We study the use of subjectivity in performance evaluation, espcially how social interactions and social ties affect the subjective evaluation ratings.

Research setting: The Chinese government's evaluation of the performance of 63 central-government owned SOEs in China

Du, Tang, and Young 2012: based on a sample period of 2004-2007.

Subordinates (SOEs) engage in influence activities to bargain for higher ratings, and we study this as the bottom-up process.

Supervisors (SASAC) play favoritism to ingratiate themselves with SOE subordinates with higher political rank, and we study this as the top-down process .

Du, Erkens, Young, and Tang 2018: based on a sample period of 2010-2012, after EVA replaced ROE and became the new primary performance measure.

With the adoption of the EVA as the new performance measure, the ambiguity about how EVA should be incorporated into the subjective evaluation gave supervisors discretion to give self-serving performance evaluations.

Supervisors did not penalize SOEs for performing poorly on EVA when SOEs performed well on ROE, and accomplished this by shifting the weight from EVA back to ROE.


We study the institutional investors' information acquisition activities that go beyond company disclosure, especially face-to-face interactions with managers in small groups.

Research setting: 21,190 corporate site visits to 1,040 Chinese listed companies.

Sample period: 2009-2013.

We examine the stock price impact of corporate site visits (Cheng, Du, Wang, and Wang 2018) and the impact of site visits on analysts' forecast accuracy (Cheng, Du, Wang, and Wang 2017).

The first study focues on the stock price impact of corporate site visits.

Main Findings:

1. There is significant market reaction around corporate site visits.

2. Stronger market reaction for firms with poor information environment (i.e., when you do not know much about the firm).

3. Stronger market reaction for group visits, visits by funds, visits covering firm-specific information.

4. Site visits convey forthcoming earnings news.

5. No evidence of price reversal after site visits.

The second study focuses on whether and how analysts benefit from corporate site visits.

Main Findings:

1. Visiting analysts improve more in forecast accuracy than non-visiting analysts after corporate site visits.

2. The benefit of site visits is more important for firms with better governance, for firms with more concentrated business, and for firms with more volatile earnings.

3. The effect of site visits is more important for site visits with fewer site visits before, for analyst only site visits, and for remote analysts.

4. Site visits can offset the disadvantage of non-local analysts.

The thid study focuses on the trading behavior of mutual fund managers. We document that the changes in the stock holdings of visiting funds has a stronger correlation with future firm performance than those of non-visiting funds.