Foggy Management Presentations: Are Shareholder Proposals and CEO Political Ideology to Blame?

We study the association between shareholder proxy proposals and the linguistic complexity of management presentations during annual earnings calls. We find evidence that shareholder proposals received by target firms are positively associated with linguistic complexity of management’s presentation portion of the earnings calls. Further exploring the obfuscation component, we find that linguistic complexity stems from managerial obfuscation. We also examine CEO political ideology and find that management presentations of target firms with liberal CEOs are less complex than those of other target firms. Overall, we show that shareholder activism poses an indirect disclosure friction, especially among non-liberal CEOs.