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Do institutional investors' corporate visits mitigate investors' heterogeneous beliefs? Evidence from China

Runmei Luo (School of Economics and Management, Southwest Jiaotong University, Chengdu, China)
Yong Ye (School of Economics and Management, Southwest Jiaotong University, Chengdu, China)

China Finance Review International

ISSN: 2044-1398

Article publication date: 26 December 2022

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Abstract

Purpose

In this study, the authors argue that the private information obtained and transmitted by institutions during the corporate visits can alleviate the degree of information asymmetry between firms and investors, so institutional visits may influence investors' heterogeneous beliefs. Therefore, the authors investigated whether and how institutional investors' corporate visits affect investors' heterogeneous beliefs.

Design/methodology/approach

This study examines whether and how institutional investors' corporate visits affect investors' heterogeneous beliefs using the data of A-share companies from the Shenzhen Stock Exchange (SZSE) during 2013–2019. Using empirical research method, this study designs and conducts an empirical research according to empirical research's basic norms.

Findings

The authors find that institutional visits effectively decrease investors' heterogeneous beliefs, especially institutional investors. Meanwhile, institutional site visits and sell-side institutional visits have a more significant negative effect on investors' heterogeneous beliefs. The findings remain after robustness tests with the alternative variable, instrumental variable, propensity score matching and quantile regression methods.

Originality/value

The development of China's capital market is imperfect, resulting in a strong speculative atmosphere. So, investors' irrational investment behaviors occur from time to time, leading to sizeable heterogeneous beliefs in China's capital market, which increases the risk of investment and is not conducive to the discovery of corporate value and the efficient allocation of resources. Therefore, exploring the factors influencing heterogeneous beliefs and finding ways to alleviate heterogeneous beliefs can reduce the proportion of speculative investors and promote the healthy development of China's capital market.

Keywords

Acknowledgements

Funding: This work was supported by the Ministry of Education of Humanities and Social Science Project (Award Number: 21YJA630107).

Citation

Luo, R. and Ye, Y. (2022), "Do institutional investors' corporate visits mitigate investors' heterogeneous beliefs? Evidence from China", China Finance Review International, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CFRI-08-2022-0141

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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