Update -- Greg Miller was interviewed by the Ross School of Business about investor relations. You can see the interview here: "Investor Relations Atwitter Over New Technologies"
In a controversial new paper, “Do Investors Benefit from Selective Access to Management” by Brian J. Bushee (Wharton -- University of Pennsylvania), Michael J. Jung (Stern School of Business) and Gregory S. Miller (Ross School of Business), they did some research on private management/investor meetings and the impact on stocks.
We examine whether investors benefit from “selective access” to corporate managers, which we define as the opportunity for investors to meet privately with management in individual or small-group settings. We focus on two potential opportunities for selective access advantages at invitation-only investor conferences: formal “off-line” meetings outside of the webcast presentation and CEO attendance at the conference.
And they found an increase in trading…
We find significant increases in trade sizes during the hours when firms provide off-line access to investors and after the presentation when the CEO is present, consistent with selective access providing investors with information that they perceive to be valuable enough to trade upon.
Along with the increase in trade sizes, they also found stock price gains after the private meetings…
We also find significant potential trading gains over three- to 30-day horizons after the conference for firms providing formal off-line access, suggesting that selective access can lead to profitable trading opportunities.
The authors go on to clarify…
While we cannot conclusively determine that managers are providing selective disclosure in these off-line settings, our evidence does suggest that selective access to management conveys more benefits to investors than public access even in the post-Reg FD period.
And in the final line of the paper, the question is raised…
This evidence raises questions about whether conference presentations meet the spirit of Reg FD in encouraging equal access to information across all investors”.
Should those in investor relations be more cautious about what they say in private? Are there other (non-verbal) signals that are happening in private meetings? Should those involved with Reg-FD look into this matter a bit more? Should the National Investor Relations Institute (NIRI) and the SEC look into it? Should the public be included in the private meetings? Should those individuals on ‘Main Street’ be included in meetings, and not just the privileged elite on ‘Wall Street’? The paper doesn’t provide solutions as to what should be done, but it does provide some evidence that more work needs to be done in the area of public disclosure, investor relations and corporate governance.
Kai Petainen's views on the market and stocks are his alone, and do not reflect the views of the Ross School of Business or the University of Michigan. Kai teaches a class on quant screening, F334 -- Applied Quant/Value Portfolio Management, at the Ross School of Business. Kai is a MFolio master at Marketocracy, and is featured in Matthew Schifrin’s book, The Warren Buffetts Next Door.
