Corporate jets and private meetings with investors

Bushee, Brian J.; Gerakos, Joseph; Lee, Lian Fen

doi:10.1016/j.jacceco.2018.01.005

Cited by 147 publications

(70 citation statements)

References 24 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…More recently, Bushee et al. () use corporate jet flight patterns to identify private meetings between managers and investors that are ex‐ante and unobservable to non‐participants. They find that such meetings enable investors to trade on their private information, thereby leading to price and volume reactions during flight periods.…”

Section: Institutional Background Literature and Predictionsmentioning

confidence: 99%

“…Second, Bushee et al. () use corporate jet flight patterns to proxy private meetings between managers and investors; they find that such meetings enable investors to trade on their private information. However, their study is based only on the stock market reaction around these flights because identifying the investors on the flights is impossible.…”

Section: Institutional Background Literature and Predictionsmentioning

confidence: 99%

“…We contribute to the literature by providing direct evidence of the information advantages that mutual funds obtain by their access to the managers of listed firms. Given data limitations, few empirical papers focus on the visiting activities of mutual funds, with most offering only indirect evidence using measures of market reaction with mixed results (Bushee et al., ). Bushee et al.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Does It Pay to Communicate with Firms? Evidence from Firm Site Visits of Mutual Funds

Li¹,

Dai²,

Kong

2017

Business Fin & Account

View full text Add to dashboard Cite

By using a unique dataset on mutual fund visits to listed firms in China, we investigate whether mutual funds are able to obtain private information or benefit from their communication with firms. Our findings are as follows: 1) such communication significantly increases the subsequent trading magnitude of mutual funds; 2) mutual fund trades that rely on communication significantly predict the unexpected earnings of visited firms, which is further supported by IV-regressions that use the number of direct flights between two cities as the instrument of communication; and 3) comprehensiveness of communication topics and firms' information environment significantly affect the benefits that mutual funds obtain from communication. Our results are robust to alternative measures and specifications, and provide insights for regulators who are concerned with fair disclosure. 611 612 LIU, DAI AND KONG access to a firm's private information, thereby allowing them to immediately trade on their resulting information advantages over other investors. Moreover, mutual fund managers may establish a close relationship with the firms they visit, thereby affording them information advantage in the future. Anecdotal evidence also suggests that fund managers often visit firms to acquire information that they cannot obtain directly from the market.Thus, although listed firms release regular reports, and some observers argue that communication between mutual fund companies and firms provides no information beyond that disclosed to the press, 1 the frequency with which fund managers visit listed firms suggests otherwise. Given the intense competition in the financial services industry, most mutual funds have incentives to seek out and acquire information and influence advantage from the relationships that they enjoy to help them make more profitable investment decisions (Holland and Doran, 1998;Schnatterly et al., 2008).More importantly, the question of whether communication provides information to mutual funds is crucial to understanding information diffusion among various market participants. However, no academic studies to date have investigated whether this type of communication results in direct information advantages to institutional investors and whether institutional investors make better investment decisions on the basis of face-to-face communication.In this paper, we provide evidence on two major issues by examining communication between mutual funds and listed companies: 1) whether face-to-face communication influences the subsequent trading behavior of mutual funds and 2) whether mutual funds gain information advantage from their communication with listed firms and whether their trading behavior can help to predict firm's forthcoming information.We compile a database on mutual fund visits from the Shenzhen Stock Exchange (SZSE). Since 2006, the SZSE has required all listed firms to disclose information on company site visits by investors. Given that the disclosure of communication information with all types of investors is ma...

show abstract

Section: Institutional Background Literature and Predictionsmentioning

confidence: 99%

Section: Institutional Background Literature and Predictionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does It Pay to Communicate with Firms? Evidence from Firm Site Visits of Mutual Funds

Li¹,

Dai²,

Kong

2017

Business Fin & Account

View full text Add to dashboard Cite

show abstract

“…In fact, a survey by the Cross Border Group (2010) documents that chief executive officers (CEOs) (chief financial officers [CFOs]) hold private meetings with investors on average 17 (26) days per year. Some of these meetings may take the form of investors visiting the firm's location (e.g., Cheng, Du, Wang, and Wang (2019)) or the firm's management visiting institutional investors as part of a corporate roadshow (Bushee, Gerakos, and Lee (2018)). Because of the geographic distribution of firms and funds throughout the United States, many of these visits would require air travel.…”

Section: Introductionmentioning

confidence: 99%

The Causal Effects of Proximity on Investment: Evidence from Flight Introductions

Ellis¹,

Madureira²,

Underwood³

2019

J. Financ. Quant. Anal.

View full text Add to dashboard Cite

We use the introduction of direct flights as an exogenous shock to the travel time between mutual funds and firms to estimate the causal effects of proximity on fund investment decisions and performance. We find that a fund invests significantly more in firms that become more proximate following the introduction of direct flights and that these more proximate investments exhibit superior performance. Our findings are robust to including a variety of fixed effects and potential confounders such as firm-level shocks, fund-level shocks, and time trends. Collectively, our results indicate that proximity enhances investors’ ability to acquire value-relevant information about firms.

show abstract

“…As for the relationship between the management and analysts, Brown et al (2015) use survey data to point out that the factors analysts consider are industry experience, private communication with management, teleconference, management forecasts, managerial ability, and recent financial performance of the firm. Numerous studies used empirical data for research on analysts following by focusing on industry experience (Bradley et al, 2017), information disclosure (Lang & Lundholm, 1996; Lehavy, Li, & Merkley, 2011), private communication with management (Brown et al, 2015; Cheng et al, 2019; Han et al, 2018), teleconferences (Matsumoto et al, 2011; Mayew, 2008; Soltes, 2014), investor meetings (Bushee, Gerakos, & Lee, 2018; Kirk & Markov, 2016), site visit (Han et al, 2018), management forecasts (Barton & Mercer, 2005), and financial performance (Barron et al, 2002). However, few studies study the impact of managerial ability on analyst following.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Do analysts follow firms with able managers?

Gao

Wang

et al. 2020

Manage Decis Econ

View full text Add to dashboard Cite

Although previous studies suggest that management quality impacts analyst behavior, there is a dearth in direct empirical evidence that proves this. A sample of listed Chinese firms over the period 2008–2016 proves that a firm with highly skilled managers draws more analysts. We use an instrumental variable approach to mitigate endogeneity issues. Tests show that the positive impact of managerial ability on analyst following is more salient in firms with no political connections and firms located in regions with developed formal institutions. Firms with high‐capability managers help analysts improve their forecast accuracy and lower the dispersion of their opinions.

show abstract

Corporate jets and private meetings with investors

Cited by 147 publications

References 24 publications

Does It Pay to Communicate with Firms? Evidence from Firm Site Visits of Mutual Funds

Does It Pay to Communicate with Firms? Evidence from Firm Site Visits of Mutual Funds

The Causal Effects of Proximity on Investment: Evidence from Flight Introductions

Do analysts follow firms with able managers?

Contact Info

Product

Resources

About