Private communication and management forecasts: Evidence from corporate site visits

Research Question/Issue This paper investigates whether the communication between managers and corporate site visitors facilitates managerial learning in improving management forecast accuracy. Research Findings/Insights Using corporate site visit (CSV) data from 2009 to 2016, we find that the frequency of corporate site visits is positively related to management forecast accuracy. The positive relationship between corporate site visits and forecast accuracy is stronger when visitors have greater expertise and advanced industry knowledge and when firms are visited during a period of high business uncertainty and are subject to high sensitivity to industry shocks. These findings are consistent with the managerial learning hypothesis. Our results are robust to endogeneity concerns and alternative CSV measures. Theoretical/Academic Implications Previous literature on voluntary disclosure assumes that managers are endowed with a private set of information and decide how much of that to reveal. In this paper, we find that corporate site visits serve as a communication channel through which managers learn from investors. Overall, we provide evidence that private communication is a two-way channel through which visitors learn useful information from managers and vice versa. Practitioner/Policy Implications We provide evidence that the private information acquisition process is also a channel of information sharing that increases management forecast accuracy. Our results could be useful to policymakers who may care about the information acquisition cost of investors when evaluating the benefit of corporate site visits.