Muddy the waters to conceal information? Evidence from firms' inconsistent answers during Q&As

Abstract

This paper investigates the differential responses by managers to institutional investors during Q&As at site visits and to retail investors during online Q&As. We find that the gap in firms’ responses to different types of investors increases the potential for comment letters to be sent to firms and leads to higher information asymmetry, consistent with the notion that this gap implies a lower quality of information disclosure. Additional tests show that managers are more likely to post differential responses when questions form retail investors have a more negative orientation, and the differential responses lead to high stock price synchronicity.