Managers’ Cultural Background and Disclosure Attributes

We examine how a manager’s ethnic cultural background affects their communication with investors. Using a sample of earnings conference call transcripts with 24,901 executives from 42 countries, we find that managers from ethnic groups that have a more individualistic culture use a more optimistic tone and exhibit greater self-reference in their disclosure narratives. Managers’ ethnic culture has a lasting effect on their narratives, an effect that persists even for executives whose work experience later exposes them to different ethnic cultures. The effect of ethnic heritage is observed in dialogues that reflect real time interactions (i.e., Q&As) and less pronounced in the scripted, less spontaneous portion of the calls (i.e., management discussion). The capital market responds positively to an optimistic tone, but only analysts who share managers’ ethnic background adjust their earnings forecasts for the cultural component of managerial tone. The findings suggest that managers’ ethnic backgrounds have a significant effect on how they communicate with the capital market and how the market responds to the disclosure event.