Site Visits and Corporate Investment Efficiency

Management Science, Forthcoming

60 Pages Posted: 23 Oct 2023

See all articles by Sean Cao

Sean Cao

University of Maryland - Robert H. Smith School of Business

Guojin Gong

University of Connecticut

Yongtae Kim

Santa Clara University - Leavey School of Business

Hanzhong Shi

Nanjing University

Angie Wang

The Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: September 24, 2023

Abstract

Site visits allow visitors to physically inspect productive resources and interact with onsite employees and executives face-to-face. We posit that, by allowing visitors to acquire investment-related information and monitor the management team, site visits offer disciplinary benefits for corporate investments. Using mandatory disclosures of site visits in China, we find that corporate investments become more responsive to growth opportunities as the intensity of site visits increases, consistent with the notion that site visits yield disciplinary benefits. We also find that the positive association between site visits and investment efficiency is more pronounced when visitors can glean more investment-related information and when they have stronger incentives and greater power to monitor managers. This positive association is also stronger among firms with more severe agency problems and higher asset tangibility. The overall evidence supports the notion that site visits serve as a unique venue for institutional investors and financial analysts to acquire valuable information and serve a monitoring function, which generates disciplinary benefits for corporate investments.

Keywords: Site visits, corporate investment efficiency, monitoring, information acquisition

Suggested Citation

Cao, Sean S. and Gong, Guojin and Kim, Yongtae and Shi, Hanzhong and Wang, Angie, Site Visits and Corporate Investment Efficiency (September 24, 2023). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4582137 or http://dx.doi.org/10.2139/ssrn.4582137

Sean S. Cao

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Guojin Gong

University of Connecticut ( email )

Storrs, CT 06269
United States

Yongtae Kim (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States
(408) 554-4667 (Phone)
(408) 554-2331 (Fax)

Hanzhong Shi

Nanjing University ( email )

Nanjing, Jiangsu 210093
China

Angie Wang

The Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
680
Abstract Views
1,769
Rank
79,996
PlumX Metrics