With the normalization of information disclosure and the development of textual information mining technology, investors pay more attention to the incremental information value of textual information such as management tone. Investment decisions not only depend on quantitative financial information, but also consider the role of qualitative textual information like management tone. It is unclear that whether management tone can be perceived by the investor of peer firms. This paper investigates the externality of management tone and the potential mechanism with the unique setting of earnings communication conferences.

Using the approach of event study, we examine the spillover effect of management tone with the stock return reaction of peer firms to the management tone of industry leaders during the window of earnings communication conferences. It shows that the association between the stock return of peer firms and the net tone in earnings communication conferences of industry leaders is significantly positive. After being divided into the positive and negative tone, the stock price of peer firms reacts stronger to the negative tone of industry leaders, indicating that the externality of management tone reflects industry prospect information and investors focus more on negative industry information. Further studies show that the spillover effect is more pronounced for firms with the same analyst following, high stock price synchronicity and industry leaders with strong market shares. As well, the spillover effect is stronger when management tone is credible. This study implies that management tone can provide incremental information for peer investors, which helps to reduce information acquiring costs and investment uncertainty, and strengthen the supervision of information disclosure.

This article makes some contributions in the following aspects: First, based on the previous studies which mainly consider the spillover effect of quantitative financial information such as earnings announcements and earnings forecasts, it further supports that qualitative information such as management tone also has a spillover effect, which is an effective supplement to the research on information spillover effect. Second, from the perspective of information externality, it finds that the tone of earnings communication conferences is positively related to the stock price of peer firms, which extends the research on the informativeness of management tone by demonstrating the incremental information value of tone to peer investors. Third, based on the effect of tone on analyst forecasts and firm investors, it finds that management tone, as non-content textual information, has a peer spillover effect, which enriches the economic consequences of earnings communication conferences. Fourth, from the perspective of information spillover effect, it helps to differentiate the components of management tone in earnings communication conferences, verifying that management tone mainly reflects industry prospects. To some extent, it provides an explanation for the “same rise and fall” phenomenon in China’s stock market combined with qualitative information disclosure, which is also important for how to strengthen the supervision of qualitative information disclosure.