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

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

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.

Suggested Citation

  • Lu, Xian-wei & Fung, Hung-Gay & Su, Zhong-qin, 2018. "Information leakage, site visits, and crash risk: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 487-507.
    • Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:487-507
    DOI: 10.1016/j.iref.2018.05.006
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    9. Li, Yi & Wang, Pengfei & Zhang, Wei, 2023. "Does online interaction between firms and investors reduce stock price crash risk?," The British Accounting Review, Elsevier, vol. 55(4).
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    More about this item

    Keywords

    Information leakage; Likelihood of a crash; Site visits;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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