Corporate Jets and Private Meetings with Investors
Brian J. Bushee
University of Pennsylvania - The Wharton School
Joseph J. Gerakos
Tuck School of Business at Dartmouth College
Lian Fen Lee
Boston College - Carroll School of Management
November 3, 2014
Chicago Booth Research Paper No. 12-43
We examine whether corporate jet flight patterns can be used to identify private meetings between managers and investors that are ex ante unobservable to non-participants. We predict that such meetings enable select investors to supplement and trade on their private information, leading to price and volume reactions during the flight periods, as well as changes in local institutional investor ownership. Using a sample of almost 400,000 flights undertaken by 396 firms between 2007 and 2010, we proxy for private meetings with “road shows,” which are three-day windows that include jet flights to multiple cities in which the firm has high institutional ownership. First, we find that the number of road show flights is significantly associated with a number of proxies for incentives to meet privately with investors. Second, we find that three-day windows including road show flights exhibit significantly greater abnormal market reactions than other flight windows. Finally, we show that flights to metro areas are positively associated with changes in local institutional ownership that anticipate future returns. Overall, our evidence suggests that these private meetings are an important information event for the participating investors, who potentially gain an advantage over non-participating investors who have no public notice of the meetings.
Number of Pages in PDF File: 63
Keywords: Selective disclosure, Corporate jets, Institutional investors
JEL Classification: G14
Date posted: September 5, 2012 ; Last revised: November 5, 2014
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