The signalling of managerial tone: evidence from the earnings conference calls

This thesis attempts to investigate the signalling role of managerial tone in the context of corporate disclosure. It first starts with a literature review in-depth to review how managers use their tone (roles) and why they use them(determinants). A detailed analysis of 81 published studies between 2010 and 2021 informs scholars about the current state of research on managerial tone. Based on a signalling framework, this thesis examines the following questions: Does managerial tone have a signalling role? Does the signal (tone) match the latent information it intends to convey? Can the receiver(analysts) correctly interpret the signal and send feedback to confirm(disconfirm) the signal? Does the signalling environment impact signalling effectiveness? How does tone signalling effectiveness varies across signaller’s characteristics? Using a sample of earnings conference call transcripts from FTSE350 firms, empirical tests in this thesis provide evidence that managerial tone can produce effective signals matching the private information from managers. Analysts accurately understand tone signals and send confirmation feedback to managers. The information environment can moderate signalling effectiveness. Beyond this, top managers with a stronger ability and signalling willingness can strengthen tone signalling effectiveness, while top managers with less signalling willingness weaken tone signalling effectiveness. The findings suggest that managerial tone represents a reliable signalling device for transmitting latent information about a firm’s quality and future performance and that receivers can correctly understand this signal and develop a consistent interpretation. It implies that managerial tone can be used for two-way communication. Further, prestigious top managers with more ability and signalling willingness are more valuable for firms to improve their signalling process