How Face-to-Face Meetings Pay Off

It’s been almost a year since in-person meetings were wiped from the calendar and replaced with all-virtual interactions. While investors and other professionals have since adapted to the efficiency of Zoom and other video platforms, research shows that physical meetings were worth the extra time and money for fund managers.

Meetings between portfolio managers and company leaders were found to predict higher investment returns in arecent paperby researchers at the Massachusetts Institute of Technology, China Investment Corp., and Remin University of China. The study, which examined investor meetings with firms listed on the Shenzhen Stock Exchange in China — where companies are required to disclose such meetings — found that a higher number of face-to-face meetings were tied to outperformance of about 70 to 100 basis points per month.

According to authors Eric So of MIT, Rongfei Wang of CIC, and Remin University professor Ran Zhang, the results likely stem from investors allocating more time and resources to meetings with firms that they perceive to be undervalued.

“Our findings suggest institutions disproportionately allocate resources to in-person meetings with underpriced firms prior to investing and rely on face-to-face contact to calibrate arbitrage opportunities,” they wrote.

They added that more frequent meetings more strongly predicted returns for firms with fewer institutional investors and less analyst coverage, which they said was “consistent with institutions benefiting most from in-person meetings among firms with lower quality information environments.”

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For the study, the authors analyzed investor meetings disclosed by SZSE-listed firms between July 2012 — when the exchange began requiring firms to report private meetings within two trading days — and December 2019. They excluded press conferences, road shows, media interviews, phone and video calls, and emails to limit the sample to face-to-face meetings held with at least one institutional investor, including mutual fund and hedge fund managers.

Roughly 75 percent of these meetings were found to have occurred before the investor initiated a position in the company, suggesting that these interactions were “a recurring feature of the institutional vetting process,” according to the authors.

“In speaking with fund managers, a common takeaway is that funds pursue investor meetings to assess the intentions and quality of firms’ management as a signal of underpricing,” the trio wrote.

他们引用了来自Companical Schroder基金管理银行的基金经理的一个例子，Schroder和中国银行之间的合资企业。本经经理报告与中央检测国际集团的新行政长官会面，中国检测和检验公司的股票价格在首席执行官的任命后遭到了预约。

“The face-to-face meetings allowed BSFM to assess the new CEO’s character and strategic initiatives, and bolster its belief that CTI’s stock had been excessively penalized,” the authors wrote. “Soon after, three of BSFM’s funds initiated positions in CTI, whose stock rose more than three-fold in the two years that followed.”

In addition to their sample focusing on Chinese companies, the authors also analyzed investor interactions with U.S. firms at investor conferences. Specifically, they looked at how frequently the U.S. companies were invited to participate in these conferences, arguing that more invitations indicated “institutional demand to commit time and resources toward a particular subset of firms.”

与对面对面会议的分析一样，作者所以，王和张某发现异常高的会议率预测未来的回报。

“These findings reinforce the idea that face-to-face meetings between firms and investors are an important part of formation of investors’ beliefs and subsequent portfolio allocation decisions,” they said.