Time distance and mutual fund holding horizon: Evidence from a quasi-natural experiment setting of high-speed railway opening
Xuanyi Chen
School of Management, Huazhong University of Science & Technology, Wuhan, China
Search for more papers by this authorQiliang Liu
School of Accounting, Jiangxi University of Finance and Economics, Nanchang, China
Search for more papers by this authorCorresponding Author
Li Tian
Shenzhen Stock Exchange, Shenzhen, China
Correspondence
Li Tian, Shenzhen Stock Exchange, 2012 Shennan Blvd., Futian District, Shenzhen, China.
Email: [email protected]
Jian Xie, Guangxi University of Finance and Economics, 100 Ming Xiu West Road, Guangxi Zhuang Autonomous Region, Nanning, China.
Email: [email protected]
Search for more papers by this authorJunbo Wang
Department of Economics and Finance, City University of Hong Kong, Hong Kong, Hong Kong
Search for more papers by this authorCorresponding Author
Jian Xie
School of International Education, Guangxi University of Finance and Economics, Nanning, China
Correspondence
Li Tian, Shenzhen Stock Exchange, 2012 Shennan Blvd., Futian District, Shenzhen, China.
Email: [email protected]
Jian Xie, Guangxi University of Finance and Economics, 100 Ming Xiu West Road, Guangxi Zhuang Autonomous Region, Nanning, China.
Email: [email protected]
Search for more papers by this authorXuanyi Chen
School of Management, Huazhong University of Science & Technology, Wuhan, China
Search for more papers by this authorQiliang Liu
School of Accounting, Jiangxi University of Finance and Economics, Nanchang, China
Search for more papers by this authorCorresponding Author
Li Tian
Shenzhen Stock Exchange, Shenzhen, China
Correspondence
Li Tian, Shenzhen Stock Exchange, 2012 Shennan Blvd., Futian District, Shenzhen, China.
Email: [email protected]
Jian Xie, Guangxi University of Finance and Economics, 100 Ming Xiu West Road, Guangxi Zhuang Autonomous Region, Nanning, China.
Email: [email protected]
Search for more papers by this authorJunbo Wang
Department of Economics and Finance, City University of Hong Kong, Hong Kong, Hong Kong
Search for more papers by this authorCorresponding Author
Jian Xie
School of International Education, Guangxi University of Finance and Economics, Nanning, China
Correspondence
Li Tian, Shenzhen Stock Exchange, 2012 Shennan Blvd., Futian District, Shenzhen, China.
Email: [email protected]
Jian Xie, Guangxi University of Finance and Economics, 100 Ming Xiu West Road, Guangxi Zhuang Autonomous Region, Nanning, China.
Email: [email protected]
Search for more papers by this author5We received assistance from the authors of “Does it pay to communicate with firms? Evidence from firm site visits of mutual funds”. They helped us verify the site visit data of mutual fund families for 2009-2011.
Disclaimer: The views of this paper are the authors’ personal academic research opinion, and have nothing to do with their institutions.
Abstract
Using a quasi-natural experiment, we investigate whether the opening of high-speed railways affects mutual fund holdings. Applying the difference-in-difference method, we find that mutual fund holdings in remote listed companies increase after the introduction of high-speed railways in their cities. This effect is primarily observed within the optimal interval of the railway. Opening high-speed railways also facilitates mutual fund visits to remote listed companies, resulting in increased holdings.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from the corresponding author upon reasonable request.
REFERENCES
- Agarwal, S. & Hauswald, R. (2010) Distance and private information in lending. The Review of Financial Studies, 23(7), 2757–2788.
- Ahlfeldt, G. & Feddersen, A. (2018) From periphery to core: measuring agglomeration effects using high-speed rail. Journal of Economic Geography, 18, 355–390.
- Arena, M.P. & Dewally, M. (2012) Firm location and corporate debt. Journal of Banking & Finance, 36(4), 1079–1092.
- Arnswald, T. (2001) Investment behaviour of german equity fund managers. Working Paper.
- Bae, K., Stulz, R.M. & Tan, H. (2008) Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts. Journal of Financial Economics, 88(3), 581–606.
- Bhojraj, S., Jun Cho, Y. & Yehuda, N. (2012) Mutual fund family size and mutual fund performance: the role of regulatory changes. Journal of Accounting Research, 50(3), 647–684.
- Bourveau, T., Lou, Y. & Wang, R. (2018) Shareholder litigation and corporate disclosure: evidence from derivative lawsuits. Journal of Accounting Research, 56(3), 797–842.
- Brands, S., Gallagher, D.R. & Looi, A. (2006) Active investment manager portfolios and preferences for stock characteristics. Accounting and Finance, 46(2), 169–190.
