1. Conference Calls as a Disclosure Mechanism: A Question of Access
Dawn A. Matsumoto
Assistant Professor
University of Washington Business School
based on research conducted with
Brian Bushee, Wharton School
Gregory Miller, Harvard Business School

2. Traditional Information Dissemination Process
Conference calls held at earnings announcement to expand on press release
Access provided to select market participants (e.g., analysts and large investors)
Follow-up with one-on-one conversations
Individual investors received information indirectly (i.e., through analyst reports)

3. Change in Environment Increase in small, individual investors
Demand for direct access to information
Selective Disclosure issue
Changes in information technology
Allows information to be provided directly, immediately, and at lower cost)
Investor relations websites
Webcasts of corporate conference calls

4. New Issues for Management
Should we allow access to our conference calls to everyone?
Pros:
Less follow-up phone calls
Public perception of fairness
Cons:
Misinterpretation by unsophisticated investors
Proprietary costs (competitors listening in)

5. Research Questions
What factors influence a firm’s decision to allow open access to their conference calls?
Related to investor base?
Related to complexity of the business?
What is the impact of broader access on trading activity?
Does price volatility increase?
Does individual investor trading increase?

6. Results Determinants of Open Calls:
Larger number of shareholders
Higher share turnover
Lower institutional ownership
Lower analyst following
Lower intangible assets
Effects of Open Calls on Trading Activity:
Greater percent change in small trades
Increases in price volatility during the call window

7. Conclusions
Evidence consistent with firms strategically broadening access to disclosure:
in response to nonprofessional investor demands
to target complex disclosures to more sophisticated users
Evidence that small investors trade when provided direct access to information in conference calls
Evidence that broader access to information results in greater price volatility

8. Future Work Effect of Reg FD on conference calls
Has the amount of information disclosed in conference calls decreased?
Have managers changed their policy with respect to the use and timing of calls?
Has price volatility increased?
Do individuals take advantage of direct access to calls?
What effect has Reg FD had on financial analyst as information intermediaries?
More analysis; less management-provided guidance?