THE JOURNAL OF FINANCE •VOL. LXXVII, NO. 1 •FEBRUARY2022
Non-Deal Roadshows, Informed Trading, and
Analyst Conflicts of Interest
DANIEL BRADLEY, RUSSELL JAME, and JARED WILLIAMS
ABSTRACT
Non-deal roadshows (NDRs) are private meetings between management and institu-
tional investors, typically organized by sell-side analysts. Wefind that around NDRs,
local institutional investors trade heavily and profitably, while retail trading is sig-
nificantly less informed. Analysts who sponsor NDRs issue significantly more opti-
mistic 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 advan-
tage for institutional investors and create significant conflicts of interests for the
analysts who organize them.
THE 2000 REGULATION FAIR DISCLOSURE (“Reg FD”) and the 2003 Global
Analyst Research Settlement (“Global Settlement”) are two of the most sig-
nificant regulatory actions designed to protect retail investors in the past few
decades. Reg FD was introduced to level the information playing field for retail
investors by prohibiting the disclosure of nonpublic, material information to se-
lected parties, and the Global Settlement was designed to reduce the conflicts
of interest that arise when financial institutions engage in both investment
banking activities and equity research. Existing evidence suggests that these
regulations have been at least somewhat successful in achieving their stated
Daniel Bradley and Jared Williams are with the Kate Tiedemann School of Business and Fi-
nance, 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 (discus-
sant), Ajai Singh, Alexander Vedrashko, Eric Weisbrod (discussant), and seminar participants at
the 2020 American Finance Association, the 2019 Conference on Financial Economics and Ac-
counting, the 2019 TCU Finance Conference, the 2019 Northern Finance Association, the 2020
Midwest Finance Association, Kent State University,Simon Fraser University, University of Cen-
tral 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 The Journal of Finance disclosure policy and have no conflicts of interest to
disclose. All errors are their own.
Correspondence: Daniel Bradley, Department of Finance, 4202 E. Fowler Ave., Tampa, FL
33620, 813-974-6358. Kate Tiedemann School of Business and Finance, Muma College of Busi-
ness, University of South Florida; e-mail: danbradley@usf.edu.
DOI: 10.1111/jofi.13089
© 2021 the American Finance Association
265
266 The Journal of Finance®
objectives.1However,there is concern that the effectiveness of both regulations
is being eroded by corporate managers’ tendency to meet privately with insti-
tutional investors, particularly when such private meetings are undisclosed
to the public. In this paper, we examine whether private “non-deal roadshows
(NDRs),” a pervasive activity among brokerages, corporate managers, and in-
stitutional investors, impact the informativeness of trading (both institutional
and retail) and amplify analyst conflicts of interest.
A company roadshow is a series of targeted private meetings over several
days across different cities where firm management meets with investors to
provide them with information regarding their firm. Roadshows are commonly
associated with presentations given by firms seeking to issue securities, such
as in an initial public offering. However, firms also frequently go on roadshows
unrelated to securities issuance. The latter roadshows, referred to as NDRs,
involve one-on-one meetings between corporate managers and investors that
are held at the offices of current and potential institutional investors. As a
recent Wall Street Journal article points out, unlike other corporate access
events such as broker-hosted conferences or analyst days, these meetings are
not disclosed to the public nor are webcasts or transcripts provided.2Moreover,
these meetings are often arranged by sell-side analysts as a corporate access
service to their institutional clients.
The secretive nature of NDRs exacerbates concerns related to both conflicts
of interest and information asymmetry. In particular, anecdotal evidence sug-
gests that sell-side analysts have strong incentives to issue overly optimistic
research in order to organize firms’ NDRs.3The lack of disclosure surrounding
NDRs makes it more difficult for investors to detect and adjust for this possi-
ble bias, which increases the risk that such conflicts ultimately distort market
prices and reduce economic efficiency. In addition, the private nature of NDRs
makes it far more difficult for smaller investors to recognize that they may
be at an informational disadvantage, amplifying the potential trading losses
incurred by uninformed investors around NDRs.
