Public Disclosure of Private Meetings: Does Transparency of Corporate Site Visits affect Analysts' Attention Allocation?

Abstract

We investigate the consequences of increased transparency of corporate site visits on financial analysts' attention allocation. Using the timely disclosure requirement by the Shenzhen Stock Exchange (SZSE) in China since July 2012 as a setting, we find that non-visiting analysts reduce attention allocated to visited firms relative to non-visited firms. These results are consistent with the conjecture that such transparency reveals the information advantage of visiting analysts relative to non-visiting analysts, who then reallocate attention across different firms. Cross-sectional analyses suggest that the effects are more pronounced when the information advantage is larger. Further evidence suggests that such transparency has positive spillover effects on peer firms' informational efficiency by influencing analysts' attention allocation. Thus, despite the potential disclosure costs directly imposed on firms, firms collectively can benefit from this disclosure requirement due to the positive spillover effects.