Researchers have found there is a specific language of lying that people use that you can tell by listening to an earnings conference call â or just reading the transcript.
Researchers at Stanford University analyzed 30,000 earnings call transcripts and found language patterns were often better predictors of negative earnings surprises than traditional accounting methods!
When being deceptive on an earnings call, the person typically uses a lot of what they call âqualifying language,â things like â âWell, to the best of my knowledge,â âAs far as I knowâ or âEveryone agreesâ¦â Or they use distancing language â not âIâ or âweâ but âThe companyâ and âthe team.â
Again, itâs not just a one-off reference â itâs four or five clusters of these deceptive indicators. Another indicator is when the person uses inflated language consistently. It was a âgreatâ quarter not a âgoodâ one, or it was an âincredibleâ quarter not just a âsolidâ one.
The Stanford researchers analyzed that famous Lehman Brothers earnings call from 2008 just months before the firmâs spectacular collapse.
Then-CFO Erin Callan used the word âstrongâ 24 times, âgreatâ 14 times, âchallengingâ six times, âincrediblyâ eight times and âtoughâ just one time.
No one is saying Callan lied but what researchers suggest is the "strong" language that preceded the firm's collapse was a better indicator of what was to come than the firm's actual accounting. So it never hurts to listen to the language.
âThese calls are supposed to be predictive â you need to learn how to sift through them and understand the language,â Meyer explained. âThere is a science to deception.â
cont on link..
http://www.cnbc.com/id/45799413
Researchers at Stanford University analyzed 30,000 earnings call transcripts and found language patterns were often better predictors of negative earnings surprises than traditional accounting methods!
When being deceptive on an earnings call, the person typically uses a lot of what they call âqualifying language,â things like â âWell, to the best of my knowledge,â âAs far as I knowâ or âEveryone agreesâ¦â Or they use distancing language â not âIâ or âweâ but âThe companyâ and âthe team.â
Again, itâs not just a one-off reference â itâs four or five clusters of these deceptive indicators. Another indicator is when the person uses inflated language consistently. It was a âgreatâ quarter not a âgoodâ one, or it was an âincredibleâ quarter not just a âsolidâ one.
The Stanford researchers analyzed that famous Lehman Brothers earnings call from 2008 just months before the firmâs spectacular collapse.
Then-CFO Erin Callan used the word âstrongâ 24 times, âgreatâ 14 times, âchallengingâ six times, âincrediblyâ eight times and âtoughâ just one time.
No one is saying Callan lied but what researchers suggest is the "strong" language that preceded the firm's collapse was a better indicator of what was to come than the firm's actual accounting. So it never hurts to listen to the language.
âThese calls are supposed to be predictive â you need to learn how to sift through them and understand the language,â Meyer explained. âThere is a science to deception.â
cont on link..
http://www.cnbc.com/id/45799413
