TY - JOUR
T1 - Conference calls and information asymmetry
AU - Brown, Stephen
AU - Hillegeist, Stephen A.
AU - Lo, Kin
N1 - Funding Information:
The authors thank Steven Sommers of First Call, Greg Radner of CCBN.com, and Mark Coker of Bestcalls.com for providing the conference call data used in this paper. Comments and suggestions by Sudipta Basu, S.P. Kothari (the editor), Stan Markov, Beverly Walther, Charles Wasley, Greg Waymire (the referee), Joanna Wu, Jerry Zimmerman, and seminar participants at the Universities of California at Berkeley, Purdue, Rochester, Stanford, the 13th Financial Economics and Accounting Conference at University of Maryland, and the 2002 Accounting Research Conference of the Universities of British Columbia, Oregon, and Washington are greatly appreciated. The authors gratefully acknowledge the financial support of the Goizueta Business School, the Accounting Research Center at the Kellogg School of Management, and the Social Sciences and Humanities Research Council, respectively.
PY - 2004/9
Y1 - 2004/9
N2 - We hypothesize that conference calls are voluntary disclosures that lead to long-term reductions in information asymmetry among equity investors. Cross-sectional and time-series tests show that information asymmetry is negatively associated with conference call activity. Firms initiating a policy of regularly holding conference calls experience statistically and economically significant and sustained reductions in information asymmetry, in contrast to one-time callers, who experience no significant decline in asymmetry. Since prior work shows that the cost of equity capital is increasing in the level of information asymmetry, our results suggest that firms that hold conference calls more frequently have lower costs of capital.
AB - We hypothesize that conference calls are voluntary disclosures that lead to long-term reductions in information asymmetry among equity investors. Cross-sectional and time-series tests show that information asymmetry is negatively associated with conference call activity. Firms initiating a policy of regularly holding conference calls experience statistically and economically significant and sustained reductions in information asymmetry, in contrast to one-time callers, who experience no significant decline in asymmetry. Since prior work shows that the cost of equity capital is increasing in the level of information asymmetry, our results suggest that firms that hold conference calls more frequently have lower costs of capital.
KW - Conference calls
KW - Information asymmetry
KW - Microstructure
KW - Probability of informed trade
KW - Voluntary disclosures
UR - http://www.scopus.com/inward/record.url?scp=11144288132&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=11144288132&partnerID=8YFLogxK
U2 - 10.1016/j.jacceco.2004.02.001
DO - 10.1016/j.jacceco.2004.02.001
M3 - Article
AN - SCOPUS:11144288132
VL - 37
SP - 343
EP - 366
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
SN - 0165-4101
IS - 3
ER -