Offshore Sales Networks and Stock Return Predictability

50 Pages Posted: 25 Sep 2019 Last revised: 14 Oct 2020

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Priya Garg

University of San Diego - Department of Finance

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Date Written: October 13, 2020

Abstract

Based on 10-K textual analysis, we assemble firm-level offshore sales networks (OSN) and find strong return predictability among industry participants that have overlapping offshore sales activities. This intra-industry return predictability based on offshore sales networks is distinct from that along several previously documented economic linkages (e.g., industry momentum, technological links, and standalone vs conglomerate firms. Moreover, we find that the effect is stronger for firms that receive low investor attention, issue hard-to-read 10-Ks, and pose high arbitrage costs. Our results highlight important asset pricing implications of the commonality of corporate offshore activities, and are broadly consistent with sluggish price adjustment caused by investors’ inattention to offshore networks.

Keywords: offshoring, offshore operations, output network, stock returns, limited attention

Suggested Citation

Bai, John (Jianqiu) and Garg, Priya and Wan, Chi, Offshore Sales Networks and Stock Return Predictability (October 13, 2020). Available at SSRN: https://ssrn.com/abstract=3455426 or http://dx.doi.org/10.2139/ssrn.3455426

John (Jianqiu) Bai (Contact Author)

Northeastern University - D'Amore-McKim School of Business ( email )

220 B RP
Boston, MA 02115
United States

Priya Garg

University of San Diego - Department of Finance ( email )

5998 Alcala Park
San Diego, CA 92110
08579997406 (Phone)
92110 (Fax)

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

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