Theoretical research suggests that numbers convey more precise information than words. Based on this work, we hypothesize that when managers provide disclosure with a greater proportion of quantitative information in an earnings conference call, investor uncertainty around the call will be lower and, thus, short-window returns around the call will be higher. We offer three main findings. First, we find a positive association between the extent of hard information (i.e., numerical disclosure) in earnings conference calls and short-window stock returns around the call. This result suggests that investor uncertainty is lower when managers provide greater numerical disclosure. Second, we find that this positive association is larger when firms are smaller and have larger stock volatility or analyst forecast dispersion. These results suggest that the effect of numerical disclosure in reducing investor uncertainty is greater when the firm’s information environment is more uncertain. Finally, we find that this positive association is larger when firms issue a negative earnings surprise. This result suggests that the effect of numerical disclosure in reducing investor uncertainty is greater when the uncertainty of a firm’s performance is greater. In additional analysis, we find that higher proportion of numerical information is negatively associated with implied volatility, further linking quantitative disclosure to a reduction in investor uncertainty. Overall, our results suggest that investors react to the extent of hard information (i.e., numerical disclosure) in earnings conference calls.

Number of Numbers: Does Quantitative Disclosure Reduce Uncertainty in Quarterly Earnings Conference Calls?

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