Insight

Betting on themselves

Do managers deliberately manipulate the tone of their concalls and mislead investors? Researchers find out

Researchers Paul Brockman, Xu Li and S McKay Price set out to analyse the relation between the tone of company executives during conference calls and their subsequent insider trading behaviour in this particular study. But instead of finding a direct correlation between the two, which would mean the executives were putting their money where their mouths were, the researchers found positive conference call tones were followed by net insider selling and negative conference call tones made for net insider buying. The conclusion: Some top managers deliberately manipulate the tone of their concalls and mislead investors to give themselves and edge, although, the authors point out, 'it is always difficult to ascertain actual intentions'. The study also found that senior managers do more selling than buying of their company shares.

 

Title: Do Managers Put Their Money Where Their Mouths Are? Evidence from Insider Trading after Conference Calls
Source: Social Science Research Center