Seminar (Dept. of Finance)

Title: How Do Corporate Managers Respond to Ordinary Investors’ Information Demands?

Speaker: Jinshuai Hu, Professor, Xiamen University

Time: 10:00-11:30, Dec 5, 2024 (Thursday)

Venue: Room 706, Mingde Business Building

Language: English/Chinese

ABSTRACT:

This study examines whether corporate managers provide information in response to ordinary investors’ demands. We identify ordinary investors’ information demands using questions posted on the online communication platforms launched by China’s stock exchanges. We utilize a machine-learning topic modeling technique to link information demanded by investors and information provided in the Management Discussion and Analysis (MD&A) sections of annual reports at the topic level. Measuring the informativeness of MD&A disclosures by the association between year-over-year MD&A modifications and changes in operating performance, we find that this association is weaker when operating performance has decreased than when it has increased. More importantly, the topic-level asymmetric informativeness of MD&A disclosures decreases with the number of investor questions posted on the same topic, and this result is stronger for firms with weaker information environments. Additional analyses show that the MD&A modifications are driven by the inclusion of additional content rather than by the removal of past content and that these modifications do not come at the expense of lower disclosure quality. Taken together, our findings suggest that managers improve the informativeness of a key narrative disclosure in response to ordinary investors’ information demands.