Keywords

institutional investors, distraction, inattention, buy-side analysts

Abstract

Research has long recognized that institutional investors possess significant information processing advantages. Yet even these investors face limited attention constraints, implying that periods of distraction may attenuate their advantage. We examine the effects of a plausibly exogenous shock to institutional attention arising from the annual buy-side focused Equity Research and Valuation (ERV) conference for Chartered Financial Analysts on institutions’ information processing. Validation tests using conference call data indicate that fewer buy-side analysts are present on calls during ERV conferences and that questions are shorter, consistent with the presence of substitute or backup analysts. In our main analyses, we find that buy-side analyst inattention reduces information asymmetry among investors and improves liquidity at these earnings announcements, consistent with theory, and observe similar results for non-earnings announcement events. In additional tests, we document slower price formation, but also more profitable retail trading, during these periods. Collectively, we provide novel evidence on the market consequences of institutional inattention during key information events.

Original Publication Citation

Davidson, Owen and Drake, Michael S. and Moon, James and Warren, James. Out of the office: Market impacts of institutional investor distraction (August 10, 2023). Available at SSRN: https://ssrn.com/abstract=4398798 or http://dx.doi.org/10.2139/ssrn.4398798

Document Type

Peer-Reviewed Article

Publication Date

2026

Publisher

Contemporary Accounting Research

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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