The Chinese market is characterized by state-controlled and closely held firms as well as significant differences in economic development and legal structures at the provincial level and corporate regulations that require firms seeking external financing to show a history of dividend payment. Using a sample of listed Chinese firms, we investigate the firm’s choice of cash or stock dividends and market reactions to the announcement of these dividend choices. We find that profitable, low leverage, high cash holding, stronger shareholder protection firms, and those firms with state ownership prior to listing and undertaking subsequent equity offerings are more likely to pay dividends and cash dividends, in particular. In addition, we find that growing firms with high levels of retained earnings and investing more in fixed assets pay stock dividends. Firms appear to cater to investor demands in setting dividend policy; hence firms with a large proportion of non-tradable shares are more likely to pay cash dividends. Consistent with the use of stock dividends to attract the attention of analysts, we find that the announcement of a stock dividend initiation is associated with significant positive market reactions and increased analyst following.

We examine whether and how variations in the level of market development across regions in China affect controlling shareholders decisions to participate in Chinese public companies rights offerings. We find significant positive relations between measures of market development and controlling shareholders participation, as well as evidence that controlling shareholders participation benefits minority shareholders. These results are consistent with the hypothesis that better market development in an economy can provide de facto protection for minority shareholders by creat- ing implicit incentives for controlling shareholders to act in the interests of minority shareholders. Because our study holds constant minority shareholders de jure rights, these results suggest a reputation channel exists for macro-level institutions to affect firm-level governance that is distinct from the direct channel of explicitly granting de jure rights to minority shareholders.

We develop a model of a financial institution to study how shareholder—debt holder conflicts interact with prudential capital regulation and accounting measurement rules. Our analysis highlights the result that, for highly leveraged financial institutions—when prudential regulation play an important role—debt overhang and asset substitution inefficiencies work in opposing directions. We demonstrate that, relative to the “historical cost” regime in which assets and liabilities on an institution’s balance sheet are measured at their origination values, fair value could alleviate the inefficiencies arising from asset substitution, but exacerbate those arising from underinvestment due to debt overhang. The optimal choices of accounting regime and prudential solvency constraint balance the conflicts between shareholders and debt holders. Under fair value accounting, the optimal solvency constraint declines with the institution’s marginal cost of investment in project quality and the excess cost of equity capital relative to debt capital. Fair value accounting dominates historical cost accounting provided the solvency constraints in the respective regimes take their optimal values. If the solvency constraints are sub-optimally chosen, however, historical cost accounting could dominate fair value accounting.

According to “whether the product of a company contacts with the consumers directly or not”, we divide all listed companies of Chinese transportation equipment manufacturing industry into two kinds. Then we calculate corporate social responsibility（CSR） score by using content analysis method to evaluate corporate annual report. We find out companies, whose products have a direct contact with consumers, tend to perform more social responsibility. When we use ROA to evaluate corporate financial performance and regress ROA on CSR score and other control variables, we find that the companies mentioned above have relatively remarkable better financial performance. After decomposing ROA by sales revenue, further test proved that CSR influences CFP positively by increasing sales revenue of a company. It ultimately prove that consumers do care about companies to be social responsible.

This is a contribution to a conference volume for the 2010 National University of Singapore Symposium on ―Law and Development in China - The Legal Dimension of China’s Development Model.‖ The paper aims to shed some light on the way forward for the Chinese securities markets. It examines the desirability of financial markets for broader economic development, and presents the national market system implemented by the US and the norms in the EU’s MiFID that promote competition among and integration of securities markets and alternative trading venues. The paper assesses the current state of the Chinese securities markets, where according to law trading is concentrated on traditional exchanges, against the backdrop of the rapidly evolving (disintegrating) US and EU markets. Clearly, China will be able to learn much from the experiences of the US and EU, but the route that China will take for further evolution of its national market for securities can at this point be neither predicted nor projected.

