This study examines the impact of managerial foreign experience on corporate innovation using manually collected data of Chinese listed companies. We find that managerial foreign experience is positively associated with corporate innovation. This association is robust to a series of robustness checks, including the use of Heckman two-step sample selection model, propensity score matching procedure, and the market reaction to the appointing announcements of managers with foreign experience. Further analyses indicate that senior managers with foreign experience have a more significant impact on corporate innovation than junior managers with foreign experience; both foreign study experience and foreign work experience have important impacts on corporate innovation; managers with foreign experience in private enterprises have more initiatives to innovate than in state-owned enterprises; and managers who gain foreign experience in the United States tend to be more influential and innovative than those who have foreign experience from other countries or regions. Overall, our results suggest that managerial foreign experience matters for corporate innovation in emerging markets.

Using a large sample of hand-collected directors' foreign experience data for Chinese listed companies from 2001 to 2016, we examine the impact of directors with foreign experience on corporate tax avoidance. We find a significantly negative association between directors with foreign experience and tax avoidance, suggesting that these directors can help constrain their firms' tax aggressiveness. The result is robust to Heckman two-stage analysis, instrumental variable approach, inclusion of potential omitted variables, change analysis, and alternative tax avoidance measures. Further analyses reveal that reputation concerns and CSR awareness are potential channels through which returnee directors affect corporate tax avoidance. The negative relation between directors with foreign experience and tax avoidance only holds when directors' foreign experiences are derived from countries or regions with higher investor protections. Non-independent directors with foreign experience have larger impacts on corporate tax avoidance than independent directors, and the effect is more pronounced when directors with foreign experience sit on audit committees. Directors' working and studying experiences both have important impacts on corporate tax avoidance. The result also suggests that the negative relation between directors with foreign experience and tax avoidance is more pronounced in non-state-owned firms. Overall, the findings suggest that directors' foreign experience matters for corporate tax behavior in emerging markets.

We examine the effects of the world's first comply-or-explain dividend regulation in China's Shanghai Stock Exchange, which requires firms to either pay at least 30% of profits as dividends or explain the use of funds. We find that many firms increased their payout ratio to comply, by increasing dividends or decreasing earnings. Firms with high profitability, state ownership, and fewer agency conflicts were more likely to comply. However, complying firms subsequently issued more debt and had a decline in accounting performance and firm valuation. The evidence suggests that the comply-or-explain regulation increased firms' dividends at substantial costs.

This paper examines the link between non-executive employee ownership and the terms and pricing of corporate loans. We find that a one-standard-deviation increase in employee stock ownership is associated with 1.67% decrease in loan spreads and one fewer restrictive loan covenant. The negative effect of employee stock ownership on loan spreads remains significant when we use within-firm variation and perform an analysis with instrumental variables based on demographic characteristics to address the concerns of endogeneity. Further analysis reveals that employee stock ownership may affect loan spreads by improving corporate governance, curbing managerial risk-taking, reducing information asymmetry, and improving employee retention. In contrast, we find that employee ownership via stock options is associated with greater loan spreads, perhaps owing to their convex payoff structure. Overall, our results underscore the importance of the level and structure of employee ownership for pricing corporate loans.

Using the Chinese stock market data, we test the hypothesis that cognitive dissonance influences the stock market response to earnings news. Supporting this notion, we find that investors disregard earnings news that contradicts their sentiment due to cognitive dissonance, thereby causing a muted announcement date price reaction to such news. Further analysis shows that higher retail concentration and greater valuation uncertainty of the underlying firm exacerbate this cognitive dissonance and hence amplify its impact, but less credible financial report does not. Finally, we find that cognitive dissonance is temporary for bad news under optimism, but is quite persistent for good news under pessimism. Overall, our findings offer a behavioral bias explanation to understand why investors underuse accounting information.

This paper explores the interplay between politics and law enforcement in China and its effects on firm financing decisions. By examining a sample of corporate lawsuits involving listed firms in China, we find that politically connected firms are less likely to be defendants, have higher win rates, and experience shorter litigation durations than non-connected firms. Additionally, we observe that firms with higher legal risk extend more accounts receivable and receive less accounts payable, but this relationship holds only for non-connected firms. Our findings support the financing advantage theory for politically connected firms and the legal risk compensation view for non-connected firms. Moreover, reforms in China's judicial system do not appear to mitigate the disadvantages faced by non-connected firms in terms of lawsuit outcomes and trade credit provision. Our findings suggest that well-functioned judicial independence might be still lacking in China, and that political connections continue to negatively impact law enforcement and corporate policies.

This paper examines corporate tax evasion from both a financial and governance perspective: one, the impact of tax evasion on a multinational (MNC)'s financial performance and secondly, whether corporate governance levels affect the probability of the multinational committing tax evasion. We specifically address: (i) whether MNCs suffer any adverse short and long-term effects on their financial performance following news that the firm in question has committed, or is suspected of committing, tax evasion and (ii) whether firm and country level governance has any influence on the likelihood of MNCs evading tax. In the short-term, we find that share prices drop in the event window around the announcement date. Further, we find evidence that multinationals do not suffer long-term reputational damage from tax evasion (unless there is repeated media follow-up); leaving no impact on firm profitability or value. We also find that a small number of firm level governance, tax-efficiency based governance and country governance measures have a significant relationship with an MNC's likelihood to commit tax evasion.

This study examines whether the proportion of equity-based compensation in outside director compensation is associated with corporate strategic alliances. We hypothesize that equity incentives provided to outside directors mitigate potential agency conflicts between outside directors and shareholders that arise from the strategic alliance decision-making process, thus resulting in more alliance activities. Our empirical evidence indicates that the percentage of equity in outside director compensation is positively associated with the incidence and the number of strategic alliance activities. Additionally, when the proportion of outside directors' equity in total compensation is higher, firms with strategic alliances generate better future stock returns. Overall, our findings suggest that providing equity incentives in outside director compensation mitigates the agency problems inherent in corporate strategic alliance decisions and enhances the quality of alliance activities.

This paper examines whether dividend policy is associated with earnings management and whether the relationship varies across countries with wide-ranging degrees of institutional strength and transparency. Based on a sample of 23,429 corporations from 29 countries, we show that dividend payers manage earnings less than dividend non-payers, and that this evidence is stronger in countries with weak investor protection and high opacity. Further, we find that dividend payers manage earnings less when they issue equity following dividend payments, and that this result is more pronounced in countries with weak institutions and low transparency. Overall, our evidence suggests that firms may employ dividend policies associated with less earnings manipulation to mitigate agency concerns and to establish credible reputation, thereby facilitating access to external funds.