School of Business

Do corporate site visits by analysts and institutional investors increase labor investment efficiency?

Document Type

Article

Abstract

Purpose: Corporate site visits increase labor investment efficiency.

Design/methodology/approach: Our empirical model for the baseline analysis follows those of Jung et al. (2014) and Ghaly et al. (2020).

Findings: We show that corporate site visits are associated with significantly higher labor investment efficiency; more specifically, site visits reduce both over-hiring and under-hiring of employees. The effect of site visits on labor investment efficiency is more pronounced for firms with higher labor adjustment costs, greater financial constraints, weaker corporate governance and lower financial reporting quality. We also find that site visits mitigate labor cost stickiness.

Originality/value: First, while the literature has suggested how the presence of institutional investors and analysts may affect labor investment decisions, we focus on institutional investors and analysts’ activities and interactions with firm executives. We provide direct evidence that institutional investors and analysts may use corporate site visits to improve labor investment efficiency. Second, our study adds to a line of recent studies on how corporate site visits reduce information asymmetry and agency conflicts. We show that corporate site visits allow institutional investors and analysts to influence labor investment efficiency. We also provide new evidence that corporate site visits reduce labor cost stickiness.

Publication Title

Asian Review of Accounting

Publication Date

2024

ISSN

1321-7348

DOI

10.1108/ARA-09-2023-0241

Keywords

corporate site visits, institutional investors, labor investment efficiency, monitoring

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