Talk the Walk: Predicting Pricing Power Using Top Management Team’s Language

André Tomano, Niels Holtrop, Joost M.E. Pennings, Thomas Post, Hauke Wetzel (working paper)

Pricing power (PP) – the ability of firms to raise or sustain prices without curtailing demand – is a fundamental driver of long-term value creation. Established accounting measures like the price–cost margin (PCM) are retrospective and cost-contaminated; they confound price-driven margin gains with cost cuts and fail to anticipate a change in a firm’s pricing position before it materializes.

Using linguistic dependency parsing on firms’ earnings calls, this study develops a continuous, firm-level measure of communicated PP, decomposed into a realized and an expected PP signal.

Applied to 55,664 firm-quarters covering 3,138 U.S. firms from 2018 to 2024, the realized component aligns contemporaneously with the accounting proxies, and the expected component anticipates future PCM, showing that managerial language moves before the accounting record.

The study offers a forward-looking, cost-clean and scalable measure of PP that complements the existing proxies, which can be applied ad-hoc to any firm communication.

Market Your Share! How Marketing Capability and its Communication Drive Firm Value through Analyst & Investor Relationships

André Tomano, Niels Holtrop, Joost M.E. Pennings, Thomas Post (working paper)

Valuing assets that drive future firm performance is a pivotal but difficult task for financial analysts and investors. This study investigates how Analyst & Investor Relationships (AIR), as a strategic market-based asset, impacts firm valuation.

Using a comprehensive survey-based measure of AIR across 1,159 U.S. firms from 2015 to 2020, we find that AIR contributes positively to firm value, measured by Total q. Drawing on resource-based theory, we identify marketing capabilities (MC) as a critical antecedent: firms with superior MC exhibit stronger AIR, and communicating MC during earnings calls strengthens this conversion. Further moderation analyses reveal that analyst coverage weakens the link between MC and AIR, but amplifies the relationship between AIR and firm value, whereas institutional ownership attenuates the latter.

These findings demonstrate that a firm’s ability to market its shares is context-dependent, contributing to literature by revealing the nuanced pathways through which MC and AIR generate firm value.