Nailing the Q&A performance

”Earnings call has been characterized as a dramaturgical encounter where the managers need to observe the different audience members and adjust their speech according to them.”

By Kaisa Penttinen

During the last couple of years, financial markets have faced uncertain times when investors have received ambiguous information on market conditions. Timely information is essential for investors, but the mandatory financial reports do not always fulfil their information needs. After the release of interim or annual reports, listed companies often organise a public earnings call with a Q&A session, where analysts and other audience members have an opportunity to ask from managers the latest information regarding the financial position of the company. For companies, the earnings call is an occasion to promote stability during uncertain market conditions and enhance investors’ confidence on company’s value.
While numeric information is presented in the preceding financial reports, the Q&A of earnings calls is a good chance to request managers to explain and elaborate the interesting points in the company’s performance. In addition to the accurate accounting information, investors benefit also from understanding what kind of expectations and interpretations of the current situation guide managers’ decisions and strategic choices. As a consequence, the phrase “could you give some color on this” has become a frequently used question during the Q&A.

The interactional nature of the event distinguishes earnings call from the written forms of financial reporting and the Q&A allows also the questioners to influence on the topics that companies discuss publicly. Earnings calls have focused traditionally on investors’ perspective and the viewpoints of other stakeholder groups have been less visible. Nonetheless, the audience of the event consists of different groups of investors that have diverse perspectives and information needs. Consequently, earnings call has been characterized as a dramaturgical encounter where the managers need to observe the different audience members and adjust their speech according to them. For instance, managers usually prefer to focus on the long-term value creation of the company that interests particularly the intrinsic investors, while analysts’ questions often emphasize the short-term perspective of the financial performance. In order to convey a positive impression in the earnings call, it is important for managers to perform well when investors are monitoring them. The event includes certain risks on managers’ reputation, because the questions proposed by analysts might concern a sensitive topic that the company would not like to comment on in front of an audience. Transparency has been perceived as an instrument of control in financial markets and facing a live audience and their questions can enhance the image of company’s openness with their shareholders. On the other hand, the Q&A puts managers in a spot where they have to regularly refuse to answer analysts’ questions so that they would not reveal information that could jeopardize the company’s competitive position or cause other negative consequences.

Therefore, achieving a favorable performance in the Q&A requires thorough preparation from managers. At the same time with seeking to promote an image of transparency to the audience, the managers need to delineate what can be revealed and what should be kept secret. Furthermore, it requires good communication skills from managers to be able to address their speech to several different audience groups simultaneously and to be ready to handle proficiently the unexpected or uncomfortable questions.

Finally, a successful earnings call event is worth pursuing, since it can provide investors more profound understanding of the company’s financial position and help companies maintain investors’ trust during challenging times.

About the author:

Kaisa Penttinen is a doctoral researcher in the School of Accounting and Finance in the University of
Vaasa. Her PhD research relates to public companies’ voluntary reporting and focuses on the practices
to communicate financial and non-financial information through oral interaction in the Q&A of earnings
calls. Kaisa’s educational background combines economics and linguistics and she utilizes
multidisciplinary research approach in her PhD study. Her other research interests include sustainability
accounting and reporting.


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