Conference Calls and Information Asymmetry

Abstract

We hypothesize that conference calls are voluntary disclosures that lead to long-term reductions in information asymmetry among equity investors. Cross-sectional and time-series tests show that the level of information asymmetry is negatively associated with conference call activity. We find that firms initiating a policy of holding periodic conference calls experience a sustained reduction in information asymmetry (although one-time callers experience no significant decline in asymmetry). Since prior work has shown that the cost of equity capital is increasing with information asymmetry, our results suggest that firms that hold conference calls more frequently have lower costs of capital.

Note: Previously titled "Voluntary Disclosure Frequency and Information Asymmetry"

Keywords: information asymmetry, voluntary disclosures, conference calls, microstructure, regulation

JEL Classification: D82, G10, M41, M45