Talk the Walk: Predicting Pricing Power Using Top Management Team’s Language
With Niels Holtrop, Joost M.E. Pennings, Thomas Post, and Hauke Wetzel
Pricing power is a fundamental driver of long-term value, yet accounting measures like the price–cost margin are backward-looking and cost-contaminated. Using dependency parsing on earnings calls, we build a continuous, firm-level measure of communicated pricing power, decomposed into realized and expected signals. Across 55,664 firm-quarters (3,138 U.S. firms, 2018–2024), the realized component aligns with accounting proxies while the expected component anticipates future price–cost margins — managerial language moves before the accounting record.