Managing the Demand for Information from Institutional Investors through Private In-house Meetings
55 Pages Posted: 11 Jul 2017 Last revised: 7 May 2019
Date Written: May 2, 2019
The Shenzhen Stock Exchange (SZSE) in China is unique worldwide in requiring disclosure of the timing, participants and selected content of private in-house meetings between firm managers and outside investors. We investigate whether managers host these private meetings to strategically influence mutual funds – the primary group of institutional investors in China. Using a large hand-collected dataset, we find that mutual funds with relatively large ownership in the hosting firm have more access to private in-house meetings. We also find that firms use private in-house meetings to disseminate negative news to mutual funds with relatively large ownership and, as a result, experience lower stock price volatility. This result suggests that managers may prefer to disclose negative developments to select institutional investors in a private setting – possibly to manage the news, minimize stock sell-offs and mitigate stock return volatility. In addition, we find mutual funds with large ownership (i) interact more often with top management, (ii) attend more exclusive meetings; and (iii) have longer meetings with hosting firms. Overall, our results suggest that mutual funds get preferential treatment depending on their ownership level, and hosting firms strategically organize their private in-house meetings to smooth stock return volatility.
Keywords: institutional investors, mutual funds, private meetings, site visits, disclosure, stock volatility
JEL Classification: G20, G23, M41
Suggested Citation: Suggested Citation