Political costs and investors' site visits: evidence from the section 301 investigation

We explore the relationship between political costs and investors' site visits. We find that the Section 301 investigation launched by the United States government in 2017 increased Chinese high-tech companies' resistance to site visits. This effect was more pronounced for companies receiving government subsidies and companies with political connections. We further find that high-tech companies underwent fewer site visits with independent institutions (i.e. securities firms, fund companies) but more site visits with security underwriters (non-independent institutions), depending on different investors' ability to disseminate corporate information. Moreover, high-tech firms selectively avoided certain topics from discussion during site visits. Additionally, the corporate shareholder structure also changed with the adjustments of visiting investors. High-tech companies reduced their site visits to avoid negative economic consequences. Overall, our study provides evidence that political costs influence the information communication behaviour of companies in the country being investigated.