Are Investors’ Corporate Site Visits Informative?

Abstract

Corporate site visits are an important type of information acquisition activity, but their usefulness is not well understood, partly due to a lack of data. Using a unique dataset of corporate site visits in China, we analyze the information content of corporate site visits. Our main findings are as follows. First, we document a significant market reaction around corporate site visits and it is stronger for group visits, visits conducted by mutual fund managers, visits covering firm-specific topics, and visits to firms with poor information environments. Second, we find that stock returns around site visits are positively associated with forthcoming earnings news. Third, we find that the market reaction is stronger for site visits to manufacturing firms, consistent with one unique attribute of site visits, namely, the observation of firms’ operations and facilities. Fourth, we provide direct evidence of the usefulness of site visits by documenting that the changes in the stock holdings of visiting funds are more positively correlated with future firm performance than those of non-visiting funds. Finally, we find weak evidence that the informativeness of site visits is partially driven by selective disclosure; the market reaction to site visits is stronger when they are initiated by firms. Overall, our study contributes to the literature by presenting the first systematic evidence on the information role of corporate site visits.