Company Visit Disclosure Regulation and Analysts’ Information Acquisition

Abstract

There is a debate on whether company visits, an important channel of analysts’ information acquisition, should be regulated similar to management disclosure under Regulation Fair Disclosure. Exploiting a Shenzhen Stock Exchange regulation, this study examines the impact of forcing the timely disclosure of analysts’ company visits on analysts’ information acquisition. We find that the regulation creates a chilling effect on analysts’ private information acquisition activities, negatively affecting analysts’ stock coverage, company visits and research report issuance. However, for the analysts who do issue earnings forecasts following the regulation, we find no evidence that the accuracy of such forecasts is lower, consistent with a rational expectation equilibrium.