Disseminating information across connected firms — Analyst site visits can help

• Published in: Journal of empirical finance Vol. 72; pp. 510 - 531
• Main Authors: Cao, Zhengyu, Wang, Rundong, Xiao, Xinrong, Yin, Chengxi
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.06.2023
• Subjects: Analyst site visits; Lead–lag effect; Limited attention; Shared analyst coverage; Lead–lag effect; G10; G24; G12; G14; Analyst site visits; Shared analyst coverage; Limited attention
• ISSN: 0927-5398; 1879-1727
• DOI: 10.1016/j.jempfin.2023.04.010

When information is disseminated across fundamentally connected firms at a fast pace, limited investor attention should be mitigated. We investigate whether analyst site visits to public firms have any impact on the lead–lag effect, a well-known phenomenon induced by limited investor attention. We find that analyst site visits to a focal firm’s connected firms almost eliminate the lead–lag effect between the visited connected firms and the focal firm at weekly frequency. The Fama–French five-factor alpha drops from 0.365% (t-statistic=3.26) per week for the strategy based on lagged returns of a firm’s non-visited connected firms to -0.082% (t-statistic=-0.97) per week for the strategy based on lagged returns of visited connected firms. We further provide evidence that analyst site visits to connected firms help improve forecast accuracy for the forecasted firm. These results indicate that analyst site visits help disseminate information across connected firms. •Shared-Analyst-Coverage (SAC) lead–lag effect exists at weekly frequency in China’s stock market.•Analyst site visits weaken the SAC lead–lag effect.•Analyst site visits to a firm’s connected firms help improve analyst forecast accuracy for the firm.•Site visit reports contain fundamental linkage information and help enhance information dissemination.