Behind Closed Doors: An Investigation of Investor Relations Officer Disclosures in Private Meetings with Investors

We examine how investor relations officers (IROs) approach disclosure decisions in private meetings with investors. In these settings, IROs face conflicting pressures to maintain a “level playing field” for all investors while also pleasing key investors. We experimentally test how pre-disclosure consideration of materiality, recommended by professional standards, affects disclosure to more and less preferred investors. In the experiment, 133 experienced IROs evaluate plausibly material information. Contrary to the stated intent of Regulation Fair Disclosure and professional standards, we find that more consideration of materiality increases selective disclosure to preferred investors, resulting in an unlevel playing field. In contrast, less consideration of materiality results in limited disclosure to both investor types, and IROs subsequently change their evaluations of materiality to rationalize not providing selective disclosure to preferred investors. Debriefing data indicates that IROs are aware that selective disclosure occurs. Our results have implications for firms and regulators.