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In Search of Interaction

69 Pages Posted: 14 Jun 2014 Last revised: 31 Mar 2016

Shuping Chen

University of Texas at Austin - Red McCombs School of Business

Stephan Hollander

Tilburg University - Tilburg School of Economics and Management

Kelvin Law

Nanyang Technological University (NTU)

Date Written: March 30, 2016

Abstract

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.

Keywords: Interactive communication, information asymmetry, conference calls

JEL Classification: M41, G12, G14

Suggested Citation

Chen, Shuping and Hollander, Stephan and Law, Kelvin, In Search of Interaction (March 30, 2016). Available at SSRN: https://ssrn.com/abstract=2449341 or http://dx.doi.org/10.2139/ssrn.2449341

Shuping Chen (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States
521.471.5328 (Phone)

Stephan Hollander

Tilburg University - Tilburg School of Economics and Management ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands
+31 13 466 8288 (Phone)
+31 13 466 8001 (Fax)

HOME PAGE: http://www.uvt.nl/people/s.hollander

Kelvin Law

Nanyang Technological University (NTU) ( email )

Nanyang Business School
Singapore, 639798
Singapore

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