Shuoyang Xie

This paper examines whether managers' voluntary disclosure behavior changes when the presence of local institutional investors grows. Using the introduction of new airline routes that connect firms with institutional investors as exogenous variation in local institutional investor presence, I find that connected firms significantly increase their voluntary disclosure frequency in two important ways: issuing 8% more voluntary Form 8-K filings and providing 28% more management guidance. I provide cross-sectional evidence that the increase in voluntary disclosure is stronger for larger firms in both voluntary 8-K and management guidance channels, and stronger for more profitable firms in the management guidance channel. I also find that these firms experience narrower bid–ask spreads and higher trading volume following the introduction of new routes, consistent with reduced information asymmetry and increased liquidity. Overall, these findings suggest that managers respond to greater demand for information from local institutional investors by increasing the supply of public information and that the increase improves firms' information environments.