Investors Favor Companies That ‘Do the Math,’ Baruch Professor’s Research Discovers

Investors Favor Companies That 'Do the Math,' Baruch Professor's Research Discovers

April 10, 2026

If you've ever had a math teacher ask you to show your work, Dexin Zhou's research will probably resonate with you.

In a paper published last year in the Journal of Corporate Finance, Zhou, an associate professor in the Bert W. Wasserman Department of Economics and Finance, examined the relationship between information disclosed during earnings conference calls and reactions by investors. He wanted to know whether conference calls that shared more numerical data (for example, earnings per share, profit margins, etc.) resulted in greater firm value.

Zhou and his co-authors applied a Python algorithm to transcripts of quarterly earnings conference calls by public companies to extract the number of words and numbers, then they calculated the proportion of numerical information in each transcript. Next, to determine increases in firm value, they studied the short-term change in each company's stock price, watching it within a three-day window after the conference call.

It probably won't surprise you to learn that their findings showed that the greater the proportion of numerical data disclosed during a given call, the higher that company's stock price rose over the short term. In other words, investors liked companies that "showed their work" or "did the math," as it were.

The obvious next question is why that would be so.

"Our interpretation is that disclosing more financial data reduces information asymmetry, and that reduces risk to investors," Zhou explains. "All things being equal, if you have one company that is a slightly riskier investment than another company, most people would prefer to invest in the less risky company. Our theory is that investors perceive companies that disclose more numbers to be less risky and that makes them more attractive as investments."

A possible alternative explanation focuses less on the amount of information investors receive than on their confidence in that information.

"It's possible that when managers have truly good results, they feel more confident in disclosing actual numbers," Zhou notes. "It's like when a parent asks a kid how she did on a test. If she says, 'I got an A!' she probably did. But if she says, 'I did pretty well,' she probably didn't get an actual A. So when investors hear a higher percentage of numbers in a call, they infer that the numbers are truthful and that makes them more interested in investing."

Zhou's latest research takes the same concept and applies it to information disclosed in financial news, such as articles published in the Financial Times or The Wall Street Journal, to see how the news affects the relationship between sales-side analysts and investors.

*** This copy was written by the Zicklin School. Visit the Zicklin School of Business to read about its undergraduate and graduate academic programs.