Do site visits mitigate corporate fraudulence? Evidence from China

Fei Su, Xu Feng and Songlian Tang

International Review of Financial Analysis, 2021, vol. 78, issue C

Abstract: Corporate site visits emerge as an increasingly important means of information acquisition process for analysts and institutional investors. In this study, we test whether and how site visits mitigate corporate fraud risk using a unique dataset of site visits to Chinese listed firms. We find that corporate site visits can substantially reduce the incidence of corporate fraud, which is robust to adding a series of control variables, alternative model specifications and alternative measures of corporate fraud, as well as accounting for endogeneity issue and controlling for firm and time fixed effects. This negative effect is more pronounced for firms with poorer information environment and for firms with weaker corporate governance. Furthermore, we examine the mechanisms underlying the negative association between site visits and corporate fraud. Overall, this paper contributes to the literature by providing complementary evidence that site visits are important venues for analysts and institutional investors to collect firm-specific information and monitor the management of firms in China. Our findings also provide significant practical and policy implications for investors and regulators who seek to promote corporate information disclosure and mitigate the risk of corporate fraud.

Keywords: Security analysts; Institutional investors; Site visits; Corporate fraud; Information acquisition (search for similar items in EconPapers)
JEL-codes: G10 G14 G30 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:78:y:2021:i:c:s1057521921002611

DOI: 10.1016/j.irfa.2021.101940

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