We investigate how institutional factors influence the behavior of distressed firms in emerging markets, where bankruptcy laws are often weak and debtors have greater bargaining power in distress. By studying two comprehensive samples of distressed firms in China, we find that local government quality and corporate ownership structure matter considerably to firm performance during distress. Distressed companies facing stronger institutional discipline and with greater private ownership have relatively better operating performance and are more likely to recover. Our results remain robust when we control for the endogeneity of entering distress, use different institutional proxies, and implement various definitions for distress.

Where legal systems and market forces enforce contracts inadequately, vertical integration can circumvent these transaction difficulties. But, such environments often also feature highly interventionist government, and even corruption. Vertical integration might then enhance returns to political rent-seeking aimed at securing and extending market power. China offers a suitable background for empirical examination of these issues because her legal and market institutions are generally weak, but nonetheless exhibit substantial province-level variation. We report that Chinese firms in the 2000's are more vertically integrated than the U.S. firms in the 1990s. We find that vertical integration is more common where legal institutions are weaker and where regional governments are of lower quality or more interventionist. Further, firms led by insiders with political connection are more likely to be vertically integrated. Finally, vertical integration among politically unconnected firms is associated with elevated per capita GDP level and growth, while vertical integration among politically connected firms is unrelated to local economy performance.

We examine the diversification choices and financial performance of companies run by former bureaucrats in China. We find that the ex-bureaucrat led companies are involved in more diversified business lines than other firms managed by professionals without such government backgrounds. While former bureaucrats that manage state-owned enterprises (SOEs) tend to operate in unattractive industries, those who manage private firms do businesses in more profitable, faster-growing, and more related industries. The diversification of private firms is helped by additional borrowing capacity brought in by ex-bureaucrat CEOs, while no such financing effect is found in SOEs. The overall diversification performance associated with bureaucrat CEOs is positive in private firms, but not in SOEs. As manifested by the different diversification strategies and outcomes between private firms and SOEs, the government-linked CEOs facilitate transfers of critical business resources that benefit either owners' or governments' goals.

We document that firms held by mutual fund managers who have public accounting experience earlier in their careers exhibit higher‐quality financial reporting, as evidenced by a lower likelihood of financial statement restatements. Additional evidence shows that fund managers with public accounting experience are more likely to conduct site visits to their portfolio firms and discuss accounting policy–related topics during those visits. Moreover, the restatement likelihood falls after fund managers' site visits, particularly when they raise accounting policy–related issues during their visits. In cross‐sectional results consistent with expectations, we find that the role that fund manager public accounting experience plays is amplified when the firm suffers more severe agency problems, firm information asymmetry is worse, fund managers are more risk averse, fund managers have prior work experience at larger accounting firms, fund managers hold a larger proportion of the firm's shares, or there is coordination among mutual funds. Collectively, our evidence suggests that fund managers with public accounting experience impose stricter external monitoring on their portfolio firms' financial reporting choices.

We find that mutual funds whose managers are socially connected with firm auditors hold more shares of these firms and generate superior portfolio returns. Cross‐sectional results reveal that the relation between social connections and mutual fund stockholdings is more pronounced: when the social connections are stronger, when the auditor is in a better position or has stronger incentives to acquire private information, when the fund manager exercises more power, for small audit firms, for auditors in areas with poor investor protection, and for public firms with greater business opacity or private information. Other results are consistent with fund managers electing to schedule their corporate site visits to coincide with the fieldwork of their connected auditors, as would be expected if fund managers time their visits to meet with these auditors to facilitate information transfer. Additionally, we observe associations between fund trading prior to earnings surprises and audit opinions, and the presence of social connections between fund managers and firm auditors. Finally, we show that mutual funds and firms in which they invest tend to appoint connected auditors and pay them higher fees. Collectively, we document empirical patterns that would arise if socially connected auditors and mutual fund managers share information.

Analyzing a sample of Chinese firms, we find that when companies receive more coverage from FinTech advisory firms, their stock prices move less in tandem with the overall market. This suggests that FinTech coverage improves how accurately stock prices reflect firm-specific information. Our results hold true across multiple testing methods and alternative ways of measuring stock price synchronicity. Further analysis shows that FinTech coverage reduces stock price synchronicity primarily by addressing information gaps between companies and investors. Additionally, greater FinTech coverage improves stock liquidity and lowers the costs of raising debt or equity financing. When examining the topics covered by FinTech firms, we find that diverse coverage topics are linked to lower stock price synchronicity, with discussions on finance, corporate governance, and negative sentiment playing a particularly effective role. Finally, a textual analysis reveals that FinTech coverage includes significantly more firm-specific information than traditional analyst reports.