Leveraging An Information Mosaic: The Interplay between Private Meetings with Investors and Subsequent Earnings Announcements

Abstract

We draw from the SEC's concept of investors leveraging an information mosaic to predict that investors use soft information collected during face-to-face investor meetings to understand better the information released at subsequent earnings announcements. Our analysis examines firms that issue stand-alone management guidance in conjunction with face-to-face meetings compared to an entropy-balanced matched sample of firms that also issue stand-alone guidance but do not have such meetings. Consistent with investors leveraging an information mosaic, we find an incremental 10 percent reduction in investor uncertainty around the subsequent earnings announcements of firms that have private meetings relative to firms that do not. The incremental reduction is larger for firms with more soft information, consistent with the theorized mechanism of an information mosaic comprised of the soft information from private meetings. The evidence reveals an interplay between disclosures occurring at different times and provides evidence of investors leveraging an information mosaic.

Keywords: Selective disclosure, Investor meetings, Disclosure complementarity, Regulation

JEL Classification: G14, K22, M41, M48