Do Corporate Site Visits Impact Stock Prices?

Abstract

We examine the stock price impact of corporate site visits using a unique data set of site visits to listed firms in China. Our main findings are as follows. First, the market reaction around corporate site visits is statistically and economically significant and is stronger for group visits, visits conducted by mutual fund managers, visits covering accounting and finance topics, visits to firms with poor information environments, and visits to manufacturing firms. Second, the stock returns around site visits are positively associated with firms' future performance. Third, the changes in visiting funds' holdings are more predictive of firms' future performance than those of nonvisiting funds. Overall, this study contributes to the literature by providing evidence that site visits are important venues for investors to collect information about firms and make informed trades.investisseurs peuvent se renseigner sur les entreprises et prendre des décisions éclairées quant à leurs opérations.we hand-collect the information on site visits, including the date, location, and the number and type of visiting institutions. Our final sample consists of 21,189 site visits to 1,040 firms in 2,859 firm-years between 2009 and 2013. These site visits involve a wide range of visitors, including mutual funds, securities brokerage companies, banks, consulting firms, and individual investors.Not all firms have site visits. Investors conduct site visits to some firms, but not others. To better understand investors' site-visit decision, we develop a determinant model of corporate site visits. We expect that investors are more likely to conduct site visits when doing so is more beneficial. Consistent with this expectation, we find that the likelihood of site visits is higher for manufacturing firms, firms with a higher market share, larger firms, firms with higher analyst coverage, profitable firms, firms with more business segments, older firms, and firms with higher book-to-market ratios. Consistent with the notion that firms with a higher level of disclosure and transparency are more likely to grant investors the site visit opportunities, we document a higher likelihood of site visits for firms with higher disclosure ratings. Moreover, we find that investors are more likely to visit firms in cities with higher GDP growth and more listed firms. Besides shedding light on the determinants of site visits, this analysis also helps us address the potential sample selection bias for the analysis of site visits' stock price impact, which is based on the sample of firms with site visits. We adopt the Heckman approach and include the inverse Mills ratio (IMR) in all of our main analyses.The univariate analysis shows significant market reactions in the 2-day window [0, +1] around site visits. Specifically, the absolute size-adjusted abnormal return is on average 9.04 percent higher than that in the normal period. We also predict and find that the stock price impact of site visits varies with firm and site-visit characteristics. In particular, w...

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