Corporate Site Visits and Financial Report Quality

Abstract

This study examines the association between corporate site visits and visited firms’ financial reporting quality. Using a sample of publicly listed firms in China for the years 2009 through 2018 and four different measures of financial reporting quality, we find that firms receiving more site visits have higher financial reporting quality. Specifically, we find that corporate site visits are associated with a lower level of accrual-based earnings management and a lower likelihood of financial violations and financial restatements. Moreover, we document a positive association between corporate site visits and the evaluation of earnings disclosure quality. We also find some evidence that the positive association between site visits and financial reporting quality is more pronounced among firms with greater institutional ownership and among state-owned enterprises. Taken together, our findings underscore the monitoring role of corporate site visits in enhancing visited firms’ financial reporting quality. This research could be of interest to regulators and institutional investors by providing insight into assessing the benefits of selective access events that may influence the quality of financial reports.

Keywords: corporate visits, selective access disclosures, financial reporting quality