Soft Activism and Corporate Dividend Policy: Evidence from Institutional Investors Site Visits

This paper documents that site visits as a type of soft activism, increase corporate cash dividend in the post-event year. The casual link is built by using both quasi-natural experiment and instrument variable approach. Site visits facilitate communication among outside investors and incumbent managers, serving as external monitoring substitute for internal control. We rule out alternative explanations related to institutional ownership and internal governance quality. Instead we show that corporate investors help reduce information asymmetry. Further studies suggest that the effect of site visits is stronger when visits are conducted by security firms and directly involving dividend related discussion. Finally, institutional site visits arouse more dividend-related proposals at following shareholder meeting. The paper supports the bright side of site visits serving as soft activism, in a weak institutional environment.