- Chen, D., Ma, Y., Martin, X. & Michaely, R. (2022) On the fast track: information acquisition costs and information production. Journal of Financial Economics, 143(2), 794–823.
- Chen, J. (2017) Institutional investor heterogeneity, private communication and corporate governance. Graduate School of Chinese Academy of Social Sciences.
- Cheng, Q., Du, F., Wang, X. & Wang, Y. (2016) Seeing is believing: Analysts' corporate site visits. Review of Accounting Studies, 21(4), 1245–1286.
- Cohen, L., Frazzini, A. & Malloy, C. (2008) The small world of investing: board connections and mutual fund returns. Journal of Political Economy, 116(5), 951–979.
- Coval, J.D. & Moskowitz, T.J. (1999) Home bias at home: local equity preference in domestic portfolios. The Journal of Finance, 54(6), 2045–2073.
- Coval, J.D. & Moskowitz, T.J. (2001) The geography of investment: informed trading and asset prices. Journal of Political Economy, 109(4), 811–841.
- Cumming, D. & Dai, N. (2010) Local bias in venture capital investments. Journal of Empirical Finance, 17(3), 362–380.
- Da, Z., Gurun, U.G., Li, B. & Warachka, M. (2019) Investment in a smaller world: the implications of air travel for investors and firms. Management Science, 67(1), 417–435.
10.1287/mnsc.2019.3452 Google Scholar
- Dahlquist, M. & Robertsson, G. (2001) Direct foreign ownership, institutional investors, and firm characteristics. Journal of Financial Economics, 59(3), 413–440.
- Degryse, H. & Ongena, S. (2005) Distance, lending relationships, and competition. The Journal of Finance, 60(1), 231–266.
- Del Guercio, D. (1996) The distorting effect of the prudent-man laws on institutional equity investments. Journal of Financial Economics, 40(1), 31–62.
- Ellis, J., Madureira, L. & Underwood, S. (2020) The causal effects of proximity on investment: evidence from flight introductions. Journal of Financial and Quantitative Analysis, 55(6), 1978–2004.
- Falkenstein, E.G. (1996) Preferences for stock characteristics as revealed by mutual fund portfolio holdings. The Journal of Finance, 51(1), 111–135.
- Fan, X.T. (2013) The moderate/long-distance travel mode choosing behavior and sensitivity analysis. South China University of Technology.
- Ferreira, M.A. & Matos, P. (2008) The colors of investors' money: the role of institutional investors around the world. Journal of Financial Economics, 88(3), 499–533.
- Firth, M., Lin, C., Liu, P. & Xuan, Y. (2013) The client is king: do mutual fund relationships bias analyst recommendations? Journal of Accounting Research, 51(1), 165–200.
- French, K.R. & Poterba, J.M. (1991) Investor diversification and international equity markets. The American Economic Review, 81(2), 222–226.
- Fu, R. & Gupta-Mukherjee, S. (2014) Geography, informal information flows and mutual fund portfolios. Financial Management, 43(1), 181–214.
- Giroud, X. (2013) Proximity and investment: evidence from plant-level data. The Quarterly Journal of Economics, 128(2), 861–915.
- Grinblatt, M. & Keloharju, M. (2001) How distance, language, and culture influence stockholdings and trades. The Journal of Finance, 56(3), 1053–1073.
- Heese, J. & Pérez-Cavazos, G. (2020) When the boss comes to town: the effects of headquarters' visits on facility-level misconduct. The Accounting Review, 95(6), 235–261.
- Hong, H., Kubik, J.D. & Stein, J.C. (2005) Thy neighbor's portfolio: word-of-mouth effects in the holdings and trades of money managers. The Journal of Finance, 60(6), 2801–2824.
- Huberman, G. (2001) Familiarity breeds investment. The Review of Financial Studies, 14(3), 659–680.
- Ivković, Z. & Weisbenner, S. (2005) Local does as local is: information content of the geography of individual investors' common stock investments. The Journal of Finance, 60(1), 267–306.
- Jiang, X. & Yuan, Q. (2018) Institutional investors' corporate site visits and corporate innovation. Journal of Corporate Finance, 48, 148–168.
- Knaap, T. & Oosterhaven, J. (2011) Measuring the welfare effects of infrastructure: a simple spatial equilibrium evaluation of Dutch railway proposals. Research in Transportation Economics, 31(1), 19–28.
10.1016/j.retrec.2010.11.004 Google Scholar
- Kothari, S.P., Leone, A.J. & Wasley, C.E. (2005) Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163–197.
- Lang, M.H., Lins, K.V. & Miller, D.P. (2004) Concentrated control, analyst following, and valuation: do analysts matter most when investors are protected least? Journal of Accounting Research, 42(3), 589–623.
