COVID-19 Pandemic : How Important is Face-to-Face Interaction for Information Dissemination?

Does face-to-face interaction still facilitate information transfer despite proliferating communication technologies? The COVID-19 pandemic has led to abrupt implementation of stay-at-home mandatory restrictions forcing people to adopt virtual communication technologies. This has resulted in a worldwide collapse in face-to-face interactions. We use this setting to examine the influence of face-to-face interaction on information flow in the stock market around earnings announcements. Using Google’s Community Mobility Reports to obtain daily, county-level abnormal mobility for U.S. residents to proxy for face-to-face interaction, we find that firms located in counties with lower abnormal mobility experience a weaker immediate price reaction to earnings announcements and a larger post-announcement drift (PEAD). Our findings suggest that lower face-to-face interactions dampen price discovery in financial markets. We also show that investor attention is a potential mechanism by which face-to-face interactions affect market responses to earnings news. Together, our study finds empirical support for the importance of face-to-face interactions in facilitating stock market information dissemination