Silence is gold: Narrative conservatism of SOE managers

Examining transcripts from earnings conference calls of Chinese listed companies from 2008 to 2020, our analysis uncovers a notable inclination among state-owned enterprise (SOE) executives, who exhibit a preference for brevity and a negative tone in their responses to investor queries. This tendency suggests an effort to minimize errors and a reduced motivation for tone management to artificially boost stock prices. Lower levels of management and employee shareholding, as well as reduced stock pledges by controlling shareholders, contribute to more concise and less distorted responses. Furthermore, female executives and those with experiences during the Great Famine display heightened conservatism in communication. Rigorous testing, including a difference-in-differences analysis using SOE remuneration reform as a natural experiment, confirms the robustness of these findings. Consequently, earnings conference calls by SOEs are associated with negative market reactions.