The Information Role of Investors’ Site Visits in Management Forecasts

ABSTRACT

Prior research mainly focuses on how investors acquire private information through corporate site visits. Rarely evidence shows whether firms can obtain external information from investors’ site visits. We hypothesize and find that investors’ site visits are positively associated with management forecast qualities (i.e. accuracy and precision). This association is stronger when investors have an external information advantage or more information demand. We also find that improving management forecasts of investors’ site visits is more pronounced when firms have better governance. Our study highlights the information role of investors’ site visits which can further benefit firms’ operations and support recent governors’ advice to maintain investor related activities better.

KEYWORDS:

• Site visits
• management forecast
• external information
• information demand

JEL:

• G10
• G24

Acknowledgments

Haojing Guo acknowledges support from the National Natural Science Funds of China (Grant No. 72202009) and the Humanities and Social Science Research Projects of Beijing Technology and Business University (KYPT202317). Siyuan Tang acknowledges support from the National Natural Science Funds of China (Grant No. 72102197). Zhe Wei acknowledges support from the GuangDong Basic and Applied Basic Research Foundation-2019A1515110977. All errors and omissions are our own.

Disclosure Statement

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

Notes

1. Following FASB Concept Statement 1, we define investor as equity investors and security analysts and advisors, brokers, lawyers, regulatory agencies, and other who advise or represent the interests of investors and creditors or who otherwise are interested in how investors and creditors are faring.

2. Sample size will change according to additional data requirements.

3. In Appendix, we also try other indicators for moral hazard such as abnormal compensation, a compose index CGI, abnormal perk, whether the CEO and chairman are the same, the ratio of the largest shareholder’s holdings, the ratio of the largest shareholder’s holdings to the second largest shareholder’s, abnormal absolute discretionary accruals. We do not find any evidence support the monitoring channel.

Additional information

Funding

The work was supported by the National Natural Science Funds of China [72102197,72202009]; GuangDong Basic and Applied Basic Research Foundation [2019A1515110977]; The Humanities and Social Science Research Projects of Beijing Technology and Business University [KYPT202317].