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Corporate site visits, private monitoring and fraud: Evidence from China

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  • Broadstock, David
  • Chen, Xiaoqi

Abstract

Corporate site visits (CSVs) offer outsiders an opportunity to directly communicate with corporate managers. Through such visits, investors can not only acquire information from managers but also offer outside knowledge and/or personal suggestions to the managers. We conjecture that CSVs play a private monitoring role that will dissuade managers from dishonest or fraudulent financial practices. Using Chinese data, we show that the frequency of site visits is negatively related to the incidence of both corporate and managerial fraud. Our findings have implications for understanding the governance role of private monitoring.

Suggested Citation

  • Broadstock, David & Chen, Xiaoqi, 2021. "Corporate site visits, private monitoring and fraud: Evidence from China," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320315944
    DOI: 10.1016/j.frl.2020.101780
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    References listed on IDEAS

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    Cited by:

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    3. He Xiao, 2023. "Institutional investors' corporate site visits and corporate investment efficiency," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 359-392, June.
    4. Minhang Deng & Yunyi Wang & Gaoliang Tian & Bozhi Xu & Yuyan Tang, 2023. "Institutional investors' corporate site visits and resource extraction: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(5), pages 5211-5243, December.
    5. Sun, Guanglin & Li, Ting & Ai, Yongfang & Li, Qinghai, 2023. "Digital finance and corporate financial fraud," International Review of Financial Analysis, Elsevier, vol. 87(C).
    6. Zhou, Taiyun & Gan, Jiawu, 2022. "Institutional investors' site visits and corporate social responsibility: Evidence from China," Economic Modelling, Elsevier, vol. 115(C).
    7. Su, Fei & Feng, Xu & Tang, Songlian, 2021. "Do site visits mitigate corporate fraudulence? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    8. Cao, Jerry & Wang, Hanyang & Zhou, Sili, 2022. "Soft activism and corporate dividend policy: Evidence from institutional investors site visits," Journal of Corporate Finance, Elsevier, vol. 75(C).

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