This study examines the effect of proximity on corporate fraud commitment using the introduction of high-speed rail (HSR) as an exogenous shock to travel time. We find that firms commit less corporate fraud after the introduction of an HSR route. A dynamic difference-in-differences (DiD) analysis shows that the effect of HSR introduction on fraud only occurs after the HSR route is launched, supporting the parallel trends assumption and confirming the causal relationship. Further analysis shows that the negative impact of HSR introduction on corporate fraud is more pronounced for firms that have higher information asymmetry or weaker monitoring mechanisms in the pre-HSR period. In addition, we find that HSR introduction increases corporate site visits by external monitors and that visits significantly reduce corporate misbehavior. Overall, our findings suggest that HSR introduction increases proximity and thereby reduces the information acquisition costs for outside monitors. As a result, outside monitors are in a better position to oversee firms, leading to decreased fraud commitment.

Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.

We investigate the generalizability of widely perceived notions that buy-side analysts try to influence or manipulate a firm’s stock price by praising or criticizing management during a public earnings conference call. Despite two institutional factors that make it difficult to detect empirically, we find some evidence of stock influence behavior by using a combination of data on conference call transcripts and trading by the institutions that employ the buy-side analysts. However, we also find evidence consistent with the null hypothesis that buy-side analysts are acquiring information rather than manipulating the stock price. Subsample analyses suggest that stock influence is more detectable among hedge funds, while information acquisition is the norm among traditional buy-and-hold institutions. The evidence we provide on each behavior should be of interest to firm managers who host conference calls, market participants who use conference calls to collect company information, as well as regulators who monitor for possible market manipulation.