Decision Support Systems And Unfiltered Information: Evidence From Conference Calls

Numerous financial decision support systems have been proposed in the literature that analyze corporate disclosures or financial news. However, these sources of corporate information are likely to be filtered before being published, either by investor relations departments or journalists. This bears the risk that the language is adapted to bias a decision support systems’ evaluations. Thus, unfiltered verbal communication should be a useful input for financial decision support systems since it is harder to manipulate. Using a sample of 200 earnings conference calls of German DAX firms, we analyze the relation of linguistic aspects of verbal management communication and the capital market reactions during the conference call. The results suggest that language aspects in the form of both sentiment and certainty assessments expressed by management influence the consequent capital market reaction. Our results show that unfiltered information released during conference calls is informative to the market and should therefore be considered as an input in decision support systems. As a consequence, these systems may profit from an increased robustness against impression management and from the possibility to react faster to new corporate information.