Seeing is not necessarily the truth: Do institutional investors' corporate site visits reduce hosting firms' stock price crash risk?

Shenghao Gao, Feng Cao and Xiangqiang Liu

International Review of Economics & Finance, 2017, vol. 52, issue C, 165-187

Abstract: This study examines the impact of institutional investors' corporate site visits (CSVs) on stock price crash risk. We find that the frequency of institutional investors' CSVs is positively associated with hosting firms' future stock price crash risk. This association is robust to an array of sensitivity checks, including alternative measures of interaction intensity, alternative samples, additional control variables, firm fixed effects model, two-stage instrumental approach, Heckman two-stage sample selection procedure and propensity score matching (PSM) procedure. Further analysis shows that the impact of institutional investors' CSVs on future crash risk is more pronounced when firm managers have higher bad-news hoarding incentives and less information disclosure monitoring, and when firms are plagued more by information asymmetry. Moreover, the economic mechanism analysis shows that the average cumulative abnormal return (CAR) around the announcement day of institutional investors' CSVs is significantly positive, that CSVs have larger effect for firms with higher CARs and that firms visited more by institutional investors are more likely to make financial restatement in future. Overall, our findings are consistent with the notion that institutional investors' CSVs exacerbate managers' incentives to withhold bad news, which leads to bad news accumulation and future stock price crash risk.

Keywords: Corporate site visits; Stock price crash risk; Institutional investors; Selective disclosure (search for similar items in EconPapers)
JEL-codes: G12 G14 G23 G34 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056017307104
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:52:y:2017:i:c:p:165-187

DOI: 10.1016/j.iref.2017.09.013

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().