When delivering bad news in a meeting or by phone, the time of day can make a difference in how the news is received. By studying quarterly corporate earnings calls to analysts, researchers showed that the tone of the conversations was more negative in the afternoon than in the morning. In addition, the market had a tendency to overreact to bad news when delivered in the morning.
It is standard practice for corporations to have a conference call with stock market analysts after quarterly earnings are released. In this call, executives make a presentation concerning the earnings report then take questions from the analysts. It is these conference calls that researchers from University of Virginia’s Darden School of Business and NYU’s Stern School of Business studied to determine what impact time of day can have on financial communications.
Accumulating data from 25,000 corporate quarterly earnings-related calls, the results of the research by Stern Professor of Accounting and Finance Baruch Lev and Darden Associate Professor of Business Administration Elizabeth Demers, appear unequivocal: the time of day directly impacts both the general tone of the communication, and the reaction to the communication.
Specifically, Lev and Demers, working with Stern doctoral student Jing Chen, found that:
Intuitively, we know that most people are fresh at the start of the day, and wear down as the hours pass, notably in mid- to late afternoon. For many, this can mean a dip in productivity and creativity.
This research empirically demonstrates, however, that fatigue and stress can have a serious and even financial impact beyond these more well known effects. If we use the research described in this paper as a guide, business leaders would do well to:
Obviously, the schedule of meetings and calls is often dictated by other factors. When there is a choice, however, managers and leaders should try to eliminate any scheduling factors that will unwittingly make an already challenging meeting even more difficult.
“Oh What a Beautiful Morning! The Effect of the Time of Day on the Tone and Consequences of Conference Calls,” Jing Chen, Elizabeth A. Demers and Baruch Lev, Darden Business School Working Paper, December 1, 2012.
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