Private Access and Professional Investor Judgments

Abstract

Research increasingly suggests private access to management provides investors with trading advantages, leading to an unlevel playing field. In this paper, we conduct two experiments to examine the influence of private access on professional investors’ investment preferences and to test the efficacy of potential interventions that may shift investors’ preferences for investing in companies that grant versus deny private access. We find that while investors prefer to invest when they are granted versus denied private access to management, these preferences for private access are attenuated when (a) investors are prompted to consider the implications of a firm’s private access policy in relation to other investors or (b) when these implications are explicitly highlighted. These interventions provide opportunities for firms and regulators to contribute to a level playing field by encouraging investors to carefully consider the broader implications of private access for all investors.

Keywords: professional investors, selective disclosure, private meetings, investor relations, financial reporting

JEL Classification: G23, M41, M48, M49