We examine the effects of controlling shareholder stock pledge on corporate acquisition decisions and associated performance. Consistent with our aggravated expropriation hypothesis, we find that pledging firms in China initiate more takeovers, but these acquisitions conducted by pledging firms experience lower announcement returns. We adopt the difference in differences and the instrumental variable approaches to establish causality. Channel tests further reveal that pledging acquirers overpay for the deals and are more likely to be involved in related party transactions. Cross-sectionally, we find that the relations between the share pledge and corporate acquisitiveness and returns are more pronounced for non-SOEs and firms with high-level excess cash. Lastly, we document that pledging acquirers underperform in the long-run in terms of lower ROAs and a greater likelihood of goodwill impairment. Overall, our findings indicate that controlling shareholders increasingly expropriate minority shareholders through self-serving corporate takeovers after the stock pledge.

We examine the effects of controlling shareholder stock pledge on corporate acquisition decisions and associated performance. Consistent with our aggravated expropriation hypothesis, we find that pledging firms in China initiate more takeovers, but these acquisitions conducted by pledging firms experience lower announcement returns. We adopt the difference in differences and the instrumental variable approaches to establish causality. Channel tests further reveal that pledging acquirers overpay for the deals and are more likely to be involved in related party transactions. Cross-sectionally, we find that the relations between the share pledge and corporate acquisitiveness and returns are more pronounced for non-SOEs and firms with high-level excess cash. Lastly, we document that pledging acquirers underperform in the long-run in terms of lower ROAs and a greater likelihood of goodwill impairment. Overall, our findings indicate that controlling shareholders increasingly expropriate minority shareholders through self-serving corporate takeovers after the stock pledge.

Using Chinese data, we investigate the impact of the China Semi-Mandatory Payout Policy that sets an explicit requirement that firms need to distribute at least 20% of their average annual net profits as cash/stock dividends accumulatively in three consecutive years before refinancing via seasoned equity offerings. Firms with the payout level below (above) the cutoff imposed by the Semi-Mandatory Payout Policy are regarded as Treated (Control) group. We find that Treated firms are more likely to cut investment, especially long-term innovation investment, and perform poorly compared to Control group due to lack of money. Treated firms also tend to use earnings management assisting in financing through the debt market as an alternative way to raise money. The negative impact of cutting investment caused by the Semi-Mandatory Payout Policy is more pronounced for firms suffering from severe financial constraints, firms having good corporate governance, and firms located in less financial development areas. We attribute findings to the difficulty of accessing capital that is implicitly increased the China Semi-Mandatory Payout Policy, which alters firms’ behavior leading to insufficient investments and destroys firms’ value.

This study investigates the relationship between gender diversity on the board and dividend payouts in China using a large sample over the period 2003–2017. Our results provide robust and strong evidence showing that gender diversity on the board is positively associated with cash payments of dividends. The empirical outcomes confirm that gender diversity on the board facilitates corporate governance and subsequently promotes dividend payouts. We demonstrate that gender diversity on the board has the greatest effect when the board has critical mass participation (three or more female directors) compared with only their token participation. However, independent female directors increase dividend payouts, while female executive directors do not have a significant impact. Furthermore, we extend the literature on the relationship between dividend payments and government ownership by providing evidence that gender diversity has a higher impact on dividend payouts for state-owned enterprises than non-state-owned enterprises. After controlling the endogeneity problems, our findings are reliable and robust.

In this article, we analyse investment preferences of domestic and foreign institutional investors to the management quality of Chinese listed firms. We find that foreign institutional investors hold higher shareholding in firms with greater numbers of executive officers with MBA degrees, having served as vice president or higher prior to joining the firm and sitting on multiple boards. Foreign institutional investors in China also show preference over investee firms with larger board size. However, they pay no attention to whether directors are independent from the firm management and meet often. Domestic institutional investors show preference to all management quality indicators that are associated with foreign institutional ownership. In addition, domestic institutional investors invest more in firms where the executive officers are certified public accountants (CPA) and are longer tenured in their current position. Furthermore, domestic institutional investors pay more attention to corporate governance of investee firms than foreign institutional investors. Finally, we find that domestic institutional investors show a strong preference to firms that have been invested by at least one Qualified Foreign Institutional Investor (QFII), even after controlling for QFII’s preference for management quality. This indicates that the QFIIs’ international reputation has been used by domestic institutional investors as a positive signal for investment opportunities.

