Follow friends to invest: evidence from the information role of weak ties

Chunxiao Geng, Tusheng Xiao, Chun Yuan and Yanan Zhang

Accounting and Finance, 2021, vol. 61, issue 5, 5999-6035

Abstract: This paper investigates the information role of weak ties in inter‐regional investments. We find that firms are more likely to engage in inter‐regional investments when firms in the same region but in different industries have previously invested in that area. The information effect of weak ties is more pronounced when firms’ exposure to weak ties is higher, investor cities are less developed, and investee cities are more opaque. And firms mainly acquire soft information through weak ties. Finally, the shared information through weak ties facilitates investments to be better matched in investor firm’s business style, and improves investment performance.

Date: 2021
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