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To see is to believe: Corporate site visits and mutual fund herding

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  • Xiaofeng Quan
  • Cheng Xiang
  • Donghui Li
  • Kelvin Jui Keng Tan

Abstract

Using a unique data set of corporate site visits by mutual funds to Chinese firms listed on the Shenzhen Stock Exchange from 2013 to 2021, we find that firms with visits (more visits) are associated with lower mutual fund herding than those with no (fewer) visits. In addition, we demonstrate that mutual funds’ visits to a firm drive the change in their herding propensity by verifying hard information (e.g., the firm's technology, innovation, accounting, and finance information) and obtaining soft information (e.g., management's risk appetite, employee morale, and corporate culture). Furthermore, corporate site visits are found to strengthen herding's price impact without return reversals. Overall, our results are consistent with information cascade theory.

Suggested Citation

  • Xiaofeng Quan & Cheng Xiang & Donghui Li & Kelvin Jui Keng Tan, 2023. "To see is to believe: Corporate site visits and mutual fund herding," Financial Management, Financial Management Association International, vol. 52(4), pages 711-740, December.
    • Handle: RePEc:bla:finmgt:v:52:y:2023:i:4:p:711-740
    DOI: 10.1111/fima.12421
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