The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms

Accounting Review - Tập 91 Số 4 - Trang 1023-1049 - 2016
François Brochet1, Patricia Naranjo2, Gwen Yu3
1Boston University
2Rice University
3Harvard University

Tóm tắt

ABSTRACT We examine how language barriers affect the capital market reaction to information disclosures. Using transcripts from non-U.S. firms' English-language conference calls, we find that the calls of firms in countries with greater language barriers are more likely to contain non-plain English and erroneous expressions. For non-U.S. firms that hire an English-speaking manager, we find less use of non-plain English and fewer erroneous expressions. Calls with a greater use of non-plain English and more erroneous expressions show lower intraday price movement and trading volume. The capital market responses to non-plain English and erroneous expressions are more negative when the firm is located in a non-English-speaking country and has more English-speaking analysts participating in the call. Our results highlight that, when disclosure happens verbally, language barriers between speakers and listeners affect its transparency, which, in turn, impacts the market's reaction.

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