Blockholder Mutual Fund Participation in Private In-house Meetings: Evidence on Social Bonding and Stock Return Volatility

57 Pages Posted: 19 Feb 2020 Last revised: 16 Oct 2021

See all articles by Robert M. Bowen

Robert M. Bowen

Chapman University - The George L. Argyros School of Business & Economics; University of Washington - Foster School of Business

Shantanu Dutta

University of Ottawa - Telfer School of Management

Songlian Tang

CUNY Baruch College; East China University of Science and Technology (ECUST)

PengCheng Zhu

University of San Diego

Date Written: October 14, 2021

Abstract

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 these private meetings benefit hosting firms and their major outside institutional investors, blockholder mutual funds (i.e., funds with ownership ≥ 5 percent). Using a large dataset of SZSE firms, we find that blockholder mutual funds have more access to private in-house meetings, and top management is more likely to be present – especially when negative news is disclosed. Further, when blockholder mutual funds attend negative news meetings with top management, they are less likely to sell shares, their investment relationship with the hosting firm lasts longer, and hosting firms experience lower post-meeting stock return volatility. These findings suggest that private in-house meetings are an informative disclosure channel that improves “social bonding” between top management and blockholder mutual funds in ways that benefit both parties.

Keywords: Institutional investors, mutual funds, private in-house meetings, site visits, disclosure, stock volatility, social bonding, trust

JEL Classification: G14, G15, G18, G34, G38, K22, M41, M48

Suggested Citation

Bowen, Robert M. and Dutta, Shantanu and Tang, Songlian and Tang, Songlian and Zhu, Phil, Blockholder Mutual Fund Participation in Private In-house Meetings: Evidence on Social Bonding and Stock Return Volatility (October 14, 2021). Available at SSRN: https://ssrn.com/abstract=3524559 or http://dx.doi.org/10.2139/ssrn.3524559

Robert M. Bowen (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States
206.334.0911 (Phone)

HOME PAGE: http://www.chapman.edu/our-faculty/robert-bowen

University of Washington - Foster School of Business ( email )

Box 353226
University of Washington
Seattle, WA 98195-3226
United States
206.334.0911 (Phone)

HOME PAGE: http://foster.uw.edu/faculty-research/directory/robert-bowen/

Shantanu Dutta

University of Ottawa - Telfer School of Management ( email )

136 Jean-Jacques Lussier Street
Ottawa, Ontario K1N 6N5
Canada

Songlian Tang

East China University of Science and Technology (ECUST) ( email )

Shanghai
China

CUNY Baruch College ( email )

17 Lexington Avenue
New York, NY 10021
United States

Phil Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

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