Face-to-Face Meetings and Investor Uncertainty

Although survey evidence suggests that investors meet personally with management to understand a firm’s long-term performance uncertainty, existing studies have focused on whether face-to-face meetings increase information asymmetry among investors. By using a proprietary dataset that identifies firms communicating earnings guidance through face-to-face meetings or impersonal contacts, we find that meeting firms do not experience immediate declines in investor uncertainty, but consistently experience a greater degree of resolved uncertainty at subsequent earnings announcements up to six quarters. The result is more pronounced for R&D intensive firms who face greater long-term uncertainty and is robust to a relatively exogenous setting where the broker’s decision to initiate hosting conferences is less influenced by participating firms. Additional analysis on trading activities further suggests that investors potentially combine soft information collected from face-to-face meetings with hard information released at earnings announcements to generate material information that reduces their uncertainty about the firm value, consistent with the mosaic theory. Our study complements existing research by documenting a potential capital market benefit of face-to-face investor meetings.