Distance Matters: Evidence From Firms' Financial Misconduct
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Advances in Pacific Basin Business, Economics and Finance
ISBN: 978-1-80382-402-4, eISBN: 978-1-80382-401-7
Publication date: 1 May 2023
Abstract
This chapter investigates the effect of the geographical distance between institutional investors and firms on managers' financial misconduct. The evidence shows that the likelihood of committing financial misconduct by management is positively associated with distance. The distance effect is more prominent for firms with higher information asymmetry and more dedicated institutional investors. In line with the balance between risk-taking and benefit extraction from misconduct, the severity of financial misconduct is higher for firms closer to their institutional investors. Results show that geographical proximity can significantly reduce the cost of information production and facilitate monitoring through access to soft information.
Keywords
Citation
Gao, H., Jiang, R., Liu, W., Wang, J. and Wu, C. (2023), "Distance Matters: Evidence From Firms' Financial Misconduct
Publisher
:Emerald Publishing Limited
Copyright © 2023 by Emerald Publishing Limited