Mutual Fund Participation in Private In-house Meetings: Evidence from Firms Listed on the Shenzhen Stock Exchange

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, mutual funds. Using a large hand-collected dataset of SZSE firms, we find that mutual funds with relatively large ownership in the hosting firm (i) have more access to private in-house meetings, particularly those meetings that reveal negative information, (ii) interact more often with top management, (iii) attend more exclusive meetings, and (iv) have longer meetings with hosting firms. When mutual funds with relatively large ownership attend negative news meetings, firms tend to experience lower post-meeting stock return volatility. This finding suggests that allowing managers and select institutional investors to discuss negative developments in a private setting – possibly to provide elaboration and manage the news – helps minimize stock sell-offs and mitigate stock return volatility.

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

JEL Classification: G14, G15, G18, G23, G34, G38