The Dark Side of Investor Conferences

Investor conferences are an important component of a firm’s investor relations efforts. Conferences provide managers with the opportunity for face-to-face interactions with investors and analysts. Managers can use these interactions to increase firm visibility and shape external perceptions of the firm’s business operations and strategy. Prior academic research finds that conferences are important information events that are accompanied by positive price and volume reactions, increases in institutional investor and analyst following, and improvements in liquidity. The research does not, however, examine whether these conferences – or investor relations activities more broadly – facilitate managerial opportunism. In a new  paper, we … Read more

Financial Misreporting: Hiding in the Shadows or in Plain Sight?

It’s widely assumed that executives are less likely to inflate earnings at  high profile companies under a good deal of regulatory oversight. And yet it’s also widely known that managers in high profile companies have an incentive to overstate their company’s performance because of pressure from investors to meet or beat Wall Street estimates every quarter.

How should policymakers looking to curb accounting fraud reconcile these countervailing forces?

When it comes to embellishing corporate earnings, managers weigh the costs and benefits: mainly the probability and consequences of getting caught in an accounting scandal against the potential for a higher stock … Read more

Guiding Through the Fog: Financial Statement Complexity and Voluntary Disclosure

“I am raising the question here and internally at the SEC as to whether investors need and are optimally served by the detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are required to prepare and file with us. […] In some cases, lengthy and complex disclosure may indeed be a direct result of the Commission’s rules.”

— SEC Chair Mary Jo White[1]

Regulators have long voiced concerns over the effectiveness of overly complex and lengthy financial statements in communicating information to investors. Detailed and lengthy disclosures can increase information processing … Read more