Buy-Side Analystss Participation on Public Earnings Conference Calls

Abstract

Using a sample of 28,000 quarterly earnings conference call transcripts from 2008 to 2013, we examine the frequency and nature of buy-side analysts’ participation in the Q&A session of corporate earnings conference calls. We find that buy-side analysts appear on approximately 15% of all conference calls, with analysts employed by hedge funds (mutual funds) representing 46% (22%) of buy-side analyst appearances. Buy-side analysts are more likely to appear on conference calls of firms followed by fewer sell-side analysts, with higher bid-ask spreads, and not in the S&P 1500, suggesting that buy-side analysts are more likely to ask questions on conference calls when uncertainty about the firm is high. Management gives buy-side analysts priority by allowing them to ask the first question on a disproportionate number of calls. We also examine the length and tone of analysts’ interactions with management, and find that relative to sell-side analysts, buy-side analysts’ interactions are shorter and their exchanges with management exhibit less favorable tone. Finally, we document that changes in bid-ask spreads following conference calls are positively associated with buy-side participation on the call and that institutional holdings increase (decrease) when buy-side tone is relatively favorable (unfavorable). Our findings add to a growing literature on buy-side analysts by documenting their use of quarterly earnings conference calls.