Using machine learning algorithms to analyze the format of the information in earnings conference call presentation slides, I examine how managers use diagrams, a salient visual presentation format and I analyze the effect of this format on investors and analysts. I find that managers use more diagrams when current quarterly earnings fall short of analyst expectations. In addition, firms that face a negative earnings surprise use more diagrams to discuss other positive key performance news including revenues, cash flows, and cost management. Also, firms increase their use of diagrams for non–GAAP earnings when current GAAP earnings fail to meet analyst forecasts. These results suggest that managers use diagrams strategically in their conference call presentations. I also find that the use of diagrams is associated with a higher initial response to earnings news at the announcement date. The use of diagrams is also associated with a lower post–earnings announcement drift over the post announcement window. Collectively, these results suggest that when earnings fall short of analyst expectations, managers use more diagrams to highlight the positive aspects of the firm’s financial performance. As a result, managers’ strategic choices regarding the presentation of earnings news hinders the efficient incorporation of earnings news into stock prices.

This paper investigates whether investors are attentive to peer firms’ segment disclosures. Prior evidence shows that investors react positively to earnings news announced earlier by other firms in the same industry (“peer firms”). The price reaction indicates spillover based on shared industry fundamentals. In this study, I examine whether investors notice that many peers are multi-industry firms and operate in minor industries unrelated to the business of their own firms. Although peer firms’ segment disclosures reveal industry-specific earnings, evidence suggests that investors react positively to uninformative earnings news from peer firms’ minor segments. When investors’ own firms later announce earnings, there is a predictable price reversal associated with peer firms’ minor-industry news. Furthermore, the positive price reaction to irrelevant minor-industry news and the later price reversal are concentrated in investors with low sophistication. Taken together, my findings are consistent with the average investor paying limited attention to peer firms’ segment disclosures and overreacting to irrelevant news from multi-industry peers.

This study examines whether analysts efficiently impound information about innovation into their short-term (quarterly and annual) and long-term forecasts. I use patents to measure technological innovation outputs, and trademarks to measure non-technological product and marketing innovation outputs. Analysts appear to understand that patents increase only long-term earnings growth whereas trademarks increase both short-term earnings and long-term earnings growth. However, their forecasts contain systematic errors. Analysts underreact to the short-term earnings implications of trademarks, and overreact to the long-term earnings implications of both patents and trademarks. In addition, analysts’ short-term forecast errors predicted from trademarks partially explain investor mispricing of trademarks. Collectively, my findings improve our knowledge of whether analysts understand innovation and how analysts’ inefficient use of information about innovation affects the stock market valuation of innovation.

We present a model in which some of the firm’s information (“new”) can be disclosed verifiably and some information (“type”) cannot, to show that some firms may voluntarily withhold good news and disclose bad news. We describe an equilibrium in which high-type firms withhold good news and disclose bad news whereas low-type firms disclose good news and withhold bad news. Under some parameter values, this equilibrium exists when other more traditional equilibria are ruled out by standard equilibrium refinements. The model explains some otherwise anomalous empirical evidence concerning stock price reactions to disclosure, provides some new empirical predictions, and suggests that mandatory disclosure requirements may have the undesirable consequence of making it more difficult for firms to reveal information that cannot be disclosed credibly.