Reduction of Post Earnings Announcement Drift Through Use of Conference Calls

Mark Kohlbeck
University of Wisconsin–Madison

Matthew Magilke
University of Wisconsin–Madison

Abstract: We investigate post-earnings-announcement drift in connection with increased voluntary disclosure of information through conference calls held concurrent with quarterly earnings announcements. Investors can use the additional information to reduce ex ante uncertainty about the firm and increase expectation precision – the effect of which would mitigate post-earnings-announcement drift. We find that conference calls do mitigate post-earnings-announcement drift when we focus our analysis on a sample that indicates drift exists in its non-conference call observations. An analysis of the information content of the conference calls for these firms suggests the effect is immediate for firms in the lowest decile of scaled forecast errors. As news improves (at least for smaller firms), the mitigation is no longer immediate, but likely accelerated compared to non-conference call post-earnings-announcement drift.

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