We tell our clients that the best days for those calls are Tuesday through Thursday. We also tell them to give careful thought to the time of day they schedule their call. We once came across a company in the Central time zone that began its call at 8:30 AM, Eastern time. That may have presented a problem not only for many New York-based analysts, but especially for analysts in the Central, Mountain and Pacific time zones.
As it turns out, there’s another compelling reason to schedule your call carefully. Research reported in the Harvard Business Review shows that physical and mental fatigue cause irritability and a decline in executive function, especially right before lunch and late in the afternoon. For example, one study showed that parole boards’ rulings on similar cases varied significantly according to whether a case was heard just before or just after lunch.
With this in mind, Jing Chen, a PhD candidate, and Baruch Lev, a professor at NYU’s Stern School of Business, along with Elizabeth Demers, an associate professor at University of Virginia’s Darden School of Business, wondered whether a similar phenomenon might apply to earnings calls. So they analyzed 26,585 earnings calls of 2,113 publicly held U.S. firms based in the Eastern and Central time zones.
Using linguistic algorithms to measure positivity, negativity and uncertainty during the Q&A portion of the calls, the researchers found that negative tone increased as the morning progressed, dipped slightly after lunch, and then rose again until the market close.
The researchers also found that the more negative the tone, the more negative the stock returns over the five trading hours after the call. Those negative stock returns associated with negative calls continued downward for up to 15 trading days.
The lesson? Even if top executives are not “morning people,” it may be best for them to avoid late-afternoon conference calls in order to convey a positive, resolute tone.
The Ammerman Experience regularly shows executives how to put their best foot forward during conference calls and analyst presentations. If you’d like an objective assessment of the content and delivery of your calls or presentations, let us know, and we’ll assess your strengths and weaknesses, and offer suggestions for improvement. Click here for more information about our Investor Relations training.