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Follow friends to invest: evidence from the information role of weak ties

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  • Chunxiao Geng
  • Tusheng Xiao
  • Chun Yuan
  • Yanan Zhang

Abstract

This paper investigates the information role of weak ties in inter‐regional investments. We find that firms are more likely to engage in inter‐regional investments when firms in the same region but in different industries have previously invested in that area. The information effect of weak ties is more pronounced when firms’ exposure to weak ties is higher, investor cities are less developed, and investee cities are more opaque. And firms mainly acquire soft information through weak ties. Finally, the shared information through weak ties facilitates investments to be better matched in investor firm’s business style, and improves investment performance.

Suggested Citation

  • Chunxiao Geng & Tusheng Xiao & Chun Yuan & Yanan Zhang, 2021. "Follow friends to invest: evidence from the information role of weak ties," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(5), pages 5999-6035, December.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:5:p:5999-6035
    DOI: 10.1111/acfi.12848
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