We study the impact of an urban land titling program on firm investment in Shenzhen, China. We find that this program increased the investment rate for titling firms, but this positive effect only holds for politically connected firms. Further analysis suggests that the titling effect is more pronounced for those titling firms associated with greater expropriation risk. During program implementation, the connected titling firms increased their investment perhaps because, as observed, they experienced fewer disputes than non-connected titling firms.

ABSTRACT We study voluntary cost disclosure by duopoly firms when they can invest in a cost-reduction technology, i.e., when their private cost is endogenously determined. We find that, contrary to most of the literature, firms disclose their endogenous cost information regardless of the type of competition. The underlying mechanisms and welfare implications, however, are different. Under Bertrand competition, cost disclosure helps a firm avoid aggressive investment in cost reduction to coordinate actions to the mutual advantage of the duopoly firms. Under Cournot competition, disclosing cost information enables a firm to show a hardened stance toward the competing firm. Although firms gain from their disclosure decisions under Bertrand competition, their disclosure decisions under Cournot competition place them in a prisoner’s dilemma, as both firms would be better off if they chose not to disclose their information. Consequently, consumers may lose under Bertrand competition but gain under Cournot competition. JEL Classifications: L13; M41.

Dual holders, financial institutions that simultaneously hold the debt and equity claims of the same firms, increase corporate tax avoidance. The positive effect is more pronounced in firms with greater ex-ante risk-taking managerial incentives and higher short-term investor ownership. We also find that tax avoidance is associated with a lower cost of debt in the presence of dual holders. We suggest that after-tax awards are a mechanism through which dual holders influence corporate tax strategies. The evidence demonstrates that dual holding increases tax avoidance through mitigating shareholder–creditor conflicts. Our results are robust to endogeneity concerns and alternative tax avoidance measures.

We study how firms build relations with local governments in emerging markets without established rules of political lobbying. We document that following a turnover of the Party Secretary or mayor of a city in China, firms (especially privately owned enterprises, POEs hereafter) headquartered in that city significantly increase their “perk spending,” for example, expenses for travel and entertainment among others. Both the instrumental-variable-based results and heterogeneity analysis are consistent with the interpretation that the perk spending is used to build relations with local governments. In addition, we find that local political turnover in a city tends to be followed by changes of the Chairmen or the CEOs of state-owned enterprises that are controlled by the local government. We also discuss and rule out several alternative explanations for the above findings.