A primary challenge in empirically examining NDRs is that NDR data are
generally not observable. We overcome this challenge by collecting a novel sam-
ple of more than 40,000 NDRs from 2013 to 2019 from TheFlyOnTheWall.com
(FLY). FLY is a subscription-based publisher of real-time financial news that
1For example, Koch, Lefanowicz, and Robinson (2013) conclude that Reg FD resulted in more
equal access to information among investors, and Corwin, Larocque, and Stegemoller (2017) find
that the Global Settlement led to a significant reduction in investment-banking related conflicts
of interest for sanctioned banks.
2Hoffman, Liz. (2020) In Boston money managers fire shot at Wall Street brokers. Wall
Street Journal, 4 March. Available at: https://www.wsj.com/articles/in-boston-money-managers-
fire-shot-at-wall-street-brokers-11583323502
3Forexample,theWall Street Journal reports that “Securities firms have struggled ever
since the settlement to make their research profitable. As a result, analysts’ relationships with
company executives, including the ability to line up private meetings for investor clients, have
become an increasingly vital revenue source. And that is increasing the pressure for ana-
lysts to be bullish on the publicly traded companies they follow” (https://www.wsj.com/articles/
new-wall-street-conflict-analysts-say-buy-to-win-special-access-for-their-clients-1484840659).
Non-Deal Roadshows, Informed Trading, and Analyst 267
obtains data on NDRs through a variety of nonpublic sources, including leaks
from employees within the brokerage firm.4For each NDR, FLY reports the
date, the firm, the location, and the brokerage firm organizing the NDR.
We begin by examining the consequences of NDRs for institutional investors
headquartered in or near the city in which a firm conducts an NDR (local insti-
tutional investors). We find that local institutional investors increase trading
in the NDR firm by a highly significant 85% during the quarter of the NDR.
Moreover, this trading is highly informed. The tercile of stocks most heavily
purchased by local institutions outperforms the tercile of stocks most heavily
sold by 1.43% over the subsequent quarter, which is more than six times larger
than the corresponding estimate for nonlocal institutional investors. Both the
intensity and informativeness of institutional trading are significantly greater
for local institutions that have high ownership stakes in the NDR firm, consis-
tent with firms using NDRs to visit their largest shareholders.
We also investigate the informativeness of retail trading around NDRs. Us-
ing the method of Boehmer et al. (2020), we find that retail trading is signifi-
cantly less informed in the weeks following an NDR. This finding is consistent
with NDRs placing retail investors at an informational disadvantage, partic-
ularly relative to local institutional investors. In contrast to NDRs, we find
no evidence that retail investor trading is less informed in the weeks follow-
ing an investor conference. This finding is consistent with the view that the
more secretive nature of NDRs puts smaller investors at a larger informational
disadvantage.
We next examine the implications of NDRs for the brokerage firm that orga-
nizes the event. Prior work finds that institutional investors reward brokerage
firms that provide valuable services with greater trading commissions (e.g., Ni-
malendran, Ritter, and Zhang (2007); Goldstein et al. (2009)), which suggests
that NDR brokers experience an increase in commission revenue following the
NDR. Consistent with this prediction, we find that commission revenues in-
crease substantially for the sponsoring broker during the week of the NDR
and remain elevated over the subsequent month.
Given that NDRs are valuable to the broker sponsoring the NDR, we exam-
ine possible conflicts that they may create for sell-side analysts. The incentives
created by NDRs are similar to investment banking conflicts. Specifically, ana-
lysts may issue overly optimistic forecasts for NDR clients, like banking clients,
to secure business. Consistent with this view, we find that brokers who take a
firm on an NDR (NDR brokers) issue substantially more optimistic investment
recommendations and target prices for the firm compared to other brokers.
This difference in optimism peaks in the period immediately surrounding the
NDR, and it continues to hold when we include broker and analyst character-
istics and include firm-time fixed effects. The magnitude of the bias is also sub-
stantial. For example, the optimism of NDR brokers is typically at least three
4FLY only reports a subset of all NDR activity, which raises concerns regarding sample selec-
tion. We explore this concern in greater detail in Section II.B of the paper.We find little evidence
that our results are biased based on FLY’s NDR coverage.
