Investor-Firm Private Interactions and Informed Trading: Evidence from New York City Taxi Patterns

50 Pages Posted: 27 Jun 2022 Last revised: 27 Apr 2024

See all articles by Marcus Kirk

Marcus Kirk

University of Florida - Fisher School of Accounting

Jeffery Piao

University of Missouri at Columbia - School of Accountancy

Date Written: April 1, 2024

Abstract

This study investigates when institutional investors seek on-site meetings with their portfolio firms and subsequent informativeness of their trading decisions. To identify private interactions, we create and validate a novel measure based on the direct taxi traffic between an institutional investor’s business office and the headquarters of its local investee. This measure allows us to complement prior literature by bringing the unit of analysis to a more granular level to control for investor-specific characteristics that are correlated with investors’ private access. We find institutional investors allocate effort to on-site meetings with portfolio firms to shape expectations and gain investment advantages through these private interactions. Institutional investors’ trades in local stocks are more informed when there is a higher degree of private interactions with investee firms. Further, consistent with public information leveling the playing field by constraining investors’ returns from private information, results suggest that institutional investors’ returns from private information acquisition mainly concentrate in firms with opaque information environments. Overall, this study suggests that private interactions with public firms reward institutional investors with information that improves their trading decisions.

Keywords: Institutional investors, private informational advantage, corporate disclosure

JEL Classification: G23, G14, K22, G11

Suggested Citation

Kirk, Marcus and Piao, Jeffery, Investor-Firm Private Interactions and Informed Trading: Evidence from New York City Taxi Patterns (April 1, 2024). Available at SSRN: https://ssrn.com/abstract=4141570 or http://dx.doi.org/10.2139/ssrn.4141570

Marcus Kirk (Contact Author)

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0222 (Phone)

Jeffery Piao

University of Missouri at Columbia - School of Accountancy ( email )

340 Cornell Hall
Columbia, MO 65211
United States

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