An asset manager trades o? the bene?ts of higher leverage against the costs of adjusting leverage in order to mitigate expected insolvency losses. We explicitly calculate optimal dynamic incentive-compatible leverage policies in simple versions of this problem.

This article provides a survey on term structure models designed for pricing fixed income securities and their derivatives

Using the daily data of Chinese 7-day repo rates from January 1, 1997 to December 31, 2008, this paper tests a variety of popular spot rate models, including single-factor diffusion, GARCH, Markov regime-switching and jump-diffusion models. We document that Chinese spot rates are subject to both market forces and administrative forces. GARCH, regime-switching and jump-diffusion models capture some important features of the dynamics of Chinese spot rates, but all models under study are overwhelmingly rejected. We further explore possible sources of model misspecification using diagnostic tests.

The issues concerning the governance mechanism of board independence and its determinants remain controversial in the field of corporate finance. Particularly, the association between the properties of family power and board independence is yet comprehensively discussed and is crucial important for the financial market in Europe and Asia. We set out in our study to identify the determinants of board independence with the sample of listed firms in Taiwan from 2002 to 2006 based on the notions that independent boards play an important role to enhance corporate governance mechanism. The argument that the higher involvement of family power in the board room is harmful to the board independence is expected. The evidence shows that firms with larger size and greater opportunities of managers to consume private benefits tend to hire more independent directors. Besides, higher growth opportunities, as well as greater outsider influence provide the same positive effect on appointing independent directors. Regarding to the most important evidence, firms with greater proportion of family members on the directorship reduce the tendency to appoint more independent directors; moreover, the higher percentage of shares owned by family members provides the positive effect on board independence. However, firm age is found to have a contradictory effect to that reported in the prior studies and firms which are more seasoned do not necessarily tend to hire more independent directors. Furthermore, we also compare board structures across different firm sizes and find that board composition in small and large firms is extremely divergent. We tend to contribute to the literatures with the evidence that firms with greater influence of power of family directorship on the board meeting are burdened with severe problem of less independence of the board.

We seek to exam the government’s role on post-privatization performance in China. Using a sample of 514 firms privatized for the period from 1996 to 2002, we find evidence that the government’s role could be both positive and negative. On the one hand, firms with politically connected CEOs have significant higher return on sales (ROS) than firms with non-politically connected CEOs both before and after listing; and CEO’s political connection has a positive effect on firms with debt burden. Also there is a significantly positive relationship between the proportion of shares owned by Government Agencies and Tobin’s Q. On the other hand, firms with politically connected CEOs underperformance firms with non-politically connected CEOs in terms of ROS change after listing, and, a significantly negative relationship is found between the proportion of shares owned by Government Agencies and postprivatization ROS.

The B-share markets in China, originally for foreign investors only, were opened to local investors in 2001. This reform was expected to improve the information efficiency in B-share markets, since local investors were supposed to be better informed than foreign investors. Meanwhile, we find that, after opening to local investors, B-share price synchronicity increases, and firm-specific return variation (idiosyncratic risk) decreases. Opening B-share markets to local investors fails to improve or even deteriorates the information capitalization of B-share prices. The findings may help us understand Chinese government’s policy making. For instance, in August 2007, Chinese government announced that Chinese citizens would be allowed in public to buy and sell Hong Kong stocks through special accounts with domestic commercial banks. But after hearing opinions from different entities, Chinese government decides to infinitely postpone this policy.

In this paper, due to the important influence of corporate governance on corporate financial behaviors and from an angle of corporate governance, we develop six hypotheses based on overseas and home relevant researches and data of Chinese listed companies from 1999 to 2003, and then we do hypotheses testes with regression models to examine the impact of share percent of the top 5 shareholders and counterbalance mechanism among blockholders on cash dividend distribution of listed companies, and to explore influence and counterbalance mechanisms in tunneling of cash dividend which derived from the special phenomena of “same shares same rights but different price”. We find that share percent of top 5 shareholders, control ability (or combined control ability) and balance degree (or combined balance degree) of blockholders have important influence on tunneling of cash dividend distribution. Lastly, the paper proposes five suggestions to restrict controlling shareholders to enlist private interests from tunneling of cash dividend and to protect rights and interests of small and medium shareholders.

The paper, based on the samples of 2003, makes empirical analyses of China listed companies from the perspective of Chinese Corporate Governance Index ( ) and its six dimensions: the index of controlling shareholders’ behaviors, board governance index, top management governance index, information disclosure index, stakeholders’ governance index, supervisors committee governance index, and find that is positively associated with return on assets (ROA), net assets per share (NAPS), earnings per share (EPS), operating cash flow per share (OCFPS), total assets turnover (TAV), rate of total assets growth (ITA) and Z-score. These indicate that good corporate governance mechanisms improve profitability, stock expansion ability, operating efficiency, growth and development potential, as well as financial flexibility and safety of listed companies. Corporate governance mechanisms of controlling shareholders, board of directors, top management, information disclosure, stakeholders and supervisors committee are largely responsible for decision-making and decision-execution mechanisms, and furthermore, they have direct and profound effects on the performance and value of listed companies.

In this paper, the relationship between firm performance’s combinations and differences as well as the timeliness of actual and scheduled third-quarter report disclosures is examined by regressing on data extracted from the semi-annual and the third-quarter reports of Chinese listed companies between 2003 and 2004. After controlling for the possible impact of semi-annual report disclosures, stock exchanges, firm size, ratios of tradable A-shares and B-shares, and so on, the results indicate that managers of listed companies may have the incentive to manipulate information in the actual and scheduled third-quarter report disclosures; the rule of “releasing good news earlier than bad news” is thus not strictly complied with. This paper further indicates that a firm’s performance, its combinations and differences, have a significant impact on the timeliness of disclosures of these two reports. I therefore suggest minimising the probability of information manipulation of listed companies, boosting investor relation management to safeguard the rights of small and medium shareholders, and enhancing the timeliness of information disclosures of Chinese listed companies.

Businesses often face the problem of providing incentives for agents to work effectively together on projects that develop over time. The agents' costly and unobservable effort jointly affects the survival of the project and thus the expected value of its cash now. A key feature of many contracting problems with multiple agents is that the agents exert effort at different times: some at the outset and some over time. The optimal timing of compensation reflects the timing of effort with payment for up-front effort preceding compensation for continuous effort. Deferring payment for agents exerting effort over time improves their incentives without impairing incentives for the up-front effort because this effort is sunk once the project is set up. The exact pattern of compensation between the agents with continuous effort depends on the relative severity of their moral hazard problems. In a special case where moral hazards are equally severe, the agents equally split the cash flow once it becomes available. This study suggests an approach to understanding a broad set of contracting problems in economics and finance. It rationalizes business conventions such as deferred compensation for top executives, the 50:50 split between law firm partners, and profit shares of influential directors (or lead actors) and residual claims of producers in the movie industry. Furthermore, the model predicts business failures such as the crisis in the mortgage industry due to the lack of characteristics suggested in the optimal contract.