Seeing is believing: analysts’ corporate site visits
- 2k Downloads
This study examines the impact of corporate site visits on analysts’ forecast accuracy based on a sample of such visits to Chinese listed firms during 2009–2012. We find that analysts who conduct visits (“visiting analysts”) have a greater increase in forecast accuracy than other analysts. Consistent with the notion that site visits facilitate analysts’ information acquisition through observing firms’ operations, we find that the results are stronger for manufacturing firms, firms with more tangible assets, and firms with more concentrated business lines. Moreover, we find that the effect of a site visit is greater when the site visit is an analyst-only visit, when the current visit is preceded by fewer visits, and when visiting analysts are based far from the visited firms. Furthermore, we find that site visits partially mitigate nonlocal analysts’ information disadvantage. Collectively, these results indicate that site visits are an important information acquisition activity for analysts.
KeywordsSite visits Analyst forecasts Information acquisition activities Local advantage
JEL ClassificationsG10 G24 M41
We greatly appreciate the helpful comments and suggestions from Sarah Bonner, Brian Bushee, Andrew Call, Kevin Chen, Shuping Chen, Xia Chen, Patricia Dechow (Editor), Mark DeFond, Mei Feng, Ole-Kristian Hope, Marcus Kirk, Jing Liu, Stan Markov, Steve Matsunaga, Chul Park, Joseph Piotroski, Nathan Sharp, Doug Skinner, T.J. Wong, Guochang Zhang, two anonymous reviewers, and conference and workshop participants at the 2013 Alumni Symposium of USC Leventhal School of Accounting, 2014 CKGSB Colloquium, 2014 Chinese University of Hong Kong CiG conference, 2015 EAA Annual Congress, 2015 AAA annual conference, 2015 University of Wisconsin-Madison Alumni Research Conference, the University of Hong Kong, and Hong Kong University of Science and Technology. We gratefully acknowledge the financial support provided by the General Research Fund of Hong Kong Research Grants Council (Project No. 790613) and the National Natural Science Foundation of China (Project No. 71102124). Cheng gratefully acknowledges funding from the Lee Kong Chian Fellowship.
- Bradshaw, M. (2011). Analysts’ forecasts: What do we know after decades of work? Unpublished working paper. Boston College.Google Scholar
- Bushee, B. J., Jung, M. J., & Miller, G. S. (2013). Do investors benefit from selective access to management? Unpublished working paper. University of Pennsylvania, New York University, and University of Michigan.Google Scholar
- Cheng, Q., Du, F., Wang, X., & Wang, Y. (2015). Are investors’ corporate site visits informative? Working paper. Singapore Management University, The University of Hong Kong, and Central University of Finance and Economics.Google Scholar