Private Conversation Matters: Evidence from Sell-side Analyst Reports after Private Meetings

Abstract

Using a hand-collected database of Shenzhen Stock Exchange listed firms from 2013 to 2015, we examine the key characteristics of firms’ private meetings and their effects on analysts’ reports. We find that the short-term earnings forecast is more accurate and less optimistic during hosting periods after these meetings in general, but recommendations are still biased upwardly, even after the Fair Disclosure Regulation change in 2012. These results are robust regardless of whether the analyst attend meetings or whether the meeting is hold onsite so that analysts can observe the firm’s operations. We also investigate various aspects of private conversations in meetings, and show that the presence of managers, a smaller number of meeting participants, and discussing questions in more categories are associated with more accurate and less optimistic short-term forecasts during the hosting periods following the meeting. Our results suggest that private and small group conversations between managers and analysts can be significant information channels in these meetings.

Keywords: Private meetings, Private conversations, Meeting characteristics, Analyst forecast, Information channels, Management access.

JEL Classification: G14, G18, G23, G41.