Do institutional investors’ site visits promote firm productivity? Evidence from China

This study investigates how institutional investors’ site visits affect firm productivity using a dataset of China’s A-share listed firms from 2013 to 2023.We measure firm productivity by total factor productivity (TFP) estimated through the Levinsohn–Petrin approach and quantify site visits based on the mandatory disclosure requirement of the Shenzhen Stock Exchange. The analysis employs firm- and year-fixed effects panel regressions controlling for firm characteristics, and the findings are robust to alternative TFP measures, alternative visit proxies, and subsample exclusions. Potential endogeneity concerns are addressed using propensity score matching and the Heckman two-step model. Notably, site visits have a constructive effect on firm productivity. Through mechanism analysis, we find that the effect could be driven by three possible channels, including reducing information asymmetry, improving stock price informativeness, and promoting digital transformation. Heterogeneity analysis demonstrates that the nexus between site visits and firm productivity is more pronounced for non-state-owned firms and firms with higher product market competition intensity. Our findings offer new insights into the benefits of investor site visits and emphasizes the relevance of investor activism in the capital market, with implications for managers, investors, and regulators.