Can companies' input of data factor eliminate investors' home biases?

Data as a new production factor plays an increasingly crucial role in influencing investor decision-making. This paper investigates how the data factor input, measured using a two-stage regression decomposition approach, impacts investors' home biases. Analyzing a sample of Chinese listed companies from 2012 to 2022, we find that: 1) companies' input of data factor effectively reduces investors' home biases; 2) this reduction is primarily driven by a decrease in information asymmetry; 3) the mitigating effect of data factor input is further strengthened by external factors such as heightened attention from analysts and stronger corporate governance. Additionally, our results reveal that this mitigating effect is more pronounced among companies facing high financing constraints, possessing low reputations, operating in low-technology industries, or located in regions with underdeveloped digital financial infrastructure. These findings offer new insights into underscore the critical role of data factor in shaping capital markets. •This paper examines how data factor input, measured via two-stage regression decomposition, affects investors' home biases.•Companies' input of data factor effectively reduces investors' home biases.•The reduction in home bias is primarily driven by the decrease in information asymmetry.•The mitigating effect of data factor input strengthens with analyst attention and robust corporate governance.