- Lerner, J. (1995) Venture capitalists and the oversight of private firms. The Journal of Finance, 50(1), 301–318.
- Lin, Y., Qin, Y. & Xie, Z. (2021) Does foreign technology transfer spur domestic innovation? Evidence from the high-speed rail sector in China. Journal of Comparative Economics, 49(1), 212–229.
10.1016/j.jce.2020.08.004 Google Scholar
- Liu, S., Dai, Y. & Kong, D. (2017) Does it pay to communicate with firms? Evidence from firm site visits of mutual funds. Journal of Business Finance & Accounting, 44(5–6), 611–645.
- Long, Y., Zhao, H.L., Zhang, X.D. & Li, Y. (2017) High-speed railway and venture capital investment. Economic Research Journal, 52, 195–208.
- Loughran, T. & Schultz, P. (2005) Liquidity: urban versus rural firms. Journal of Financial Economics, 78(2), 341–374.
- Massa, M. & Simonov, A. (2006) Hedging, familiarity and portfolio choice. The Review of Financial Studies, 19(2), 633–685.
- O'Brien, P.C. & Tan, H. (2015) Geographic proximity and analyst coverage decisions: evidence from IPOs. Journal of Accounting and Economics, 59(1), 41–59.
- Parwada, J.T. (2008) The genesis of home bias? The location and portfolio choices of investment company start-ups. The Journal of Financial and Quantitative Analysis, 43(1), 245–266.
- Piccioni, J.L., Sheng, H.H. & Lora, M.I. (2012) Mutual fund managers stock preferences in Latin America. International Review of Financial Analysis, 24, 38–47.
10.1016/j.irfa.2012.07.003 Google Scholar
- Pinnuck, M. (2004) Stock preferences and derivative activities of Australian fund managers. Accounting and Finance, 44(1), 97–120.
10.1111/j.1467-629x.2004.00102.x Google Scholar
- Pool, V.K., Stoffman, N. & Yonker, S.E. (2012) No place like home: familiarity in mutual fund manager portfolio choice. The Review of Financial Studies, 25(8), 2563–2599.
- Preston, J. & Wall, G. (2008) The ex-ante and ex-post economic and social impacts of the introduction of high-speed trains in south east England. Planning Practice and Research, 23(3), 403–422.
10.1080/02697450802423641 Google Scholar
- Schipper, K. (1991) Analysts' forecasts. Accounting Horizons, 5(4), 105.
- Seasholes, M.S. & Zhu, N. (2010) Individual investors and local bias. The Journal of Finance, 65(5), 1987–2010.
- Sun, L. (2021) Research on the choice of intercity travel modes under different travel distances. Chang'an University.
- Tan, H., Wang, S. & Welker, M. (2011) Analyst following and forecast accuracy after mandated IFRS adoptions. Journal of Accounting Research, 49(5), 1307–1357.
- Tian, X. (2011) The causes and consequences of venture capital stage financing. Journal of Financial Economics, 101(1), 132–159.
- Wang, K.T., Liu, Y. & Wang, W.W. (2022) Government control, regulatory enforcement actions, and the cost of equity. The European Accounting Review, 31(2), 449–493.
- Wen, Z.L. & Ye, B. (2014) Analyses of mediating effects: the development of methods and models. Advances in Psychological Science, 22, 731–745.
10.3724/SP.J.1042.2014.00731 Google Scholar
- Xiong, J., Ouyang, C., Tong, J.Y. & Zhang, F.F. (2021) Fraud commitment in a smaller world: evidence from a natural experiment. Journal of Corporate Finance, 70, 102090.
- Xu, B. (2018) Research on the ICLV model of intercity travel mode selection. Beijing Jiaotong University.
- Zeng, Y., Yuan, Q. & Zhang, J. (2015) Blurred stars: mutual fund ratings in the shadow of conflicts of interest. Journal of Banking & Finance, 60, 284–295.
10.1016/j.jbankfin.2015.08.029 Google Scholar
- Zhang, J. (2017) High-speed rail construction and county economic development: a study based on satellite light data. China Economic Quarterly, 16, 1533–1562.
- Zhang, X., Wu, W., Zhou, Z. & Yuan, L. (2020) Geographic proximity, information flows and corporate innovation: evidence from the high-speed rail construction in China. Pacific-Basin Finance Journal, 61, 101342.
- Zhu, N. (2002) The local bias of individual investors. Working Paper, Yale ICF, No. 02-30.
- Zhu, N.Z., Wang, K.T. & Wilson, M. (2022) The effect of conditional management earnings forecast mandates on voluntary disclosure and analyst forecast properties. Abacus-A Journal of Accounting Finance and Business Studies, 58(3), 479–522.
10.1111/abac.12253 Google Scholar
