Information content of holding investor conferences: the case of Taiwan’s semiconductor supply chain

ABSTRACT

Investor conference has been adapted from conference call but allows substantial managerial controllability over its timing and disclosures during the meeting. The announcement of holding such a meeting is posited to have information content. We examine investors’ positive prospect utilizing the announcements during growth period of Taiwanese semiconductor supply chain (TSSC). TSSC’s disintegration into upstream, midstream, and downstream firms further allows tests for information transfer vertically among three subgroups. We find supportive evidence that all three subgroups show significantly positive cumulative abnormal returns surrounding the upstream firm’s announcement of an upcoming investor conference. Notably, the spillover effect is stronger for industry peers with shorter vertical distance to the announcing firm.

KEYWORDS:

• Investor conference
• conference call
• information transfer
• supply chain

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. In Article 8 of Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities, ‘A Taiwan Stock Exchange (TWSE) listed company shall comply with the following requirements for investor conferences: …An R.O.C. TWSE listed company and a TWSE primary listed company shall at least hold or be invited to one investor conference in the R.O.C. every year.’

2. In Article 8 of Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities, ‘The material information, including announcement of the date, time and venue of the conference and other relevant information, shall be published at the latest 1 day prior to the date of convening or 1 day prior to the date of attending the conference.’ The official system to file the time and location of the announced holding of an investor conference is the Market Observation Post System (MOPS).

3. We examine the information transfer using three TSSC subgroups: upstream, midstream, and downstream firms. This approach does not identify a production network between each firm and its major customers, as it already handles such a relation in the study of information transfer within TSSC. In TSSC practices, the midstream subgroup comprises a few dedicated chipmakers that play the core manufacturing function in the semiconductor value chain. This allows upstream IC designers to avoid capital-intensive IC fabrication and to rely on any midstream firms that provide IC fabricating services with price, capacity, and chip making technology that match the designed products. Thus, an upstream firm’s product-specific production network could include any firms in the midstream subgroup which match the designed products. As such, Nien et al. (2016) also utilize the same setting of three TSSC subgroups without identifying a specific production network when they study the information transfer of disclosures during investor conferences.

4. The material information is defined by Article 4 of Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities and Article 4 of Taipei Exchange Procedures for Verification and Disclosure of Material Information of Companies with TPEx Listed Securities. After reviewing information on MOPS for our sample firms, we do not find any material information announced by midstream firms or downstream firms within 7 days before or after an upstream company announces the material information on holding a conference call. Therefore, the event study approach is proper to investigate our research questions.

5. Different from Gompers, Ishii, and Metrick (2003) and Johnson, Theodore, and Sorescu (2009) who draw on a long event study approach, we use a short event window and refer to the announcement period of AR from the day before the announcement date to one day after the announcement date. Using a short event method allows us to make a direct and noise-free assessment regarding the effect of announcing the material information about holding a conference call on MOPS by upstream firms.

6. In Equation (3) we delete the control variable YEAR, because of collinearity between D and YEAR.