Divergent Market Reactions to Abstract Language: A Multicountry Event Study of European Central Bank Communications

In this paper, we develop a theory about how language abstraction - a dominant strategy used to create common ground among diverse audiences - can become problematic when used in a global environment where market actors have divergent interests. Employing a multicountry event study, we analyze how the stock markets in 11 Eurozone countries react to the abstract language in public speeches delivered by the European Central Bank president. We find that abstract language, rather than creating common ground, produces divergent market reactions across core and peripheral countries, such that market actors in core countries react more favorably to abstract communication, while those in peripheral countries prefer concrete communication. We also show that this divergent reaction is stronger when the economic interests of the core and the periphery are made more salient.