Complex sentences, words on earnings call can forecast bad news

Feeling queasy as a CEO steps up the fancy talk when discussing results? It’s with good reason.

A study of conference calls by S&P Global found the average length of sentences and the proportion of polysyllabic words employed was higher for firms disclosing negative news, such as an earnings miss.

Those with higher levels of complexity in their language took fewer questions from analysts, the examination of second-quarter calls found.

It’s all related, said Frank Zhao, a quantitative analyst at S&P.

When fewer analysts are allowed to speak, the company’s shares trail the market over the next two months. That’s probably because the company spent so much time on the call going on about its results that it barely got around to calling on anyone.

And going on about results means the results are bad.