We examine how changes in property rights security impact firm capital structure decisions by exploiting a quasi-natural experiment, specifically, the implementation of China's Property Rights Law in 2007 (the Law). Using a large dataset of non-listed firms and a difference-in-differences (DID) design, we examine the Law's cross-sectional heterogeneous effects on firm leverage. We find that financially constrained firms exhibit a significant increase in leverage relative to unconstrained firms after the Law's implementation. Our results are robust to three alternative measures of financial constraint: asset tangibility, ownership structure, and firm size. This finding is consistent with the financial constraint hypothesis that states that lenders are willing to extend more credit to constrained firms given that the Law strengthens creditor rights. Overall, we find that the Law has had a significant impact on firm leverage decisions and that it is particularly important to financially constrained unlisted firms.

This paper examines the effect of board gender diversity on firm performance in China's listed firms from 1999 to 2011. We document a positive and significant relation between board gender diversity and firm performance. Female executive directors have a stronger positive effect on firm performance than female independent directors, indicating that the executive effect outweighs the monitoring effect. Moreover, boards with three or more female directors have a stronger impact on firm performance than boards with two or fewer female directors, consistent with the critical mass theory. Finally, we find that the impact of female directors on firm performance is significant in legal person-controlled firms but insignificant in state-controlled firms. This paper sheds new light on China's boardroom dynamics. As governments increasingly contemplate board gender diversity policies, our study offers useful empirical guidance to Chinese regulators on the issue.

We provide the first comprehensive and robust evidence on the relationship between board independence and firm performance in China. We find that independent directors have an overall positive effect on firm operating performance in China. Our findings are robust to a battery of tests, including endogeneity checks using instrumental variables, the dynamic generalized method of moments estimator, and the difference-in-differences method. The positive relationship between board independence and firm performance is stronger in government-controlled firms and in firms with lower information acquisition costs. We also document that Chinese independent directors play an important role in constraining insider self-dealing and improving investment efficiency.

In this study, we employ the World Bank Enterprise Survey (WBES) data collected in 2002, 2005, and 2009 for 21499 firms from 27 Eastern European and Central Asian countries to examine firm-level growth constraints faced by privatized firms versus those faced by the originally (de novo) private firms. We find that the de novo firms experience significantly higher financial, corruption, and legal obstacles than the privatized firms. We further document that, even though faced with more obstacles in the business environment, the de novo firms outperform the privatized firms. One explanation is that the profit motive of the de novo firms is organic, whereas the profit motive of the privatized firms is acquired. The organic profit motive may be powerful enough for the de novo firms to overcome more difficulties in the business environment and excel. Our study is the first in the privatization literature to go beyond performance comparisons and examine firm-level growth constraints.

This paper examines the impact of financial reporting practices on corruption obstacles for about 150,000 firms across 143 mostly developing countries from 2006 to 2019. We document a strong positive relationship between the production of audited financial statements (AFS) and corruption obstacles (CO) faced by the firm. We argue that in a corrupt business environment, rent-seeking bureaucrats use the credible financial information to optimize their bribe demands. Our baseline results remain robust after addressing endogeneity concerns. We further show that country-level institutional quality has a moderating effect on the AFS-CO relation. The evidence from surveying entrepreneurs also provides qualitative support for our empirical findings. Our study sheds light on a previously under-explored adverse consequence of transparency - exposure to corrupt bureaucrats where institutions are weak.