Do corporate site visits affect the informational role of independent directors?

Abstract

This study examines the influence of corporate site visits on information acquisition and dissemination by independent directors (IDs). Employing two unique sources of data from Chinese listed firms based on the mandatory disclosure of IDs’ (i) site visit activities and (ii) opinions about corporate decisions, we find that the acquisition of firm-specific information and the dissemination of such information to the market are greater among IDs who conduct visits than their counterparts without such visits. Moreover, this effect is more pronounced in firms with complex information environments, in firms with lower proprietary costs, and among IDs with greater internal information asymmetry, superior external information, and stronger incentives and abilities to perform their duties. Furthermore, the firm-specific information disseminated by IDs leads to stronger market reactions and improves stock price efficiency. Our study shows that site visits contribute to the informational role of IDs, and our evidence offers important corporate governance and regulatory implications.