Can private interactions between managers and investors be measured?

Brian Bushee (The Wharton School), Joseph Gerakos (The Tuck School of Business at Dartmouth) and Lian Fen Lee (Boston College Carroll School of Management) use an exciting data set, namely corporate jet flight patterns, to identify private meetings with investors. Of course, private interactions between managers and investors take place through a number of channels, for instance phone calls and emails. However, they are not observable and, thus, cannot be measured. Using approximately 400,000 flights, the authors overcome the unobservability challenge. They define a “roadshow” as a three-day window that include flights to money centers (e.g. Boston, Chicago, New York, and San Francisco) and to non-money centers in which the firm has high institutional ownership, and find that these roadshows exhibit greater abnormal stock reactions, analyst forecast activity, and absolute changes in local institutional ownership than other flight activity. They also find positive trading gains in firms with more complex information and infrequent private meetings, suggesting that roadshows provide participating investors an advantage over non-participating investors.

Read “Corporate jets and private meetings with investors”(2018) by Brian J.Bushee, Joseph Gerakos and Lian Fen Lee, Journal of Accounting and Economics (Volume 65, Issues 2–3, April–May 2018, Pages 358-379) at ScienceDirect.