The informativeness of investor communication with corporate insiders: Evidence from China

Abstract

This study examines the informativeness of individual investors in the stock market. Specifically, we study the EasyInteraction Platform administrated by the Shenzhen Stock Exchange of China. This public platform allows individual investors to openly ask corporate insiders questions and requires the corporate insiders to answer these questions. Conducting a content analysis on the investor–firm conversations, we find that the negative tones in the investor questions have a permanent negative effect on stock prices, followed by a lower degree of earnings surprises. This effect is robust after controlling for media coverage as well as firm-specific financial variables, and after ruling out short-sellers and the firm competitors as the source of the negative messages. Overall, our results suggest that individual investors disclose value-related information through public communications with corporate insiders.