The effect of conference calls on equity incentives: An empirical investigation

Conference calls have become increasingly common in recent years, yet there is little empirical evidence regarding the effect of conference calls on executive compensation. In this study, we examine the effect of voluntary disclosures on equity incentives. We hypothesize that voluntary disclosures, as measured by conference calls, affect executive compensation contracts. Using a dataset of 6263 firm-year observations from both conference call and non-conference call firms, our results are consistent with the argument that the board of directors substitutes voluntary disclosures for more costly corporate governance mechanisms. Alternatively, in firms where CEOs have less equity incentives, the owners demand more voluntary disclosures. The results of this study should be of great importance to executives and capital market participants internationally, such as investors and analysts, since we provide evidence that conference calls affect incentive based compensation contracts, which were shown in prior studies to be value relevant.