We evaluate the efficacy of price discovery in the round-the-clock U.S. Treasury market. Using a comprehensive intraday database, we explore informational role of trades over the 24-hour day. We find that information asymmetry is generally highest in the preopen period and lowest in the postclose period. Information asymmetry in the overnight period is comparable to that in the regular trading period. However, on days with macroeconomic announcements, information asymmetry peaks shortly after the news release at 8:30. Moreover, information asymmetry is higher on Monday morning and higher immediately before than after the open of U.S. Treasury futures trading. Although volume is low after hours and trading cost is relatively high, overnight trading generates significant price discovery. Results suggest that overnight trading activity is an important part of the Treasury price discovery process.

Using a sample of listed subsidiaries and their parent companies in China, I study top executive compensation and turnover and their relationship to firm performance in business groups in China. The empirical results support the hypothesis that the pay-performance sensitivity of managerial compensation (CEO turnover) in a listed firm is positively (negatively) related to the accounting performance of its parent company. Using related party transactions to proxy for the correlation between the two firms, I find that management compensation in a listed firm is related to the performance of its parent company if related party transactions exist between them. In addition, I find a stronger relationship between the compensation (turnover) in a listed subsidiary and the performance of its parent company when the percentage of common directors and managers are less than median level. This result indicates that the incentive system can be used to align the interests of managers in the listed firm with that of its parent company when the information asymmetry is high and the parent company can not effectively monitor. Using brand name as a proxy for reputation, I find that management compensation and CEO turnover in group firms are more likely to be sensitive to the performance measures in their parent companies if both use the same brand name.

Lin, Cai, and Li (1998) argue that under information asymmetry, SOE managers can use state-imposed policy burdens as excuses of poor performance and make the State accountable for it. The argument implies that turnover-performance sensitivity of SOEs decreases as policy burdens increase and that such impact depends on the extent of information asymmetry. Accordingly, this paper empirically explores how policy burdens affect top management turnover of Chinese listed firms between 2000 and 2005. We find that high surplus labor significantly reduces the sensitivity of chairman turnover to performance for state-controlled firms, while private firms do not exhibit such a pattern. Furthermore, our results show that high surplus labor reduces the turnover-performance sensitivity more for firms with greater information asymmetry. Overall, we find strong evidence supporting the implications of Lin, Cai, and Li (1998). In addition, we find that chairman turnover of Chinese firms is sensitive to different performance measures for state-controlled firms and private firms.

This paper examines the association between ownership structure and the extent of Web disclosure of 1056 listed companies of differential privatization stage in China. Literature suggests that state controlled economies are expected to have restricted forms of information disclosure and blockholder’s equity can reduce the needs for information disclosure. Our results show that state ownership will curtail the extent of Web disclosure in the post-privatization stage and private block shareholding is positively related to Web disclosure for low privatization firms, but not for highly privatized companies. The findings indicate that state and private blockholders have diverse Web reporting policies during ownership evolution and information asymmetry may exist in post-privatization stage. The results suggest that reinforcement of the institutional environment and continuous scrutiny of a company’s reporting practices in the post-privatization stage should be emphasized.

Financing of and investing in R&D are prone to risks of appropriation by competitors, information asymmetry, and agency problems. Although legal protection of intellectual property (IP) rights at the national level is necessary to encourage investing in R&D, we show that the effective enforcement at the local level is also critical. We concentrate on the impact of provincial level IP rights enforcement on the financing of and investing in R&D, using a unique and rich sample of high technology firms. These firms are located in twenty-eight provinces/districts throughout China. The enforcement of IP rights differs at the provincial level, although the firms are under the same set of national and international laws. Controlling for provincial institutional factors such as economic development, banking system development, legal system performance, and local government corruption, we find that the enforcement of IP rights positively affects firms' ability to acquire new external debt (including formal and informal financing) and external equity. The firms in provinces with better enforcement of IP rights invest more funding in R&D, generate more patents, and produce more sales from new products. We also find better enforcement of IP rights helps mitigate the problem of appropriation by local partners in foreign and ethnic joint ventures. To deal with the problems of reverse causality and omitted common variables, we adopt the instrumental variable method and the approach used by Rajan and Zingales (1998), and the impact of IP rights enforcement is robust to different specifications. Our evidence confirms that enforcement of IP rights matters even in China. Furthermore, our results support that the enforcement of IP rights affects the growth in the economy via the channels of financing of and investing in R&D.

We examine the independent and dominating effects of the liquidity level, the information asymmetry and the divergence of opinion on asset returns in an important emerging market, Chinese stock market. We use the variable ILLIQ from Amihud (2002) to proxy for the liquidity level, the variable PIN from Easley, Hvidkjaer, and O'Hara (2002) to proxy for the information asymmetry and the variable OBS based on Nas and Skjeltorp (2006) to proxy for the divergence of opinion. We find striking evidence that stocks with a higher liquidity level, or a lower information asymmetry, or a higher divergence of opinion, experience significantly lower excess returns. More importantly, the explanatory power of the liquidity level on asset returns may only reflect those from the information asymmetry and the divergence of opinion. Moreover, we find no evidence on the dominating effect between the information asymmetry and the divergence of opinion when examining their impact on asset returns.