This paper surveys how and why the share spilt reform enhance the corporate governance using agency cost as proxy from the perspective of stockholders’ conflict and liquidity increase in the process of share spilt reform respectively. We find that share spilt reform brings significant governance improvement. Besides, we use some governance effect and liquidity theory proposed by Edmans et al. (2011) to testify by which means the share split reform enhance the corporate governance. What is more, we find that the corporations with great difficulty, which represented for severe shareholders’ conflict, in carrying forward the reform tend to have severe governance problems while it was this kind of corporation that benefited most from the reform and formed the main driving force of the realization of the goal of reform. It has some implication on China’s current reform; that is, only when toughest problems have been overcome will the goal of reform be achieved.

The deviation of control right and cash flow right is a common problem of corporate governance in East Asian companies.With Taiwan's listed companies as samples, this paper discusses whether the degree of deviation of control right and cash flow right will affect the company’s earnings distribution policy. The results reveal that, regardless of using stock right or the number of directors to measure the control right, companies of higher degree of deviation of control right and cash flow right have higher proportions of employee bonuses against the shareholder dividends, In this case, the company is more biased in the care of the employees at the expense of the minority shareholders. The company is especially likely to exploit the minority shareholders by controlling the board of directors and paying cash dividends to employees. As investors believe that the controlling shareholders of companies with high degree deviation of control right and cash flow right, and high proportion of employee bonuses are intended to exploit the minority shareholders, such companies have significantly lower declared earnings distribution remuneration compared with companies with low degree of deviation and low employee bonuses.

This study investigates the impact of ultimate government ownership or control on the cost of debt of Chinese listed corporations. We first examine the relative level of cost of debt of corporations under government control compared to corporations under individual or family control. We then explore circumstances under which government control is likely to reduce a corporation’s cost of financing. Our results suggest that the benefits of government control are conditional on firm-specific financial circumstances and internal- and external-corporate governance environment. We find that, on average, government controlled corporations have lower cost of debt but the effect is not homogeneous. Government controlled corporations have lower cost of debt when they are highly financially constrained and have higher risk of being expropriated by controlling shareholders and in provinces where the local government is less effective, but not otherwise.

We study the impact of directors with foreign experience on firms in emerging markets. To establish causality, we use a unique dataset from China and exploit that at different times, Chinese provinces introduced policies to attract highly talented emigrants. These policies led to an exogenous increase in the supply of Chinese individuals with foreign experience in the local labor market and ultimately increased the likelihood that firms in these provinces had directors with foreign experience in comparison to firms with a similarly high demand for these skills elsewhere. We document that hiring directors with foreign experience results in higher firm valuation, productivity, and profitability. Furthermore, corporate governance improves and firms are more likely to make international acquisitions, to export, and to raise funds internationally. These results indicate that the transfer of knowledge to emerging markets occurs not only through foreign investment, but also through labor flows and, in particular, return migration.

We investigate how a firm’s political connections may affect its corporate policies. We propose and test the hypothesis that firms’ political connections enhance investors’ endorsement of managerial decisions, which elevates firm investment and encourages equity issuance and less cash payout. Using a sample of non-state owned Chinese firms, we find strong evidence in support of this hypothesis. Specifically, politically connected firms are less likely to pay dividends and pay less if they pay. The dividend announcement returns are significantly lower in connected firms than in otherwise similar but unconnected firms. Investors prefer firm investments to cash payouts by politically connected firms with high growth opportunities, and tend to value these firms’ investment decisions significantly higher. Finally, connected firms are also more able to tap public equity market for external funds. Our evidence is more consistent with political connections being an investor endorsement device rather than the expropriation device as suggested in the prior literature.