Do firms walk the climate talk?
(with Florian Eugster, Emma Sjöström and Alexander Wagner)
Managers refer more to climate-related topics on earnings conference calls when climate matters are more material for a firm. However, there is also a large
unexplained variation in climate talk. Employing a global sample of firms, we find that this extra climate talk is negatively related to the change in CO2
emissions in the years after the call. After the Paris Agreement, only remarks in answers continue to predict emission changes, suggesting that climate talk
has become a staple in prepared managerial remarks. In the US, individualistic cultures, and cultures characterized by short-term horizons, climate talk does not predict emission reductions, and in these settings, stock prices also react negatively to climate talk. Overall, these results suggest that firms generally walk the climate talk, but the credibility of such talk varies among firms.
Exchange competition, fragmentation, and market quality
(with Björn Hagströmer and Chengcheng Qu)
This paper investigates how the market quality effects of fragmentation depend on the type of exchange competition. We propose a novel measure of liquidity competition and show that its correlation to the fragmentation of volume is modest (ρ = 0.5), suggesting that exchanges attract traders also for other reasons, such as speed and compliance. Using a natural experiment where the competition for trading Swiss stocks is eliminated overnight, we show that the liquidity benefit associated with fragmentation is concentrated among stocks where the liquidity competition before the event is high. For those stocks, the effective spread increases by 23% when competition is removed. For other stocks, there is no significant change.
Temporal focus and stock price reactions to earnings calls.
(with Ming Deng and Alexander Wagner)
Using machine-learning algorithms and a conventional rule-based approach, we develop a measure of temporal focus in earnings calls, “Future minus Past (F MP)”. In presentations, managers who emphasize the future appear to do so tactically, whereas their future focus in answers signals information. Consequently, stock prices respond negatively to F MP in presentations but positively in answers. Reactions to F MP are more favorable when future information is relevant and agency concerns are low. The stock price reactions align with analyst responses and changes in uncertainty. Overall, the context in which information is presented influences how investors and analysts interpret the same linguistic feature.
Director networks and carbon emissions.
(with Katarzyna Burzyńska, Sara Jonsson and Lu Liu)
This paper studies the impact of board directors’ social networks on firm carbon emissions. We investigate both the effects from directly connected social peers and the effects of firms’ board connectedness in the whole director network. Analyzing 3,304 firms in 35 countries from 2003 through 2020, we identify causal influence of social peers on absolute carbon emission levels and emission intensity. Peer effects are primarily driven by firms mimicking peers with relatively lower emissions (better peers) rather than peers with higher emissions (worse peers). However, for firms in high-emitting sectors, we find a stronger better-peer effect in terms of emission intensity but a stronger worse-peer effect in terms of emission level. These contrasting results suggest that firms appear to use emission intensity as the primary metric to benchmark their emission performance against their social peers. We do not observe any association between board connectedness and emissions, indicating limited advantages of board connectedness for carbon emission reductions. However, high board connectedness is associated with higher environmental pillar scores, suggesting a potential greenwashing behavior.
Straight talkers and vague talkers: The effects of managerial style in earnings conference calls.
(with Alexander F. Wagner and Richard J. Zeckhauser)
CEOs conducting earnings conference calls display distinctive styles in their word choice. Some CEOs emphasize uncertainty by using qualifying words such as “approximately”, “probably”, and “maybe” more frequently than the fundamental uncertainty in their companies’ business activity would suggest. Others use such words less frequently. Analysts and the stock market respond more strongly to earnings news conveyed by low-uncertainty talkers, independent of actual business uncertainty. Past performance does not explain the style of a newly appointed CEO, but when a firm does appoint a low-uncertainty CEO, Tobin’s Q increases and analyst recommendations become more favorable. Overall, investors and analysts appear to value low-uncertainty talk.
Do News Agencies Help Clarify Corporate Disclosure
Many investors rely on financial news agencies for information about companies despite the fact that much of it can be obtained directly from the companies themselves. The key reason appears to be that companies write press releases strategically, emphasizing good news and trying to package bad news, while news agencies deliver the same information in a more balanced and transparent form. News agencies also provide additional information about companies with infrequent press releases. Through their actions, news agencies reduce information asymmetries in the market.