Managers who talk too much about the future during earnings calls accidentally tank their company's stock by confusing everyone.
Conventional wisdom says markets reward forward-looking leadership, but data shows that 'future-talk' in prepared speeches increases investor uncertainty and forecast errors. Interestingly, the effect flips during the Q&A session, where discussing the future is seen as actually providing useful information.
Temporal Focus and Stock Price Reactions to Earnings Calls
SSRN · 6389238
We study the stock market consequences of managerial focus on the future versus the past, "Future minus Past (FMP)," in earnings conference calls. FMP is accompanied by more positive tone, suggesting it should also boost the stock price. Surprisingly, we find that stock prices respond negatively to FMP in presentations. Rationalizing the puzzling effect on stock returns, FMP in presentations is associated with higher return volatility, bid-ask-spreads, forecast dispersion, and forecast errors. T