Linguistic Cues of CEOs’ Future Focus in Earnings Conference Calls: The Impact on Corporate Policies

28 Pages Posted: 5 Aug 2019 Last revised: 23 Jan 2020

See all articles by Serena Iacobucci

Serena Iacobucci

'Gabriele d'Annunzio' University of Chieti-Pescara; Catholic University of Portugal (UCP) - Católica Porto Business School

Eleonora Monaco

Catolica Porto Business School,Universidade Catolica Portuguesa; European Capital Markets CRC

Loreta Cannito

Independent

Riccardo Palumbo

University of Chieti-Pescara; European Capital Markets CRC

Date Written: July 31, 2019

Abstract

Building on the Upper Echelons Theory we investigate the impact of CEO future sightedness on corporate policies and firm performance. We capture CEOs future orientation through an unobtrusive, validated tool of linguistic analysis of textual characteristics expressed by CEOs during 2008-2012 earnings conference calls for the top 1.000 NYSE companies. We then provide three levels of results. Firstly, we show that - all other factors equal - the presence of a future-oriented CEOs impacts on Corporate Financial Policies, both in terms of book leverage and cash holdings. Secondly, we analyse the differences in capital structure as result of CEOs’ active financing decision. In line with the Pecking Order Theory (and conditional to the presence of net financing deficit) highly future focused CEOs negatively affect the attraction of external resources via debt and equity issuance and prefer internal sources of financing in terms of retained earnings. Finally, we integrate our sample with acquisition announcements and estimate a series of linear probability models to assess whether CEO future focus has a material impact on firm acquisitiveness. Future focused CEOs in our sample are, indeed, less likely to attempt an acquisition in a given year, more likely to pay for the acquisition with acquirer stocks, and less likely to conclude a cross-sector acquisition.

Keywords: Upper Echelons Theory; CEOs; corporate policies; pecking order theory; earning calls; future focus; LIWC Analysis; temporal orientation

Suggested Citation

Iacobucci, Serena and Monaco, Eleonora and Cannito, Loreta and Palumbo, Riccardo, Linguistic Cues of CEOs’ Future Focus in Earnings Conference Calls: The Impact on Corporate Policies (July 31, 2019). Available at SSRN: https://ssrn.com/abstract=3429736 or http://dx.doi.org/10.2139/ssrn.3429736

Serena Iacobucci (Contact Author)

'Gabriele d'Annunzio' University of Chieti-Pescara ( email )

Viale Pindaro 42
Chieti Scalo, Pescara 66013
Italy

Catholic University of Portugal (UCP) - Católica Porto Business School ( email )

Rua de Diogo Botelho 1327
Porto, Porto 4169-005
Portugal

Eleonora Monaco

Catolica Porto Business School,Universidade Catolica Portuguesa; European Capital Markets CRC ( email )

Porto, Porto 4169-005
Portugal

Loreta Cannito

Independent ( email )

Riccardo Palumbo

University of Chieti-Pescara ( email )

Via Luigi Polacchi 11
Chieti, Chieti 66100
Italy

HOME PAGE: http://www.unich.it

European Capital Markets CRC ( email )

Via Luigi Polacchi 11
Chieti, Chieti 66100
Italy

HOME PAGE: http://www.ecmcrc.org

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