Financial information, physical proximity and COVID: The experience of Asian sell-side equity research analysts

Abstract

The need for physical proximity and face-to-face communication in financial information flows is contested. But the movement restrictions imposed across Asia during the COVID-19 pandemic, together with the elevated information needs as financial markets became stressed, provided the unique circumstances for a natural experiment to test the extent to which physical interaction is important in the origination and distribution of financial information. Drawing upon 70 interviews undertaken across Asia during 2021, primarily with sell-side analysts who act as information intermediaries in the financial ecosystem, this article provides evidence that physical proximity and face-to-face communication remains highly valued, particularly when accessing information embedded in informal local networks and originated through reciprocal client relationships. Analysts physically restricted from contacts at corporates and within their associated operating environments, reported a degradation of knowledge, especially versus more proximate competitors. The enforced physical separation also weakened previously strong social and reciprocal relationships with clients, even those co-located in the same city. Although these trends may be gradual and incremental rather than dramatic, they are persistent and self-reinforcing, and demonstrate the continued benefits of proximity and face-to-face interaction, with longer-term implications for financial geographies.