Institutional investors’ site visits and corporate financialization in China

Abstract

This paper examines the influence of institutional investors’ site visits on corporate financialization of heavily polluted enterprises in China. We find that these visits significantly restrain corporate financialization, and this effect is robust after addressing concerns of endogeneity. Mechanism analyses show that institutional investors’ site visits affect corporate financialization by alleviating financing constraints and improving corporate governance. We also show that the impact is more pronounced for companies operating in regions with poor information environments, weaker financial development, and less robust legal frameworks. Moreover, our finding reveals that the impact is significant only for firms that are visited by “independent” institutional investors.