Can the Balanced Scorecard Help in Designing Conference Calls?

Posted by JAN CHRISTOPH HENNIG - Jan 16, 2020

In a recent study, published in the European Accounting Review (EAR) Special Issue on Textual Analysis Research in Accounting, Sebastian Firk, Michael Wolff and I shed light on the value creation potential of quarterly earnings conference call design. Specifically, we investigate whether the balanced scorecard can help in designing more effective conference calls?

The use of conference calls as a tool for capital market communication has become a standard for large listed firms. Therefore, and due to the open nature of conference calls academic interest has been growing substantially over the last decades. Despite the increased focus on conference calls, insights from practice and research reveal uncertainty among firms when facing a variety of design choices in the open nature of conference calls. For example, instead of experimenting with more informative formats (Rehm, 2013), managers adhere to predetermined scripts and even refrain from answering questions as they fear the risks arising from the unintended disclosure of negative information (Hollander, Pronk, & Roelofsen, 2010; Lee, 2016). However, given the variety of design choices in conference calls, there may be potential upsides for firms. While practitioners have started to push for advice on handling conference calls more effectively (Rehm, 2013), specific courses of action are missing.

Reminiscent of the main reasons for voluntary disclosure, we focus on whether the design of conference calls can help in bridging the gap between managers and investors. This is in line with the initial studies on conference calls, which investigated the decision regarding whether to hold a conference call and stressed the specific benefits in form of reduced information asymmetry (Brown et al., 2004; Frankel, Johnson, & Skinner, 1999; Tasker, 1998). We extend these studies by providing a specific course of action to exploit the open nature of conference calls by using a specific design, namely, the balanced scorecard concept as a framework for firms to better present their information.

The balanced scorecard complements financial information with information on customers, internal processes, as well as learning and growth to overcome the shortcomings of purely financial information (Kaplan & Norton, 1992). The balance among the four perspectives enables a more holistic presentation of a firm’s business in a condensed form (De Geuser, Mooraj, & Oyon, 2009; Kaplan & Norton, 1993). This balance may also be beneficial in the context of external communications as financial analysts and investors require both non-financial as well as financial information (Brown, Call, Clement, & Sharp, 2015). In this light, we argue that firms and their investor relations (IR) teams could lean on the balanced scorecard concept as a framework with which to prepare the information content of their conference calls (i.e. balanced information composition). By doing so, firms could reduce information asymmetry and lower their cost of capital.

To empirically address this question, we develop a proxy for information composition in line with the balanced scorecard concept using textual analysis. Therefore, we construct word lists for the four balanced scorecard perspectives: finance, customers, internal processes, as well as learning and growth. For each perspective, we measure the occurrences (i.e. word counts) in firms’ quarterly conference calls. Based on the word counts of the four perspectives, we calculate a reversed version of the Gini coefficient to derive our measure of balanced information composition for each call. We use a sample consisting of 7536 quarterly conference calls of the largest listed firms in the US.

Our findings show a negative and economically meaningful effect of the balanced information composition in conference calls on the cost of capital. Further, we find that the observed effect is driven by a reduction in information asymmetry. We run a battery of robustness tests to rule out alternative explanations for our findings. Our results indicate the effectiveness of the proposed framework of the balanced information composition and its relevance for firms’ value creation potential. Overall, these findings indicate that the idea of the balanced scorecard concept could help firms and IR teams as a framework to lean on when composing the information for conference calls.

Göttingen, Jan 16 2020 

Jan Christoph Hennig


Discover more about our study at

To cite this article: Sebastian Firk, Jan C. Hennig & Michael Wolff (2020): Can the Balanced Scorecard Help in Designing Conference Calls? The Effect of Balanced Information Composition on the Cost of Capital, European Accounting Review.



Brown, L. D., Call, A. C., Clement, M. B., & Sharp, N. Y. 2015. Inside the “black box” of sell-side financial analysts. Journal of Accounting Research, 53(1): 1–47.

Brown, S., Hillegeist, S. A., & Lo, K. 2004. Conference calls and information asymmetry. Journal of Accounting and Economics, 37(3): 343–366.

De Geuser, F., Mooraj, S., & Oyon, D. 2009. Does the balanced scorecard add value? Empirical evidence on its effect on performance. European Accounting Review, 18(1): 93–122.

Frankel, R., Johnson, M., & Skinner, D. J. 1999. An empirical examination of conference calls as a voluntary disclosure medium. Journal of Accounting Research, 37(1): 133–150.

Hollander, S., Pronk, M., & Roelofsen, E. 2010. Does silence speak? An empirical analysis of disclosure choices during conference calls. Journal of Accounting Research, 48(3): 531–563.

Kaplan, R. S., & Norton, D. P. 1992. The balanced scorecard – Measures that drive performance. Harvard Business Review, 70(1): 71–79.

Kaplan, R. S., & Norton, D. P. 1993. Putting the balanced scorecard to work. Harvard Business Review, 71(5): 131–140.

Lee, J. 2016. Can investors detect managers’ lack of spontaneity? Adherence to predetermined scripts during earnings conference calls. The Accounting Review, 91(1): 229–250.

Rehm, W. 2013. Three steps to a more productive earnings call. McKinsey on Finance, August: 2–4.

Tasker, S. 1998. Bridging the information gap: Quarterly conference calls as a medium for voluntary disclosure. Review of Accounting Studies, 3(1/2): 137–167.