COVID-19 Pandemic: How Important is Face-to-Face Interaction for Information Dissemination?

49 Pages Posted: 13 Nov 2020 Last revised: 18 Jun 2021

See all articles by Daniel Cahill

Daniel Cahill

University of Western Australia, Buiness School

Chloe CY Ho

The University of Western Australia

Joey (Wenling) Yang

The University of Western Australia

Date Written: March 31, 2021

Abstract

Does face-to-face interaction still facilitate information transfer despite proliferating communication technologies? The COVID-19 pandemic has led to abrupt implementation of stay-at-home mandatory restrictions forcing people to adopt virtual communication technologies. This has resulted in a worldwide collapse in face-to-face interactions. We use this setting to examine the influence of face-to-face interaction on information flow in the stock market around earnings announcements. Using Google’s Community Mobility Reports to obtain daily, county-level abnormal mobility for U.S. residents to proxy for face-to-face interaction, we find that firms located in counties with lower abnormal mobility experience a weaker immediate price reaction to earnings announcements and a larger post-announcement drift (PEAD). Our findings suggest that lower face-to-face interactions dampen price discovery in financial markets. We also show that investor attention is a potential mechanism by which face-to-face interactions affect market responses to earnings news. Together, our study finds empirical support for the importance of face-to-face interactions in facilitating stock market information dissemination.

Keywords: Earnings announcements; Information dissemination; Abnormal mobility; Face-to-face interaction; Investor attention

JEL Classification: D83, G14, M41

Suggested Citation

Cahill, Daniel and Ho, Chloe CY and Yang, Joey (Wenling), COVID-19 Pandemic: How Important is Face-to-Face Interaction for Information Dissemination? (March 31, 2021). Available at SSRN: https://ssrn.com/abstract=3729031 or http://dx.doi.org/10.2139/ssrn.3729031

Daniel Cahill

University of Western Australia, Buiness School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Chloe CY Ho

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Joey (Wenling) Yang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

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