Geographical proximity and information advantage evidence from the Chinese seasoned equity offering market

Studying the Chinese SEO market, we find that investors geographically closer to an SEO firm's headquarters tend to submit bids that align more closely with the final offer price and tend to win the auction with a higher likelihood, particularly for high-demand SEOs. This local advantage is especially pronounced when bidding on firms with high operational uncertainty, active earnings management, and limited visits from institutional investors and analysts. Additionally, local investors are more likely to conduct on-site visits to SEO firms before the offering process than their nonlocal counterparts. However, this local edge diminishes during the nationwide COVID-19 lockdown and with the establishment of efficient transportation links to SEO firms. Overall, the evidence suggests that proximity provides investors with a significant advantage to gain information.