N°26-74: Chair Voice Tone, Financial Constraints, and Corporate Investment

We examine whether the Federal Reserve Chair's vocal tone at post-Federal Open Market Committee (FOMC) press conferences is associated with corporate investment and whether firm-level financing conditions moderate this relationship. Using panel local projections on quarterly data for 5,181 U.S. listed non-financial firms from 2011Q2 to 2023Q3, we document that the association between voice tone and investment varies with firms' financing conditions over time. In our preferred specification, the investment response to a more positive voice tone is 0.0414 percentage points stronger over four quarters for firms that are more constrained than their own average, and the pooled constraint index does not capture this pattern. This differential association is asymmetric. It is concentrated in unusually downbeat press conferences, after which firms that are more constrained than their average invest relatively less, while upbeat tone deviations generate little differential response. The average association between more positive voice tone and investment is modestly negative in the short run, especially in low-uncertainty quarters, and is descriptive rather than causal.