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Research Highlights

Investors’ Access to Management: Size Matters

By Michael Jung, Assistant Professor of Accounting

Michael Jung research on investor access to management

This selective access potentially conveys an information advantage by allowing attendees to ask specific questions to elicit 'mosaic' information that is valuable only in combination with their private information, to assess nonverbal cues in a less rehearsed setting, and to possibly benefit from intentional or inadvertent material disclosures by managers.

In perhaps another example of how difficult it is to regulate fairness and transparency in the financial world, big investors have an advantage over smaller investors when it comes to gaining access to top management. NYU Stern Assistant Professor of Accounting Michael Jung and two co-authors found that private, face-to-face interactions at invitation-only conferences organized by brokerage houses enable investors to ask top executives the specific questions that will help them develop and execute their strategies.

Brokerage firms organize the conferences with the aim of boosting trading by their largest clients. The clients who choose to attend such conferences in person, rather than view webcast presentations, are often able to meet with managers outside of the presentations, write Professors Jung, Brian Bushee, and Gregory Miller in “Do Investors Benefit from Selective Access to Management?

“This selective access potentially conveys an information advantage by allowing attendees to ask specific questions to elicit 'mosaic' information that is valuable only in combination with their private information, to assess nonverbal cues in a less rehearsed setting, and to possibly benefit from intentional or inadvertent material disclosures by managers,” the authors write.

The authors found proof that investors were acting on their privileged access: “significantly greater increases in trade sizes in the hours before and after the presentation for firms providing one-on-one access throughout the day, and in the hours after the presentation for firms providing breakout sessions immediately after the presentation.”

Firms providing personal access after their conference presentations also experienced significantly greater potential trading gains 3 to 30 days afterward, versus firms only providing presentations.

“Investors are not only changing their beliefs based on their private access to management, but their trades appear to be profitable over a short horizon," Jung noted.