In Search of Interaction
University of Texas at Austin - Red McCombs School of Business
Tilburg University - Tilburg School of Economics and Management
Nanyang Technological University (NTU)
March 30, 2016
Corporate managers increasingly employ interactive media to communicate with market participants. Exploiting the live, interactive nature of conference call question-and-answer (Q&A) sessions, in which participants get the opportunity to ask their questions, our analysis reveals that conference calls oftentimes pass with an inadequate number of questions raised by the participants. In the post-Regulation Fair Disclosure world, this practice makes information acquisition and interpretation more costly, particularly for less sophisticated investors. We find that, when no one asks questions, firms experience a 13 percent smaller reduction in bid-ask spread and downward pressure on their stock price (i.e., next-day abnormal return is 72 basis points lower), consistent with a cost disadvantage. Our results hold across three identification strategies, and extend to calls in which the number of questions raised falls far below expectations.
Number of Pages in PDF File: 69
Keywords: Interactive communication, information asymmetry, conference calls
JEL Classification: M41, G12, G14
Date posted: June 14, 2014 ; Last revised: March 31, 2016
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