Talk the Walk: A New Measurement of Pricing Power Using Top Management Team’s Language

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

Pricing power – the ability of firms to raise prices without losing demand – is a fundamental driver of long-term value creation. Yet investors and analysts have few tools to assess it in real time. Conventional measures such as the Lerner Index and demand elasticities are backward-looking, data-intensive, and silent on firms’ strategic intentions.

This study constructs a continuous, firm-level measure of pricing power derived from earnings call transcripts. Using relation extraction via dependency parsing, we score each sentence by the directional relationship between pricing-relevant verbs and their syntactic objects – alongside negation handling and company-subject filtering to distinguish managerial agency from references to external price movements. Scores are decomposed into forward- and backward-looking components based on sentence tense and separately tracked across call sections to distinguish executive prepared remarks from Q&A responses.

Applied to 55,652 firm-quarter observations for 3,138 unique U.S. firms from 2018 to 2024, preliminary descriptives reveal two consistent patterns. First, the PP signal is substantially higher in prepared presentations than in Q&A sections across all years and industries, with pooled mean scores of 0.015 and 0.005 respectively – a gap that is statistically significant in every year and in all 40 industries examined. Second, the temporal decomposition shows that forward-looking sentences consistently generate a stronger PP signal than past-tense ones across all sections and years – with the gap widening notably during 2022–2023 – coinciding with the high-inflation period when pricing was most salient in management discourse. This suggests that management uses prepared remarks not only to signal future pricing intentions but also to frame past pricing outcomes in a favourable light.

This study offers the first forward-looking, scalable, text-based measure of pricing power updated at quarterly frequency. It complements backward-looking financial proxies and provides investors and analysts with more timely information about firms’ capacity to sustain or expand margins.

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.