Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 14th May 2024, 07:41:37am EDT
Session Chair: Dalida Kadyrzhanova, Federal Reserve Board
Location:SEC Headquarters in Washington, DC
Session Topics:
Corporate Finance
Presentations
Bloated Disclosures: Can ChatGPT Help Investors Process Information?
Alex Kim, Maximilian Muhn, Valeri Nikolaev
University of Chicago, United States of America
Discussant: Sean Cao (University of Maryland)
Generative AI tools such as ChatGPT can fundamentally change the way investors process information. We probe the economic usefulness of these tools in summarizing complex corporate disclosures using the stock market as a laboratory. The unconstrained summaries are remarkably shorter compared to the originals, whereas their information content is amplified. When a document has a positive (negative) sentiment, its summary becomes more positive (negative). Importantly, the summaries are more effective at explaining stock market reactions to the disclosed information. Motivated by these findings, we propose a measure of information “bloat.” We show that bloated disclosure is associated with adverse capital market consequences, such as lower price efficiency and higher information asymmetry. Finally, we show that the model is effective at constructing targeted summaries that identify firms’ (non-)financial performance. Collectively, our results indicate that generative AI adds considerable value for investors with information processing constraints.
Does Sustainable Investing Make Stocks Less Sensitive to Information about Cash Flows?
Steffen Hitzemann3, An Qin2, Stanislav Sokolinski1, Andrea Tamoni2
1Michigan State University, United States of America; 2Rutgers University; 3University of Houston
Discussant: Min Park (University of Kansas)
Traditional finance theory asserts that stock prices depend on expected future cash flows. We explore how the growing prominence of non-pecuniary preferences in the form of sustainable investing alters this core financial relationship. Using the setting of earnings announcements, we find that sustainable investing diminishes stock price sensitivity to earnings news by 45%-58%. This decline in announcement-day returns is mirrored by a comparable drop in trading volume. This effect persists beyond the immediate announcement period, implying a lasting alteration in price formation rather than a short-lived mispricing. Our findings suggest that sustainable investing reduces the significance of cash flows in shaping stock prices.
