Bill Mayew

Assistant Professor of Accounting
Ph.D. University of Texas at Austin, 2006

Working Papers

“The Power of Voice: Managerial Affective States and Future Firm Performance” with Mohan Venkatachalam

Abstract: In this study, we measure managerial affective states during earnings conference calls by analyzing conference call audio files using vocal emotion analysis software. We hypothesize and find that when managers are scrutinized by analysts during conference calls, positive and negative affect displayed by managers are informative about the firm's financial future. In particular, we find that managers exhibiting positive (negative) affect are positively (negatively) related to contemporaneous stock returns and future unexpected earnings. However, analysts do not incorporate the information when determining short term earnings forecasts. When making stock recommendation changes, however, analysts incorporate positive affect but not negative affect suggesting that analysts may not fully incorporate information contained in negative affect. We observe market underreaction to negative affect as if market participants follow analyst recommendation changes. Together, this study presents new evidence that managerial vocal cues contain useful information about firms' fundamentals, incremental to both quantitative earnings information and qualitative “soft” information conveyed by the linguistic content.

“Are there private information benefits to participating in a public earnings conference call?” with Nate Sharp and Mohan Venkatachalam

Abstract: We examine whether analysts who participate in earnings conference calls by asking questions receive private information benefits relative to analysts who do not ask questions.  Private information benefits accrue to a participating analyst when a manager’s response to the analyst’s question uniquely complements that analyst’s private information set.  Our evidence is consistent with participating analysts receiving beneficial private information.  Specifically, we find that the initial annual earnings forecasts subsequent to a conference call are more accurate and more timely for participating analysts.  We also find that participating analysts are more likely to reciprocate by upgrading (not downgrading) a firm’s stock recommendation upon receiving good (bad) earnings news.  Our results suggest that managers and analysts continue to exchange private benefits in the Post Regulation FD era.

“Earnings Surprises and Uncertain Managerial Ability: Evidence from CEO Turnovers” with Shane Dikolli and Dhananjay Nanda

Abstract: We document that the number of past quarterly performance surprises: earnings decreases, negative analysts' forecast errors, and negative stock returns, are positively related to the likelihood of CEO dismissal. This relation declines over a CEO's tenure, consistent with performance surprises revealing information about uncertain managerial ability. We also show that CEO tenure affects firm governance characteristis: tenure is positively associated with CEO ownership and CEO-chair duality, and negatively associated with board independence. Results suggest that periodic performance reports increasingly resolve uncertainty about managerial ability thereby affecting a firm's demand for minitoring its CEO over the CEO's tenure.

“Religious Socal Norms and Corporate Financial Reporting” with Scott Dyreng and Chris Williams

Abstract: Social norms have been shown to influence economic decisions in a variety of contexts. We investigate how social norms stemming from religious adherence surrounding a firm's headquarters affect financial reporting choices. We hypothesize and find that religious social norms are negatively associated with financial reporting aggressiveness. Relative to counties exhibiting low levels of religious adherence, firms operating in counties with high levels of religious adherence (1) exhibit no discontinuity preceding zero in their analyst based forecast error distributions, (2) have higher accrual quality, (3) have lower risk of fraudulent accounting, and (4) are less likely to restate their financial statements. Corroborating these results, we find that religious social norms are also inversely associated with tax avoidance, where effective tax rates and tax haven usage act as proxies. Finally, we find that capital market participants react more strongly to earnings from firms operating in areas of high religious adherence, consistent with investor acknowledgement of the role of religious social norms curbing aggressive financial reporting.

“The Effect of TRA86 on the Extent of Implicit Taxes at the Corporate Level ” with Ross Jennings and Connie Weaver

Abstract: We examine the effect of the Tax Reform Act of 1986 ( TRA 86) on the extent of implicit taxes at the corporate level. Using a variety of methods, we find consistent evidence that implicit taxes abruptly declined from eliminating virtually all of the cross-sectional differences in explicit tax preferences in years before TRA 86 to eliminating only about one-third of the cross-sectional differences in tax preferences in years following TRA 86. This shift is accompanied by corresponding increases in the persistence of tax-related earnings changes and relative decreases in book-to-market ratios for firms with high tax preferences, both economic implications of the shift in implicit taxes. Further analyses indicate that TRA 86 is also associated with a systematic change in the relation between tax preferences and leverage, providing indirect evidence that the decline in implicit taxes may be due to more complex tax planning strategies or unobservable tax shelters as increasing sources of tax preferences.

Work in Progress

On the Use of Voice Analysis to Detect Financial Misreporting, with Jessen Hobson and Mohan Venkatachalam

Affective States and Monetary Policy: Evidence from the Federal Reserve Chairman, with Mohan Venkatachalam