courses. Students in one section were required to complete weekly adaptive learning assignments. Students in the second section were required to complete the adaptive assignments only before each of the three exams administered in the course, thereby giving students more control over when to complete them. The findings show that the presence of rigid deadlines detracted from student participation with the adaptive learning assignments. However, the assignments contributed positively to performance in the traditional assessment categories of homework and exams.     

Measuring responsible financial consumption behaviour

Sound consumption decisions determine individuals’ well‐being; responsible financial consumption behaviour (RFCB) affects not only their finances but also their societal status and emotional state. The failure to manage personal finances responsibly may result in serious long‐term consequences for individuals and society overall. In order to evaluate the concept of RFCB, this study combines two established theoretical frameworks—the family management system and the theory of planned behaviour. The paper investigates the relationships among RFCB, responsible financial attitudes, financial literacy and behavioural control. Its theoretical model is tested on a random sample of 494 respondents and analysed using PLS‐SEM. The results confirm the formation of responsible consumption behaviour by six formative elements: self‐control in spending, planning for the future, seeking information, education, rational decision‐making and solvency. The findings also indicate that all three focal variables have a direct effect on RFCB.     

Business model innovation in a knowledge revolution: An evolutionary theory perspective

For knowledge‐intensive industries, a need remains to increase clarity on the dynamics through which business model innovation occurs. Progress has been limited owing to complexities in these industries and to the underlying ontology of the business model concept itself. Through a conceptual methodology, our findings expose impediments to current business model theory and propose economic evolutionary theory as a useful alternative lens through which to address these limitations. This research contributes to the literature by broadening the traditional scope of the economic evolutionary view as relevant for business model innovation research and by offering a corresponding framework for future research.     

Sticking points: common‐agency problems and contracting in the US healthcare system

We propose a “common‐agency” model for explaining inefficient contracting in the US healthcare system. Common‐agency problems arise when multiple payers seek to motivate a provider to invest in improved care coordination. We highlight the possibility of “sticking points,” that is, Pareto‐dominated equilibria in which payers coordinate around contracts which give weak incentives to the provider. Sticking points rationalize three hard‐to‐explain features of the US healthcare system: widespread fee‐for‐service arrangements; problematic care coordination; and the historical reliance on single‐specialty practices to deliver care. The model also analyzes the effects of policies promoting more efficient contracting between payers and providers.     

The business cycle is alive and well

Business Economics - Have the dynamic relations among macro variables changed markedly since the financial crisis? A dynamic factor model provides consistent evidence of stability across 248...     

Review: Chinese public administration and finance—a call for a new theory,research and dialogue

In implementing its national strategy to achieve global leadership, China needs a new public administration theory that integrates political administration, economic management and social regulation. Even so, China has already started to promote its brand of political and economic development abroad. Therefore new comparative research and dialogue is called to explore the universality of Chinese and Western public administration ideas.