The sound of uncertainty: Examining managerial acoustic uncertainty in conference calls

Abstract

Building on the literature showing that speech disfluency conveys information about the speaker’s uncertainty, we create a measure of firm uncertainty based on disfluency of managerial speech in earnings conference calls and examine its impact on analysts. We show that, when managers exhibit greater disfluency (which we label “managerial acoustic uncertainty”) in their responses to analyst questions, analyst forecast dispersion increases, even after accounting for characteristics of the language being used by managers and analysts. Furthermore, we find that the positive association between acoustic uncertainty and analyst forecast dispersion is concentrated in conference calls in which the managerial responses exhibit more specificity and forward-looking information, and for firms with more negative earnings news and weaker information environments. Our findings are consistent with uncertainty expressed in the acoustic features of managerial speech affecting market participants, and suggest that our measure captures a unique aspect of firm uncertainty.