Brian Bushee

Brian Bushee, Daniel Taylor, Christina Zhu (2023), The Dark Side of Investor Conferences: Evidence of Managerial Opportunism, The Accounting Review, 98 (4), pp. 1-22. 10.2308/TAR-2020-0624

Abstract: Although the shareholder benefits of investor conferences are well-documented, evidence on whether these conferences facilitate managerial opportunism is scarce. We examine whether managers opportunistically exploit heightened attention around the conference to “hype” the stock. We find that (1) managers increase the quantity of voluntary disclosure leading up to the conference, (2) these disclosures are more positive in tone and increase prices to a greater extent than post-conference disclosures, and (3) these disclosures are more pronounced when insiders sell their shares immediately prior to the conference. In circumstances where pre-conference disclosures coincide with pre-conference insider net selling, we find evidence of a significant return reversal––large positive returns before the conference and large negative returns after the conference––and that the firm is more likely to be named in a securities class action lawsuit. Collectively, our findings are consistent with some managers hyping the stock prior to the conference.

Brian Bushee, Matthew Cedergren, Jeremy Michels (2020), Does the Media Help or Hurt Retail Investors during the IPO Quiet Period?, Journal of Accounting and Economics, 69 (1). 10.1016/j.jacceco.2019.101261

Abstract: We examine how the media influences retail trade and market returns during the “quiet period” that follows a firm’s IPO. We find that more media coverage during this period is associated with more purchases by retail investors and that such purchases are attention-driven, rather than information-based. Further, these retail trades are negatively associated with stock returns at the firm’s first earnings announcement post-IPO. Our results suggest that media coverage, combined with market frictions that limit price efficiency in the post-IPO period, leads to worse investing outcomes for retail investors.

Brian Bushee, Ian Gow, Daniel Taylor (2018), Linguistic Complexity in Firm Disclosures: Obfuscation or Information?, Journal of Accounting Research.

Jennifer Blouin, Brian Bushee, Stephanie Sikes (Forthcoming), Measuring Tax-Sensitive Institutional Ownership.

Abstract: We classify all institutional investors that file Form 13F over the period 1995–2013 as either “tax-sensitive” or “tax-insensitive” based on their trading behavior and portfolio characteristics. We examine tests of the effects of investor tax-sensitivity on portfolio rebalancing, price pressure, and fund performance, and compare our measure of tax-sensitive institutional investor ownership to three measures used in prior studies. We show that our measure of tax-sensitive investors dominates other measures in the portfolio rebalancing and price pressure tests. In the fund performance test, our measure of tax-sensitivity is the only one that finds that tax-sensitive investors have significantly lower returns on their portfolio stocks, which is a new result in the literature.

Brian Bushee and Henry Friedman (2016), Disclosure Standards and the Sensitivity of Returns to Mood, The Review of Financial Studies, 29 (3), pp. 787-822.

Abstract: We provide evidence that higher-quality disclosure standards are associated with stock returns that are less sensitive to noise driven by investors’ moods. We identify return-mood sensitivity (RMS) based on the association between index returns and urban cloudiness, a source of short-term variation in mood. Based on a stylized model, we predict and find evidence consistent with higher-quality disclosure standards reducing RMS by tilting susceptible investors’ trades toward information and by facilitating sophisticated investors’ arbitrage. Our findings suggest that disclosure standards play an important role in enhancing price efficiency by reducing noise in returns, particularly noise related to investors’ short-term moods. 

Brian Bushee, Joseph Gerakos, Lian Fen Lee (Working), Corporate Jets and Private Meetings with Investors.

Brian Bushee, Ted Goodman, Shyam V. Sunder (Working), Financial Reporting Quality, Investment Horizon, and Institutional Investor Strategies.

Brian Bushee, Mary Ellen Carter, Joseph Gerakos (2014), Institutional Investor Preferences for Corporate Governance Mechanisms, Journal of Management Accounting Research, 26 (2), pp. 123-149.

Abstract: We examine institutional investors' preferences for corporate governance mechanisms. We find little evidence of an association between total institutional ownership and governance mechanisms. However, using revealed preferences, we identify a small group of "governance-sensitive" institutions that exhibit persistent associations between their ownership levels and firms' governance mechanisms. We also find that firms with a high level of ownership by institutions sensitive to shareholder rights have significant future improvements in shareholder rights, consistent with shareholder activism. Further, we find that factors describing the characteristics of institutions' portfolios are correlated with governance preferences. Large institutions, those holding a large number of portfolio stocks, and those with preferences for growth firms are more likely to be sensitive to corporate governance mechanisms, suggesting those mechanisms may be a means for decreasing monitoring costs and may be more essential for firms with a high level of growth opportunities. Finally, our results suggest that common proxies for governance sensitivity by investors (e.g., legal type, blockholding) do not cleanly measure governance preferences.

Brian Bushee, Michael Jung, Greg Miller (Working), Do Investors Benefit from Selective Access to Management?.

Brian Bushee (2012), Discussion of “Financial reporting opacity and informed trading by international institutional investors”, Journal of Accounting and Economics, 54 (2-3), pp. 221-228.

Abstract: Maffett (this issue) finds that the opacity of a firm's information environment affects the degree of informed trade by institutional investors. In this discussion, I address the key research design choices involved in studies of opacity and informed trading and I relate the results to the literature on institutional investor performance and stock selection. I suggest that future work investigate the role of discretionary opacity in facilitating informed trade as part of the cost–benefit trade-off of the opacity decision maker (e.g., managers, analysts); test the relative effects of opacity on private information, liquidity, and price correction speed; and examine how institutional investors select which opaque firms to hold.