Using the introduction of margin trading in China, this study examines the effects of margin trading on the informativeness of trades and stock market liquidity. Using the methodology of Hasbrouck (1991 and 1993), I find that allowing investors to trade on margin leads to more informed trading. This increase in informed trading is mirrored by an increase in the adverse selection component of the bid-ask spread and a decrease in the relative weight placed on public information in trading decision. The discussed findings are more pronounced for stocks with relatively high levels of margin trading. Overall, the findings in the paper suggest that margin trading may lead to more information-based trading and lower levels of stock market liquidity.

China?s recent removal of short selling and margin trading bans on selected stocks enables testing of the relative effect of margin trading and short selling. We find the prices of the shortable stocks decrease, on average, relative to peer A-shares and cross-listed H-shares, suggesting that short selling dominates margin trading effects. However, there is negligible short sales activity and contrary to the regulators? intention, and recent empirical evidence, liquidity declines and bid-ask spreads increase in these shortable stocks. Consistent with Ausubel (1990), together these results imply uninformed-investors avoid these stocks to reduce the risk of trading with informed-investors.

The 2005 split-share reform in China mandated the conversion of previously non-tradable shares into tradable status. The reform was swift and changed investors?ability to trade corporate equities in a US$400 billion market. This paper examines the e¤ects of the 2005 stock market reform on ?rms? real and ?nancial outcomes. It does so exploiting multiple institutional features of the conversion program. We ?rst examine a small pilot trial conducted at the beginning of the reform, which we are able to replicate using the same data and selection criteria that was used by regulators. We also take advantage of the staggered nature of the larger conversion schedule, whereby over a thousand ?rms converted their outstanding shares at di¤erent times within a pre-speci?ed window. These various wrinkles produce counterfactuals against which to gauge the economic e¤ects of secondary equity trading. Using a time-varying treatment estimation approach, we identify increases in corporate pro?tability, investment, value, and productivity as pre-existing shares were allowed to trade in or- ganized exchanges. We also identify changes in ?rms?propensity to issue new shares, pay dividends, and engage in merger deals. Our ?ndings provide new insights on the role of stock markets in shaping corporate behavior and on the impact of regulation on economic growth.

Statistics reporting litigated cases of fraud on an exchange-by-exchange basis are not readily available to investors. This paper introduces data from three countries with multiple exchanges with different listing standards, – Canada, the United Kingdom and the United States – to show litigated cases of fraud significantly vary by country, and the different exchanges within the country. Comparisons are also made to Brazil, China and Germany to assess out-ofsample inferences. The data examined suggest listing standards have a strong influence over the nature of observed fraud by securities commissions within the United States; by contrast, outside the United States there appears to be a comparative lack of enforcement. The data also suggest policy implications for the ways in which fraud ought to be reported to improve investor knowledge, market transparency and market quality.

This paper documents different timeliness in disseminating sanction and enforcement information (SEI) by two types of regulatory agencies in China and the different consequences that flow from them. The China Securities Regulatory Commission (CSRC) does not make timely public disclosures of SEI and, instead, leave it up to the firms to make a public announcement under their general obligation to disclose price-sensitive information. The firms therefore have considerable discretion in deciding whether and when to disclose SEI. In contrast, the stock exchanges in Shenzhen and Shanghai make SEI public promptly through the media and the exchanges’ official websites. Using Chinese SEI data during the period 1999 to 2005, we find that the CSRC approach is associated with significantly lagged corporate disclosure (compared with the timely stock exchange approach) and a significantly negative (but delayed) stock price reaction. We also show that the sanctioned firm may take advantage of the less timely CSRC approach to delay its disclosure of SEI for opportunistic reasons such as completing material transactions. We conclude that the CSRC should make immediate public announcements of SEI as these contain price-sensitive information. Furthermore, the immediate dissemination of SEI will bring the CSRC into line with the disclosure practices of China’s stock exchanges and international market regulators.