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The Power of Words: Analysing the Impact of Managerial Sentiment in Earnings Conference Calls on Stock Price Reactions
Rachfahl, Finnegan (2025) The Power of Words: Analysing the Impact of Managerial Sentiment in Earnings Conference Calls on Stock Price Reactions.
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| Abstract: | This thesis examines how managerial sentiment during earnings conference calls (ECCs) influences short-term stock price reactions. Using FinBERT, a finance-specific NLP model, sentiment scores were extracted from over 15,000 ECC transcripts of S&P 500 companies (2010-2018), analyzing Full Call, Presentation, and Q&A sections separately. These sentiment scores were matched with three-day cumulative abnormal returns (CAR) using market-adjusted event study methodology. Results confirm that positive sentiment significantly predicts higher CAR across all three sections, with Full Call showing the strongest effect. The Q&A section demonstrates stronger individual effects than Presentation, suggesting investors respond more to unscripted communication. Sector-specific analysis reveals significant variation: Technology, Communication Services, and Consumer Discretionary show stronger sentiment-return relationships, while Utilities and Energy exhibit minimal sensitivity. This research contributes to behavioral finance and signaling theory by demonstrating that managerial tone serves as a credible signal beyond numerical financial data. The study offers practical insights for investors seeking short-term trading opportunities and companies aiming to optimize their communication strategies. By combining advanced NLP techniques with formal event study methodology, this thesis provides a scalable framework for future ECC sentiment research and highlights the signaling power of managerial communication in financial markets. |
| Item Type: | Essay (Bachelor) |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 83 economics |
| Programme: | International Business Administration BSc (50952) |
| Link to this item: | https://purl.utwente.nl/essays/106846 |
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