One of the most glaring legacies of 20thcentury Chinese socialism is a sharp and widened divide between China's urban and rural areas. China's widened urban-rural divide arose from a socialist industrialization process, which created a hastened heavy-industrial base at the expense of its rural population. China's vast rural population not only endured a standard of living far below that in the urban sector, they were also denied access to many social welfare benefits and social-mobility opportunities (Martin King Whyte, 1996). This urban-rural gap in social and economic wellbeing, together with a massive reservoir of rural surplus labor and an acute shortage of consumer goods, formed the driving forces for China's change of migration-control policy and for the rapid increase of rural migrants in Chinese cities. Though the exact number of migrants is still hard to ascertain, due to both a lack of consensus in the definition of migrant and the absence of an authoritative national survey, migrants' prominent presence in Chinese cities is hardly disputable. In China's largest cities, for instance, it is often quoted that at least one out of every five persons is a migrant, and most likely a migrant from rural areas. In Shanghai, the number of migrants rose tenfold in one decade: from 0.26 million in 1981 to 2.81 million in 1993. The percentage of local residents who were migrants correspondingly rose from less than 5 percent in the early 1980's to 21.7 percent in 1993 (Changming Sun, 1997). In Beijing, the number of migrants was 3.29 million in 1994, compared to a locally registered population of 10.63 million for the whole municipality, and 6 million for its city districts (Dangsheng Ji et al., 1996 p. 95). In city districts, one out of every three persons in Beijing is a temporary migrant from elsewhere. Most of these recorded migrants are also genuine migrants, not short-term visitors: more than 60 percent had stayed for more than half of a year, and only 17 percent had been in Beijing for less than one month. Three-quarters of all the surveyed migrant population listed business or employment as their purpose of stay (Ji et al., 1996 pp. 96-97). Rural migrants account for over threequarters of all migrants in large Chinese cities. In Shanghai, for instance, a survey in 1995 found that 88.1 percent of all migrants had their place of household registration in the countryside (Wang and Zuo, 1997). Similarly, in Beijing, where one expects to see a higher circulation of urban to urban migrants, close to 80 percent of migrants surveyed in late 1994 were peasants before moving into Beijing (XiuhuaLiu, 1996 p. 112).

The low profitability of European banks relative to their U.S. counterparts has recently raised concerns among policy makers and researchers. This paper attempts to shed light on this issue by using the O’Donnell (2012)decomposition approach. This approach enables us to decompose the relative profitability of European banks into an output–input price index and a total factor productivity index, with the former further decomposed into two price indexes and the latter further into four productivity and efficiency measures. Our results show that European banks’ profitability was not only weak, but also deteriorated over time. Our further analysis shows that the decline in the output–input price index was due to declines in relative lending rate and relative return on securities and an increase in funding costs, while the decline in the productivity index was driven by declines in technical efficiency, scale efficiency, and residual mix efficiency.

This paper proposes and tests the hypothesis that takeover vulnerability contributes to short-term price reversal by motivating investors to trade speculatively and also by making investors demand immediacy in their trades. That is, takeover vulnerability is hypothesized to amplify two channels of short-term price reversal, namely, overreaction and price concession. Using several different measures of takeover vulnerability, we find that takeover vulnerability is positively related to price reversal at daily frequencies. We also find that their positive relation is more pronounced when the stock is illiquid or when it is costly to arbitrage, a finding that is consistent with the notion that the observed price reversal is driven by the earlier price concession or overreaction. While unable to determine the exact relative importance between the two channels, we conduct further analysis showing that each channel plays an independent role. Finally, we find no relation between takeover vulnerability and price reversal at the portfolio level, which means that the price reversal observed in individual stock returns is driven by a firm-specific component.

This paper examines whether new equity may be issued to recapitalize existing assets in financially distressed firms. Using a sample of 3,184 follow-on primary common stock issues offered by Korean publicly traded firms from 2000–2013, we find that more than one-third of the equities are issued to creditors in direct exchange for debt. We also determine that equity issuers are in severe financial distress prior to the issue and are more likely to experience a subsequent change in control. The proceeds are used more to replace existing debt than to increase R&D. These findings suggest that equity issues in emerging markets may be used primarily to recapitalize existing assets through debt restructuring or control transfers rather than to finance growth options.

We use a proprietary trade- and account-level dataset of short sales to investigate the profitability of individual investors short-selling in the Korean stock market from August 1, 2007, to May 31, 2010. Using actual data on short-covering transactions, we find that the average profit is 26,810 Korean won (roughly USD 24.4) per trade per hour, and about 44% of shorted trades are covered within a day. We also find that the profitability of short-selling decreases as the hours-to-cover increases. Account-level analyses show that investors who sell short more firms make higher profits than those who sell short fewer firms and that the profitability of short-selling is persistent. We attribute the profitability to short-sellers’ ability to exploit short-run price reversals and information processing skills.

ABSTRACT This paper studies the value of a firm’s internal information when the firm faces an adverse selection problem arising from unobservable managerial abilities. Although more precise information allows the firm to make ex post more efficient investment decisions, noisier information has an ex ante screening effect that allows the firm to attract on-average better managers. The tradeoff between more effective screening of managers and more informed investment implies a nonmonotonic relationship between firm value and information quality. A marginal improvement in information quality does not necessarily lead to an overall improvement in firm value. JEL Classifications: M41; D82; G34.