Non-Deal Roadshows, Informed Trading, and Analyst Conflicts of Interest

Daniel Bradley; Russell Jame; Jared Williams

doi:10.1111/jofi.13089

Non-Deal Roadshows, Informed Trading, and Analyst Conflicts of Interest

Daniel Bradley, Russell Jame, Jared Williams

Finance and Quantitative Methods

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

Non-deal roadshows (NDRs) are private meetings between management and institutional investors, typically organized by sell-side analysts. We find that around NDRs, local institutional investors trade heavily and profitably, while retail trading is significantly less informed. Analysts who sponsor NDRs issue significantly more optimistic recommendations and target prices, together with more “beatable” earnings forecasts, consistent with analysts issuing strategically biased forecasts to win NDR business. Our results suggest that NDRs result in a substantial information advantage for institutional investors and create significant conflicts of interests for the analysts who organize them.

Original language	English
Pages (from-to)	265-315
Number of pages	51
Journal	Journal of Finance
Volume	77
Issue number	1
DOIs	https://doi.org/10.1111/jofi.13089
State	Published - Feb 2022

Bibliographical note

Funding Information:
Daniel Bradley and Jared Williams are with the Kate Tiedemann School of Business and Finance, Muma College of Business, University of South Florida. Russell Jame is at the Gatton College of Business and Economics, University of Kentucky. We would like to thank Stefan Nagel (the Editor), two anonymous referees, Kevin Crotty (discussant), Steve Dennis, Ying Duan, Clifton Green, Vincent Gregoire (discussant), Lena Larkin (discussant), Kevin Mullaly, Jay Ritter (discussant), Ajai Singh, Alexander Vedrashko, Eric Weisbrod (discussant), and seminar participants at the 2020 American Finance Association, the 2019 Conference on Financial Economics and Accounting, the 2019 TCU Finance Conference, the 2019 Northern Finance Association, the 2020 Midwest Finance Association, Kent State University, Simon Fraser University, University of Central Florida, and University of Kentucky for helpful comments and suggestions. Jame is grateful to the Institution for Free Enterprise at the University of Kentucky for financial support. The authors have read disclosure policy and have no conflicts of interest to disclose. All errors are their own. The Journal of Finance

Publisher Copyright:
© 2021 the American Finance Association

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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abstract = "Non-deal roadshows (NDRs) are private meetings between management and institutional investors, typically organized by sell-side analysts. We find that around NDRs, local institutional investors trade heavily and profitably, while retail trading is significantly less informed. Analysts who sponsor NDRs issue significantly more optimistic recommendations and target prices, together with more “beatable” earnings forecasts, consistent with analysts issuing strategically biased forecasts to win NDR business. Our results suggest that NDRs result in a substantial information advantage for institutional investors and create significant conflicts of interests for the analysts who organize them.",

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Non-Deal Roadshows, Informed Trading, and Analyst Conflicts of Interest

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Bibliographical note

ASJC Scopus subject areas

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