No. 168: Response Latency as a Cue to Management Deception

Drawing from established models in psychology, we examine whether response latency (RL), defined as the pause between the end of a question and the beginning of the subsequent answer, reveals deceptive management communication. We provide a three-pronged validation of RL as a deception cue. First, managerial statements directly quoted in settled securities class action lawsuits exhibit longer RL. Second, RL predicts linguistic patterns consistent with deceptive communication theory. Third, analysts respond to high-RL answers with greater skepticism, as evidenced by challenging follow-ups. We further examine whether manager responses following high RL have broader capital market effects. We find that a more positive disclosure tone following high RL leads to an immediate positive stock price reaction that reverses over time, consistent with managers strategically distorting information. Our results are robust to controlling for alternative drivers of cognitive strain in dialogue, such as linguistic and vocal uncertainty. Overall, we provide evidence that RL serves as a granular, response-level cue to deceptive management communication in interactive firm disclosures.