Cash Got Your Tongue? CEO Language-Uncertainty Around Undisclosed Cash Acquisitions

Abstract

Firms host quarterly earnings calls and field analysts' unscripted questions, and the language a CEO uses in answering is increasingly read as a window into what managers know but have not yet disclosed. Yet when a firm is privately committed to an acquisition it has not announced, the executive holds the routine call unable to confirm or deny the one development that matters. Whether the spoken record tracks that withholding has not been characterized. We study the earnings-call transcripts and acquisition records of United States public firms from 2002 to 2018, covering 88,205 calls from 1,884 firms. From this language we construct a residual measure of CEO question-and-answer uncertainty - the part that remains once each executive's persistent speaking style is removed - and we track it around firms' cash acquisitions, with stock acquisitions as a comparison. We find that this residual uncertainty is elevated in the quarter before a cash acquisition, relative to the firm's own other quarters, with no comparable rise before stock acquisitions. Moreover, it becomes indistinguishable from zero in the first observed announced-but-not-closed call window, even before completion, while the cash that funds the purchase stays on the balance sheet until the deal closes. Furthermore, the elevation concentrates in cash acquisitions rather than stock acquisitions, a difference that survives a formal pooled test. This pattern is not accounted for by the analyst cash-scrutiny we can measure; we read it as call language that tracks the deal's passage from private to public, a within-firm correlational regularity rather than a tested mechanism. Finally, the residual is also unrelated to the firm's post-call bid-ask spread, a standard gauge of information asymmetry, while the scripted presentation is, contemporaneously and on one-tailed within-firm tests, positively associated with it, consistent with the two parts of the call relating to the outside information environment in different ways. Overall, a constrained executive's unscripted answers appear to carry a readable, anticipatory trace of an acquisition the firm has not yet disclosed.