Does Stricter Disclosure Regulation of Private Meetings Improve the Information Environment?

55 Pages Posted: 3 Nov 2020

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

East China University of Science and Technology (ECUST)

Pengcheng Zhu

University of San Diego

Date Written: November 2, 2020

Abstract

The Shenzhen Stock Exchange (SZSE) in China is unique worldwide in requiring disclosure of the existence and content of private meetings between firm managers and outside investors. We investigate whether the SZSE’s increased disclosure requirements in July 2012 led to tangible benefits for market participants. We use a difference-in-differences design (where possible) and a dataset that includes Shanghai Stock Exchange (SHSE) firms as a control group. Despite allegedly ‘improved’ disclosures, we find the SZSE’s information environment experienced increased stock price volatility and reduced information efficiency relative to pre-July 2012 and relative to SHSE firms. After July 2012, private meetings became quasi-public and disclosures became more positive and less informative. Mutual fund participation in private meetings increased – especially for funds with little or no ownership in the host firm. Increased participation by these less informed institutional investors is one explanation for observed higher stock volatility and lower information efficiency around these meetings.

Keywords: disclosure regulation, private meetings, site visits, mutual funds, stock volatility, information efficiency, information environment

JEL Classification: G14, G15, G18, G28, M48

Suggested Citation

Bowen, Robert M. and Dutta, Shantanu and Tang, Songlian and Zhu, Pengcheng, Does Stricter Disclosure Regulation of Private Meetings Improve the Information Environment? (November 2, 2020). Available at SSRN: https://ssrn.com/abstract=3723824 or http://dx.doi.org/10.2139/ssrn.3723824

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

Pengcheng Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

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