What you are versus what you do: The effect of noun-verb framing in earnings conference calls

Abstract

A firm can choose to use nouns (e.g., “our company is a provider of personalized services”) or verbs (e.g., “our company provides personalized services”) in its disclosures without substantially altering the content of disclosures. We present theory and evidence from three experiments related to how noun-verb framing affects investors' judgments. Our first experiment shows that investors' judgments of a firm with stable-trend financial performance are more favorable when the firm's disclosures are framed using nouns rather than verbs; the reverse is found for a firm with growing-trend financial performance. We conduct two supplementary experiments to test the associated causal chain. The findings inform managers, investors, and regulators on how word choices made by firms impact investors.