Do Managers Learn from Institutional Investors Through Direct Interactions?

Abstract

I examine whether corporate managers learn from institutional investors through direct interactions at investor conferences. While institutional investors often possess industry expertise, there is limited large-scale evidence on how they can provide useful information to corporate managers. I find that managers seek more direct interactions with institutional investors at conferences when they have a greater need for information about their firms’ product markets and supply chains. This relation is stronger when managers expect investors to be knowledgeable about these topics. I show that the information learned from conference interactions is reflected in managers’ subsequent decisions in that they issue forecasts more frequently and accurately. I also find that their personal stock trades during the seven days following conference participation earn higher abnormal returns than non-participating insider trades in the same firm-month. Overall, my paper shows that managers acquire decision-relevant information from their interactions with their firms’ institutional investors.