This paper develops a dynamic trade-off model to study the interaction between product market competition and capital structure. Firms make interdependent entry, investment, financing and default decisions. Trade-off between tax benefits, bankruptcy costs and strategic considerations in the product market determines optimal capital structure. The model delivers the following results that are consistent with empirical evidences: (1) Firms may have non-linear and non-monotonic reactions to their competitors’ change of leverage, depending on their original levels of leverage; (2) The within-industry variation of leverage can be large, because incumbents and entrants use leverage strategically differently ; (3) Entrants have higher leverage than incumbents in equilibrium, because the incumbents use lower leverage to gain strategic advantages over the entrants.

本文利用短期融资券的推出作为自然实验研究金融创新引起的公司融资约束变化对公司经营业绩的影响，从而为金融发展与经济增长的关系提供微观证据。利用短期融资券作为自然实验，本文解决了在研究金融发展与经济增长关系中的内生性问题。基于两者关系中“分配金融资源”的理论观点：金融发展能够更加有效的分配资金资源，减少公司的融资约束，增加公司的业绩，本文提供了这一经济作用机制的实证证据。本文发现当短期融资券成为企业潜在的融资工具后，能够利用这一金融工具的企业在负债能力和投资能力方面有了大幅提高，其经营业绩也得到大幅增长。本文的证据表明金融工具创新和金融市场发展对公司价值产生了巨大影响，因此能够促进经济增长。

本文在现有“制度环境与债务融资”研究基础上，进一步结合终极所有权研究公司债务融资问题。理论上本文首次基于控股股东决策视角，通过动态模型研究发现，在利率管制的中国市场上，投资者法律保护不足及控股股东的存在，导致公司过度债务融资，政府干预进一步加剧了这一行为，控股股东现金流权可以有效抑制过度债务融资。实证研究表明，控股股东现金流权与过度债务融资显著负相关，法制环境的改善、政府干预减少显著降低了过度债务融资规模及过度长期债务融资。这一研究在验证本文理论分析的同时，为控股股东利用控制权侵占提供了新的证据。

Many prior studies conclude that Chinese independent directors engage in window dressing. The results of research into the relationship between the proportion of independent directors on the board and firm performance are mixed. We use the number of negative opinions issued by a firm’s independent directors as a proxy for their effectiveness in the monitoring role they play. We hypothesize that both board structure and the personal characteristics of independent directors influence the effectiveness of monitoring. Using a matched control sample of firms in which there were no disputes in the board room over the sample period, we find that independent directors who have more political capital, such as former government officials, Communist Party members, and those who also have a senior management position in another firm are more likely to issue negative opinions. We also find that the independent directors of firms with more balanced power structure in board and those that operate in a better institutional environment have a greater tendency to issue negative opinions.

The controlling shareholder of a firm may suffer as a result of its right to control the firm due to unfavorable market reactions associated with concerns on private benefit extraction by the controlling shareholder. Thus, the controlling shareholder has an incentive to build a good governance mechanism as a commitment device in order to discipline itself, which allows it to sell shares at a higher price in the initial public offering (IPO). An improvement in pricing efficiency will give the controlling shareholder more incentive to limit its private benefits from controlling the firm. Therefore, we propose that, besides improving the efficiency of capital allocation, the development of the financial market can shape the corporate governance of firms in an economy, thus improving firm operation efficiency. A model of IPO is constructed to demonstrate this mechanism of market discipline. Using data from China stock market on the regulatory changes in IPO pricing and firm ownership structure, we find evidence consistent with the model’s implications.

Previous studies have typically found a negative relation between pyramidal ownership and firm value, and have interpreted it as supporting evidence of the incentive problems created by pyramiding. Those studies, however, do not adequately control for the endogeneity of ownership to factors that also affect firm performance, leaving the agency problem indistinguishable from the unfavorable fundamental shock. Using a unique sample of privately owned listed enterprises in China, this paper examines the effect of pyramidal ownership on returns in response to the announcement of the Share Split Reform in China. This reform triggered zero fundamental shocks but resurrected entrepreneurial incentives in proportion to the separation of ownership and control. Estimates of agency cost of pyramidal ownership are significant and material, and are robust against a range of alternative hypotheses. Moreover, institutional investors appear to appreciate the reform more when a firm’s pyramidal ownership is less separated. The findings suggest that, despite the endogenous determinant of ownership choice, agency theory alone successfully explains the pyramidal discount.

We investigate the role played by institutional development in the prevalence and value of family firms, while controlling for the potential effect of cultural norms. China provides a good research lab since it combines great heterogeneity in institutional development across the Chinese provinces with homogeneity in cultural norms, law, and regulation. Using hand-collected data from publicly listed Chinese firms, we find that, when institutional efficiency is low, family ownership and management increase value, while family control in excess of ownership reduces value. When institutional efficiency is high, none of these effects are significant.

This paper investigates the impact of ownership and ownership concentration on the performance of China’s listed firms. By recognizing the differences between ownership and ownership concentration and between total ownership concentration and tradable ownership concentration, we conduct simplex, interactive and joint analyses. We find that ownership concentration is approximately associated with higher firm performance. Ownership concentration is more powerful than any category of ownership in determining firm performance. Firm performance is better when the state is the largest of the top shareholders and/or institutions dominate ownership among the top tradable shareholders. Our results support the theory that high ownership concentration mitigates the agency problem.

This study investigates how ultimate controlling shareholders influence dividends payout policy in industrial firms in the natural experimental setting of Hong Kong, which features no tax on dividends and the prevalence of concentrated ownership. We find that the ultimate control held by the controlling shareholders is negatively associated with the level of dividends payout, consistent with the agency costs explanation of dividends; and that the dividend payout behavior in firms with controlling shareholders exhibits similar patterns as in US, UK and EU firms. We also conduct separate analysis on family controlled and state controlled firms and find that the heterogeneity across these large shareholders has a confounding effect on corporate dividend payout behavior.

This paper evidences a lead-lag relationship between securities which experience high levels of short-selling and those that do not. This is based on evidence that short-selling increases the speed with which information, especially negative information, is absorbed into prices. Previous literature mainly focus on the presence of short-selling and its effect on prices. This paper focuses on the magnitude of short-selling and finds a strong lead-lag relationship between returns of stocks that experience heavy short-selling compared to those that experience slight amounts. The relationship conforms to that of Chordia & Swaminthan’s (2000) speed adjustment hypothesis, in that it facilitates the imputation of common information. The relationship is strongest in small illiquid stocks where short-selling aids in the imputation of common information symmetrically and asymmetrically, and reduces as stocks become larger and more liquid. However in extremely volatile markets this relationship suffers. The relationship is robust to various factors including out of sample tests, accounting for size, and accounting for volume. Of note is the finding that short-selling aids in information imputation over-and-above the efficiency attributed to sophisticated investors. This indicates that market maker and uninformed short-sales add to the lead-lag effect.