The Value of Private Information in Investment Research: Do Company On-Site Visits Affect the Trading Patterns and Performance of Professional Investors?

Abstract

This paper looks at relationships between managerial characteristics and actions on the performance, management fees, and systematic risk of US equity investment management firms during the period 2008 through 2011, focusing on the impact of company on-site visits. Company on-site visits significantly enhance performance, management fees, and portfolio turnover. On-site visits are also positively related to employee equity ownership while the latter is inversely related to portfolio turnover. This supports the agency hypothesis that managers with greater personal stakes in their companies invest more in collecting non-public information for longer-term commitments.