Download Open versus Closed Conference Calls

Conference Calls as a Disclosure
Mechanism:
A Question of Access
Dawn A. Matsumoto
Assistant Professor
University of Washington Business School
based on research conducted with
Brian Bushee, Wharton School
Gregory Miller, Harvard Business School
Traditional Information
Dissemination Process
• Conference calls held at earnings
announcement to expand on press release
• Access provided to select market
participants (e.g., analysts and large
investors)
• Follow-up with one-on-one conversations
• Individual investors received information
indirectly (i.e., through analyst reports)
Change in Environment
• Increase in small, individual investors
– Demand for direct access to information
– Selective Disclosure issue
• Changes in information technology
– Allows information to be provided directly,
immediately, and at lower cost)
• Investor relations websites
• Webcasts of corporate conference calls
New Issues for Management
• Should we allow access to our conference
calls to everyone?
• Pros:
– Less follow-up phone calls
– Public perception of fairness
• Cons:
– Misinterpretation by unsophisticated investors
– Proprietary costs (competitors listening in)
Research Questions
• What factors influence a firm’s decision to
allow open access to their conference calls?
– Related to investor base?
– Related to complexity of the business?
• What is the impact of broader access on
trading activity?
– Does price volatility increase?
– Does individual investor trading increase?
Results
• Determinants of Open Calls:
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Larger number of shareholders
Higher share turnover
Lower institutional ownership
Lower analyst following
Lower intangible assets
• Effects of Open Calls on Trading Activity:
– Greater percent change in small trades
– Increases in price volatility during the call window
Conclusions
• Evidence consistent with firms strategically
broadening access to disclosure:
– in response to nonprofessional investor demands
– to target complex disclosures to more sophisticated
users
• Evidence that small investors trade when provided
direct access to information in conference calls
• Evidence that broader access to information
results in greater price volatility
Future Work
• Effect of Reg FD on conference calls
– Has the amount of information disclosed in conference
calls decreased?
– Have managers changed their policy with respect to the
use and timing of calls?
– Has price volatility increased?
– Do individuals take advantage of direct access to calls?
• What effect has Reg FD had on financial analyst
as information intermediaries?
– More analysis; less management-provided guidance?