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Information leakage, site visits, and crash risk: Evidence from China

Xian-wei Lu, Hung-Gay Fung and Zhong-qin Su

International Review of Economics & Finance, 2018, vol. 58, issue C, 487-507

Abstract: This study uses Chinese listed firms during 2009–2014 to examine how conditional skewness (crash risk), the third moment of the return distribution, reacts to the information revealed by site visits. Our results indicate that crash risk increases with site visits. Our findings are robust for multiple measures of crash risk, site visits, firm-fixed effects, endogeneity issues, and different modeling techniques. The effect of site visits on crash risk is stronger for firms with lower disclosure, a high dispersion of investor opinions, in down markets, and at non-SOEs. In addition, we show that site visits provides more firm specific information to the market, reducing their return co-movements with the market. These results indicate that site visits are an important way for market participants to gain information about the firms.

Keywords: Information leakage; Likelihood of a crash; Site visits (search for similar items in EconPapers)
JEL-codes: G28 G31 G32 (search for similar items in EconPapers)
Date: 2018
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