Investor Conferences, Firm Visibility, and Stock Liquidity

Published date01 November 2017
Date01 November 2017
The Financial Review 52 (2017) 661–699
Investor Conferences, Firm Visibility,
and Stock Liquidity
Paul Brockman
Lehigh University
Musa Subasi
University of Maryland-College Park
Cihan Uzmanoglu
Binghamton University
We examine the influence of investor conferences on firms’ stock liquidity. We find that
firms participating in conferences experience a 1.4% to 2.8% increase in stock liquidity com-
pared to nonconference firms. Consistent with investor conferences improving firm visibility,
the increase in liquidity is larger for firms with low pre-conference visibility and varies pre-
dictably with conference characteristics that affect the ability of investorsto revise their beliefs
about the firm. However, for firms with a large investor base and high visibility, conference
participation is associated with a decline in stock liquidity,consistent with investor conferences
exacerbating the information asymmetry among investors.
Keywords: investor conferences, firm visibility, stock liquidity
JEL Classifications: G14, G23, G31
Corresponding author: Perella Department of Finance, College of Business and Economics, 621 Taylor
Street, Lehigh University,Bethlehem, PA 18015; E-mail:
Wethank Ji-Chai Lin, Umit Gurun, Ferhat Akbas, Rajesh Narayanan, and seminar participants at Louisiana
State University,Binghamton University, and the 2014 FMA Annual Meeting for valuable comments, and
Xiang Gao for excellent research assistance. We are especially thankful to Srinivasan Krishnamurthy
(Editor) and two anonymous referees, whose insightful comments helped us improve the paper greatly.
C2017 The Eastern Finance Association 661
662 P.Brockman et al./The Financial Review 52 (2017) 661–699
1. Introduction
Brokerage firms and industry associations organize thousands of investor con-
ferences each year that allow investors and analysts to have face-to-face interactions
with C-level executives.Firms invited to conferences can give webcast presentations
followed by question and answer (Q&A) sessions or meet privately with interested
investors in offline sessions. Consistent with investor conferences increasing firm
visibility, recent studies show that institutional ownership and analyst following in-
crease after these events (Bushee, Jung and Miller, 2011; Green, Jame, Markov
and Subasi, 2014b). This increase in firm visibility can improve stock liquidity. In
contrast, since selective access to management at conferences provides benefits to
certain investors (Bushee, Jung and Miller, 2013), information asymmetry between
investors can increase after conferences, leading to a decline in stock liquidity.In this
paper, we examine the effect of conferences on firms’ stock liquidity and explorethe
types of firms that are more likely to enhance their stock liquidity by participating at
The extensive literature on stock liquidity shows that corporate policies that
increase a company’s visibility also improve the liquidity of its securities. Investor
conferences help companies build or maintain their visibility by facilitating face-to-
face interactions with potential investors and analysts. Investors and analysts have
incentives to participate in these conferences because they update their prior beliefs
about the firm through face time with the executives or through discussions with
other participants. According to Chris Hodges, founder of the Alpha IR Group, many
investment funds now have policies against taking a stake in a company before
meeting with the Chief Executive Officer (CEO). He advises executives of mostly
small- to mid-cap companies to devote at least one or two days a month to investor
meetings because “if they don’t play Wall Street’s game, it really does have an
impact on their valuation.”1In response to increasingly higher demand for face time
by investment funds and in an effort to increase firm visibility among investors,
CEOs and Chief Financial Officers (CFOs) devote a significant portion of their time
preparing for and traveling to these conferences. Companies go to an average of nine
investor conferences a year and CEOs (CFOs) spend on average 17 (26) days per
year on such investor relations.2
In contrast, participating in investor conferences may lead to a decline in a
firm’s stock liquidity and an increase in its cost of equity capital. Recent studies show
that investors who meet with firm executives at investor conferences glean material
nonpublic information (Bushee, Jung and Miller, 2011, 2013; Solomon and Soltes,
2013; Green, Jame, Markov and Subasi, 2014a,b). Therefore, investor conferences
can increase the quantity and quality of private information available to investors
1Kwoh, L. (2012, November 29). Investorsdemand CEO face time, Wall Street Journal.
2Cross Borders, Global Survey on Roadshow Practices, 2010.
P.Brockman et al./The Financial Review 52 (2017) 661–699 663
who are physically present at conferences, while other investors remain uninformed
and therefore disadvantaged. Faced with this information risk, uninformed investors
may demand higher returns as informed investors are better able to adjust their
portfolio weights to incorporate the new information theyglean at conferences (Easley
and O’Hara, 2004). Hence, participating in conferences may increase information
asymmetry among a firm’s investors, thereby reducing the firm’s market liquidity
and increasing its cost of equity capital.
In this study, we analyze a sample of 56,922 conference presentations made by
2,888 companies between January 2005 and December 2010. We first explore firm
characteristics that are associated with a firm attending an investor conference.3We
find that firms with better performance, higher research and development (R&D)
expenditures, lower dividend payouts, and greater visibility (e.g., higher institu-
tional ownership, more analyst following, greater stock liquidity,larger investor base,
greater availability of credit ratings, and Standard & Poor’s (S&P) 500 index mem-
bership) are more likely to participate in conferences. In addition, firms in highly reg-
ulated industries (e.g., energy, telecommunications) are also more likely to present at
Next, we examine the impact of conference presentations on stock liquidity. We
run firm-quarter panel regressions of changes in various measures of stock liquidity
on a conference participation indicator and firm characteristics that the prior literature
suggests affect stock liquidity. We find that the change in stock liquidity is roughly
1.4% to 2.8% larger (significant at conventional statistical levels) for firm-quarters
where the firm participates in at least one conference than other firm-quarters where
the firm does not participate in any conference. The marginal impact of conference
presentations on stock liquidity decreases as the number of conferences attended
increases. Depending on the liquidity measure used, one to two conferences in a
quarter are associated with the greatest improvement in stock liquidity.
Further, we find that liquidity improvements are greater for firmswith relatively
lower pre-conference visibility (i.e., informationally opaque firms), consistent with
investor conferences increasing firm visibility. However,we also find that firms with
a large investor base and high visibility experience a reduction in stock liquidity
with conference participation, suggesting that investor conferences can also increase
information asymmetry as investorswho are physically present at conferences become
more informed about the firm than investors who are not at the conference.
To shed further light on the mechanism underlying these liquidity changes, we
investigate the influence of conference characteristics on a firm’s stock liquidity. We
find that conferences with a larger number of presenting firmslead togreater improve-
ments in liquidity. Furthermore, conference firms experience largerimprovements in
stock liquidity when the conference host offers equity research services or is a highly
3We include selected excerpts from PotashCorp’s 2010 conference presentation in Supplementary Ap-
pendix A as an example.

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