We conduct a large-scale, nondeceptive field experiment to elicit preferences for government participation in China's venture capital and private equity market. Our main result is that the average firm dislikes investors with government ties. We show that such dislike is not present with government-owned firms and that this dislike is highest with best-performing firms. Additional results and surveys suggest that political interference in decision-making is the leading reason why government investors are unattractive to private firms. Overall, our findings point to the limits of a model of “state capitalism” that strongly relies on the complementarity between private firms and government capital to drive high-growth entrepreneurship and innovation.

We assess the potential impact for non-high-income countries (NHICs) of linking bank capital asset requirements (CARs) to private sector ratings–as contemplated by the new Basel proposal. Specifically, we show that linking bank CARs to external ratings would have a series of undesirable effects for NHICs. First, since ratings are by far less widespread for banks and corporations in NHICs, bank CARs would be practically insensitive to improvements in the quality of assets, widening the gap between banks of equal financial strength located in higher and lower income countries. Second, bank and corporate ratings in NHICs (as opposed to their homologues in high-income countries) are strongly linked to their sovereign ratings. This would expose bank capital requirements in NHICs to the same “pro-cyclical” swings, which have characterized sovereign rating revision in the recent crisis episodes. We conclude that linking bank CARs to private sector ratings would worsen the availability and cost of credit to NHICs – with potential negative effects on the level of economic activity – and suggest that a reassessment of the Basel proposal may help to avoid such undesired consequences.

This study examines changes in SEC enforcement and firm cooperation after the SEC introduced its new cooperation program in 2010. While previous research shows that the SEC penalized cooperative firms prior to 2010, our results suggest that after that year, it rewarded cooperation, especially good faith actions. We also find that after 2010, the SEC increased mentions of cooperation in public speeches and publicized more details about firm cooperative activities in AAERs. Finally, we find some evidence that misconduct firms increased good faith cooperation after the SEC revised its cooperation program in 2010. Our findings suggest that having a more explicit leniency program improves its effectiveness.

This paper employs unique data on export transactions and corporate tax returns of UK multinational firms and finds that firms manipulate their transfer prices to shift profits to lower-taxed destinations. It shows that the 2009 tax reform in the United Kingdom, which changed the taxation of corporate profits from a worldwide to a territorial system, led to a substantial increase in transfer mispricing. It also provides evidence for a trade creation effect of transfer mispricing and estimates substantial transfer mispricing in non-tax-haven countries with low- to medium-level corporate tax rates, and in R&D intensive firms.

We investigate a controversial and hotly debated issue of whether low stock return synchronicity (SRS) means more or less informative stock prices using three exogenous events: an anti-corruption campaign launched by the Chinese Government, a stock market crash in China, and firms’ public exposure of fraud. Investigating the changes in SRS associated with these events helps mitigate endogenous issues since these events have distinctive relationships with companies’ stock price informativeness. Our results show that firms’ SRS declines significantly after the anti-corruption campaign aiming to improve corporate governance and after firms’ public exposure of fraud. The SRS is substantially higher during and after the stock market crises. Firms located in more developed regions have lower SRS than those in less developed regions. These results consistently indicate an inverse relationship between the SRS and stock price informativeness.

This paper studies the differences in the announcement effects of seasoned equity offerings (SEOs) of commercial banks and non-banks, and explores the influence of bank regulation and the financial crisis on such differences. We find that abnormal stock returns on SEO announcements for US commercial banks are significantly higher than those of non-banks, consistent with the hypothesis that bank regulations reduce the likelihood that bank SEOs signal overpriced equity. The propensity score matching-based difference-in-difference analysis indicates that the differences in stock returns between banks and non-banks decreased during the 2007–2009 financial crisis period and increased after the passage of the Dodd-Frank Act in 2010.

Using national elections as sources of exogenous variation in uncertainty, we show that political uncertainty affects the volume and outcome of cross-border acquisitions. When a country is about to hold a national election, this deters foreign firms’ inbound acquisitions, especially when the host country poses greater expropriation risk. An upcoming home country election encourages firms to conduct outbound cross-border acquisitions, especially to target countries with free-trade agreements, military allies, or countries with better governance. At transaction level, we show that announcement returns to cross-border deals incorporate political uncertainty considerations. Overall, these results shed light on the effects of political uncertainty through the cross-border acquisition channel.

How does common ownership affect innovation? We study this question using project-level data on pharmaceutical startups and their venture capital (VC) investors. We find that common ownership leads VCs to hold back projects, withhold funding, and redirect innovation at lagging startups. Effects are stronger where R&D costs are larger, consistent with common owners aiming to cut duplicate costs. Effects are also stronger where technological similarity is greater and preexisting competition is lower, consistent with common owners seeking market power for their surviving projects. Overall, common VC ownership appears to generate social benefits , via improved innovation efficiency, but also social costs.