Behind Closed Doors: Selective Disclosure in Private Meetings
44 Pages Posted: 1 Sep 2021 Last revised: 24 Feb 2024
Date Written: February 22, 2024
Abstract
We examine investor relations officers’ (IROs) disclosure decisions in private meetings with investors. In these settings, IROs face conflicting pressures to maintain a “level playing field” for all investors while also catering to investors. We experimentally test how pre-disclosure materiality consideration, recommended by professional standards, affects disclosure to more and less preferred investors. Across two experiments, a total of 273 experienced IROs respond to hypothetical investor questions. We find direct evidence of selective disclosure to more preferred investors. Further, and contrary to Regulation Fair Disclosure and professional standards, we find that materiality consideration dampens overall disclosure but does not reduce, and may even exacerbate, selective disclosure to preferred investors. Supplemental data indicates that IROs are more likely to provide preferred investors with private access to the CEO, and professional investors believe this access provides even more useful investment information. Our results have implications for firms and regulators.
Keywords: Regulation Fair Disclosure; investor relations; private disclosure; materiality
JEL Classification: G23; M41; M48; M49
Suggested Citation: Suggested Citation