Abstract
CEOs can alter the temporal immediacy of their language (i.e., changing the tense of verbs and active vs. passive voice) in describing firm performance. For example, using temporal immediate language to describe good news would make it seem more immediate, and using temporal nonimmediate language to describe bad news would make it seem more distant. In an experiment, we examine whether a CEO’s effective use of this simple linguistic cue can successfully impact investors’ willingness to invest. Furthermore, as video communication of earnings conference calls has become more popular, our study also investigates this linguistic effect in both text and video formats. We predict and find that investors are more likely to increase their investment willingness when managers effectively use temporally immediate language to describe positive news and temporally nonimmediate language to describe negative news than otherwise. However, such an effect only exists with text communication but not with video communication. Our findings have important implications for investors, managers, and regulators.
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