The US dollar has been volatile and falling again and again in recent decades as well as recent years, and for many observers, it is going to be broken sooner or later. The central importance of the dollar is due to the fact that it is not just a currency for the US. Over half of all dollar bills in circulation are held outside of the US borders, and almost half of the US Treasury bonds are held as reserves by foreign central banks. The US dollar is supposed to be the anchor that stabilizes the global currency market. Instead, today it is a major source of instability. In the back ground, the US fiscal deficits have been running high again under Bush administration, once up to almost 3% of US GDP. And current account deficit is set to about 7% in 2005 and more volatility is widely expected. The situation is very challenging for the central banks of Japan, China, Korea, Taiwan and Singapore which collectively hold about US$2.8 trillion worth of US Treasury bonds as part of their reserves. The moment that they reduce their purchases, the value of the dollar slips. Yet, the more they buy, the more they are exposed to a potential free fall of the US dollar. China has been blamed, not only by US congressmen who are understandably not very familiar with either the complicated currency issues or the domestic politics in any other country, but also many economists or business strategists. It was said that it was all because RMB did not reevaluate, as the source of this "global imbalance" and currency instability. How much revaluation of RMB would remove the US deficits of $700 billions, or at least the US-China trade deficits $200 billions (including Hong Kong)? 500% or 1000%? Of cause no body asked for that kind of magnitude now. Normally smart people say 30-50%, with the unsaid intention to blame-then-suggest again another 30-50% after some initial moves, then the third, the fourth. This seems not really new phenomena at all. It has been all so familiar before and since the Nixon shock in early 70s', and in 80s' when there was the Plaza Accord. The convenient targets to blame were the gold standard, the Dutch Mark, the Japanese Yen. Now it is turn for Chinese reminbi. So the question is what are the real causes of the global imbalance and currency instability? In this short paper, we first take a look at what is really going on with the Chinese economy and trade balance, and then try to identify sources of the current imbalance , and then, as a concluding remark, think again the possibilities to reform the global currency system.

We examine the dynamic relation between return and volume of individual stocks in Russia and other emerging markets. In a simple model in which investors trade to share risk or speculate on private information, Llorente, Michaely, Saar, and Wang (2001) show that returns generated by risk-sharing trades tend to reverse themselves while returns generated by private information trades tend to continue themselves. We apply this theoretical framework to analyze the relation between daily volume and first-order return autocorrelation for individual stocks traded in Russia and other emerging markets. We find strong evidence of return continuation following high volume days, suggesting the presence of private information trading in emerging markets. Using corporate announcement data from Russia, we discover that the private information trading is especially strong around major corporate event dates. In addition, we find stocks in countries that enforce insider-trading law and provide better investor protection exhibit less private information trading. These results suggest a possible measure of “information asymmetry” for ranking emerging market stocks.

Until recently, trading in Chinese markets was fully segmented―B-shares for foreign investors and A-shares for domestic investors. The fact that B-shares trade at a discount is a puzzle, since comparable markets overwhelmingly show premiums that are easily explained by international asset pricing models. The two most common explanations for this puzzle are that domestic investors are (i) better-informed and (ii) face lower costs of liquidity. The evidence, however, is inconclusive and relies on poor proxies. Based on as of yet unused trade and quote data, we explore direct measures of both information and liquidity using a spread decomposition model. We reject the liquidity-based explanation and find considerable support for betterinformed domestic investors. This creates an empirical basis for recent equilibrium models that rely on asymmetric information to explain China’s strong growth in spite of poor property rights.

摘要：本文主要研究了2002－03年1月间深成指调整的价格效应和成交量效应，结果表明加入(剔除)股票在调整日有显著的正(负)异常报酬，成交量上升。加入股票的价格经历了永久的上升，剔除股票的价格则回复到了先前的水平。但在1997、1999年的两次调整中并没有观察到类似的现象，这可能与我国投资基金迅速发展有关，股指调整导致基金增持加入股票和减持剔除股票。另外，加入(剔除)股票在调整日后成交量显著的下降(上升)。上述现象可能的原因是成份股和非成份股有无相近替代品的不对称性。 Changes in the Shenzhen composition index Abstract: This study mainly investigates the price and volume effects of changes in the Shenzhen composition index from 2002 to January 2003.On average,Price increases significantly in the event day for stock added with partial post-event reversal; while price decreases significantly in the event day with full post-event reversal for stock deleted. Trading volume both increases significantly in the event day.but we haven’t see the same phenomena in the index changes of 1997 and 1999 ,it maybe due to the development of investment fund. Furthermore,Long-term trading volume drops(rises) significantly for stocks added(deleted). These evidences maybe due to the asymmetry between ineex stocks and non-index stocks that have substitute.