Elevating Earnings Calls: How AI-Powered Insights Transform CEO and CFO Responses

Earnings calls are quite important for listed companies. CEOs and CFOs have the opportunity to engage with analysts and investors, both sharing their results and discussing what lies ahead. Having said that, earnings calls may be perceived by the buy side as somewhat redundant when it is not evident that management can provide new material data points to the market (and thus, the importance of having a good script that adds value to your investors and analysts).

A recent research paper, “Executives vs. Chatbots,” introduced an innovative concept called “Human-AI Differences (HAID).” HAID measures information content by comparing responses from corporate executives during earnings calls to those generated by context-preserving Large Language Models (LLMs) trying to gauge what new information is being conveyed by the management team. The academics behind this argue that this development may eventually reshape earnings calls, equipping CEOs and CFOs with data-driven insights to customize their responses based on predictions about the call’s Q&A, and allowing investors and analysts to sift through the noise to find the information from the call that truly matters.

Large Language Models (LLMs) such as ChatGPT have demonstrated their efficiency in processing and analyzing extensive data. When coupled with HAID’s methodology, researchers found they can predict stock liquidity, abnormal returns, accuracy of analyst forecasts, and the number of analysts forecast revisions following earnings calls.

Following this argument, this paper suggests that when earnings are projected to decline or the company is facing significant uncertainty, AI-backed responses can help maintain a calm and reassuring tone which may help anchor stakeholders’ trust. That, at least, is the claim. Conversely, when earnings are predicted to soar, executives can confidently take the microphone themselves and be more natural and authentic. The ability to present results personally can bolster confidence among investors and convey a strong message of leadership.

The flexibility offered by AI-powered insights may improve how executives approach earnings calls in the future. It is evident that AI is set to become a bigger part of business communication going forward, and understanding how to use this flexibility in your favor sooner rather than later is ideal.

At Miranda Partners, our highly specialized team is ready to help you figure this out. We are happy to explore the benefits of AI tech, while maintaining effective human communication strategies to elevate your investor relations materials.

Sources:

Executives vs. Chatbots: Unmasking Insights through Human-AI Differences in Earnings Conference Q&A by John (Jianqiu) Bai, Nicole M. Boyson, Yi Cao, Miao Liu, Chi Wan :: SSRN

Executives vs. chatbots: unmasking insights through human-AI differences in earnings conference Q&A, Sarah Wolter (fintech.io)