The effect of institutional investors' site visits: evidence on corporate cash holdings

This study examines the impact of institutional investors' site visits (SVs) on corporate cash holdings by using a unique dataset of SVs in China during the period of 2012-2019. We find that SVs significantly increase the level of cash holdings, and the result remains robust after addressing endogeneity concerns and selection bias. The positive impact of SVs on cash holding is more pronounced if a firm has a lower information quality, confirming that SVs facilitate information distribution between managers and investors and thus allowing more cash holding. Further analyses show that firms rely greatly on equity issues and internal cash flows for cash savings, and SVs increase the value of cash for shareholders. Collectively, our findings suggest a new effect of institutional investors' site visits.