“Fake” Tariff News: Is Corporate America Concerned with Trade War?
The effect of trade war on Corporate America is a widely disputed hot topic. On one hand, the trade dispute might ward off abusive trade practices by foreign companies, but, on the other hand, it might hurt American exporters, raise costs for manufacturers, and interrupt companies’ supply chain. We shed some light on this question by examining the language of first-quarter earnings call transcripts, since this was the earliest voluntary disclosure that was used by the US companies to communicate their views on this topic to the investors. We find that companies that bring up trade tariffs during their call adopt a more negative tone on the call. We also find that analysts share in the pessimism expressed by the managers, as they tend to have lower earnings forecasts for these companies. We also find that tariff talk affects the variance but not the mean of stock returns.
Journal of Investing
College of Management
Accounting and Financial Management
Klevak, J., J. Livnat, D. Pei, & K. Suslava. Fake Tariff News: Is Corporate America Concerned with Trade Wars? Journal of Investing, 1, 088, May 2019.