This paper examines the effect of financial shared service centers (FSSCs) on corporate misconduct. Using a sample of Chinese public companies with hand-collected FSSC data, we find that the adoption of FSSCs is negatively associated with the likelihood and frequency of corporate misconduct. The results hold to a battery of robustness tests. Moreover, we show that the negative association between FSSCs and corporate misconduct is more pronounced in firms that have no management equity ownership, disclose internal control weaknesses, and have more subsidiaries. Additional analyses indicate that FSSCs can help mitigate both disclosure-related and nondisclosure-related misconduct.

The finance–growth nexus has been a central question in understanding the unprecedented success of the Chinese economy. With unique data on all the registered firms in China, we build extensive ownership networks, reflecting firm-to-firm equity investment relationships, and show that thesenetworks have been expanding rapidly since the 2000s, with more than five million firms in at least one network by 2017. Entering a network and increasing network centrality, both globally and locally, are associated with higher firm growth. Such positive network effects tend to be more pronounced for high productivity and privately owned firms. The RMB 4 trillion stimulus, mostly in the form of newly issued bank loans and launched by the Chinese government in November 2008 in response to the global financial crisis, partially ‘crowded out’ the positive network effects. Our analysis suggests that equity ownership networks and bank credit tend to act as substitutes for state-owned enterprises, but as complements for privately owned firms in promoting growth.

This paper studies the determinants of cash holdings and the marginal value of cash in China’s share-issued privatized firms from 1994 – 2007. We first analyze the effects of firm characteristics on corporate cash holdings and find empirical evidence that is largely consistent with U.S. and other international evidence in previous studies. Specifically, we find that smaller, more profitable and high growth firms hold more cash. Debt and net working capital are negatively related to cash holdings, suggesting that debt and working capital may be treated as cash substitutes. We also find that state ownership is negatively related to cash holdings. Firms with high state ownership are less financially constrained in that they have better access to credit in the mostly state-owned bank lending environment. We further examine the cross-sectional variations in the marginal value of corporate cash holdings. We find that the marginal value of cash declines with higher level of cash and higher level of debt, consistent with evidence in U.S. firms. Our most important finding is that the marginal value of cash declines as the equity ownership retained by the state increases. For the average firm in our sample, the value of an additional dollar is $0.94. An additional dollar is valued $0.33-$0.47 higher in firms with zero percent state ownership than in firms with 50 percent or higher state ownership. This difference is both statistically and economically significant.

Numerous studies have focused on the theoretical and empirical aspects of corporate capital structure since the 1960s. As a new branch of capital structure, however, debt maturity structure has not yet received as much attention as the debt-equity choice. We use the existing theories of corporate debt maturity to investigate the potential determinants of debt maturity of the Chinese listed firms. In addition to the traditional estimation methods, the system-GMM technique is used to explicitly control for the endogeneity problem. We find that the size of the firm, asset maturity and liquidity have significant effects in extending the maturity of debt employed by Chinese companies. The amount of collateralized assets and growth opportunities also tend to be important. However, proxies for a firm’s quality and effective tax rate apparently report mixed or unexpected results. Debt market and equity market conditions are also examined in relation to corporate loan maturity. The system-GMM results show that market factors seem to influence debt maturity decisions. Finally, corporate equity ownership structure has also been found to have some impact on debt maturity mix.