Do Disclosures of Selective Access Improve Market Information Acquisition Fairness?: Evidence From Company Visits in China

Abstract

With a unique dataset of company visits to China’s listed firms from 2009 to 2016, we examine the impact of timely and detailed disclosures of company visits on market information acquisition fairness. Market reactions around visits are larger and more predictive of future earnings when visits are disclosed within 2 trading days after visiting, compared with that disclosed in annual reports long after visiting, suggesting timely disclosures of visits disseminate information discovered by visitors to the whole market quickly. Consistent with this argument, we observe that timely disclosures of visits improve forecast accuracy of non-visiting analysts, reduce forecast dispersion among analysts and weaken the relative information advantages of visiting analysts. Additionally, visits are more concentrated in firms with worse information environment, firms with larger capitalizations and firms in the manufacturing industry, namely, firms with larger potential visiting benefits. To summarize, timely and detailed disclosures of visits improve market information acquisition fairness and decrease the level of information asymmetry while causing information chilling effects for firms with fewer visiting benefits.

Keywords: Company Visits; Selective Access; Analyst Forecasts; Information Acquisition; Mosaic Theory; Chilling Effects

JEL Classification: G12; G14; G18