Moral foundations and financial performance: the effect of moral cues during times of earnings uncertainty

This paper aims to investigate whether cues of morality can mitigate stock sell-offs in the face of earnings uncertainty prior to earnings conference calls and draws on moral foundations theory to study the effect of universal moral cues (harm/care and fairness/reciprocity rhetoric) and primarily conservative moral cues (ingroup/loyalty, authority/respect and purity/sanctity rhetoric) on market performance.

The study relies on a longitudinal data set of 1,920 firm-quarter observations corresponding to calls held by firms listed on the S&P 500 in 2015 and relies on computer-assisted-text-analysis and event-study methodology to test hypotheses.

The results suggest that cues of universal moral foundations have a mitigating effect on stock sell-offs and are able to create firm value; while cues primarily conservative moral foundations are not found to have an effect on market performance.

This investigation highlights why earnings conference calls may serve as a valuable tool for communicating a firm’s moral inclination and why universal morality may appeal to a wider range of shareholders than primarily conservative morality.