Using a unique database of Chinese firms bribing initial public offering (IPO) regulators, we examine the impact of bribing on IPO pricing. Our findings suggest that bribing firms are younger, smaller, more volatile in their operating activities, and more generous in compensating underwriters and management. Most important, bribing firms price their IPO shares more aggressively than non-bribing firms and exhibit a higher price-to-earnings ratio, lower first-day return, and poorer post-IPO stock performance. Additional analyses suggest that both bribing and non-bribing firms exhibit negative announcement returns after the arrest of corrupt officials. However, the effect is stronger for bribing firms. Overall, bribing firms are systematically more aggressive than their non-bribing counterparts. They concede less to IPO investors and reward underwriters and management for helping them access the capital market.

We exploit the merger between BlackRock and Barclays Global Investors to study how changes in expected ownership concentration affect the investment behavior of funds and the cross-section of stocks worldwide. We find that funds with open-end structures and large exposure to commonly held stocks begin avoiding these stocks following the merger announcement. This leads to a permanent change in the composition of institutional ownership and a negative price and liquidity impact. We confirm these results in a large sample of global asset management mergers. Our findings suggest that market participants behave strategically in response to changes in expected financial fragility.

We build an asset-pricing model with dynamic strategic competition to explain the strong joint fluctuations in aggregate discount rates, competition intensity, profitability, and asset prices. Product market competition endogenously intensifies as discount rates rise, because firms compete more aggressively for current cash flows by undercutting each other as the value of future cooperation decreases. In industries with a lower turnover rate of market leaders, firms’ profit margins tend to be higher yet more exposed to discount-rate fluctuations, thereby generating the gross profitability premium. We exploit large tariff cuts to identify exogenous variation in market structure to test the core mechanism directly.

We examine 68,044 completed or abandoned M&A transactions involving unlisted targets to determine the effect of transaction rumors on deal-closing propensity and transaction values. Estimation is challenging because rumors may be spread on purpose or emerge accidentally while transaction values are only observable for completed deals and no regulation requires to disclose them. We use indirect inference to overcome these challenges. We find that (a) M&A rumors are deal breakers, (b) rumored but closed deals have higher transaction values, and (c) the combined economic impact of (a) and (b) is negative: in expectation rumors destroy about 32% of transaction value.

We analyze the role of venture capitalists (VCs) in transforming the management and governance of China's private family firms. We show, causally, that VC-backed family firms are more likely than non-VC backed family firms to experience departures of family members from top management positions and decreases in the separation between family control rights and cash-flow rights; these effects are stronger when VCs have greater equity ownership or board representation. We show that these changes in top management and governance in family firms are associated with higher IPO firm valuations and better post-IPO long run stock returns.

The sovereign CDS market has developed rapidly for two decades and currently has a gross notional amount of more than a trillion dollars. We document a strong momentum effect in this market, which cannot be explained by a large set of risk factors. These momentum returns are positively skewed and higher during recessions. Consistent with the interpretation that this momentum effect is due to investors’ initial underreaction to sovereign credit information followed by corrections, our evidence shows that the momentum returns tend to be higher during the months surrounding announcements of credit rating or outlook changes of the underlying countries.

We examine the impact of lifetime work experience of top executives on mergers and acquisitions (M&As) behavior and outcome. Based on hand-collected data of top executives in a sample of Chinese firms during 2002–2018, we construct a generalist ability index of top executives to study the impact of generalist top executives (GTEs) vs. specialist top executives (STEs) on M&As. Our findings suggest that GTEs conduct more M&As than those of STEs. The results are robust to alternate specifications of M&A frequencies and after accounting for endogeneity issue. Furthermore, the M&A announcement and long-term returns are better for acquirers with GTEs than those with STEs. We attribute the findings to GTEs' ability of searching target ex ante, making the M&A process efficient, and fully leveraging their social networks post M&A. In addition, we find the increase in M&A activities in GTE firms are primarily due to GTEs' experience of M&As rather than their talents. Finally, the M&As from GTEs improve investment efficiency and are less likely to divest targets post M&As. In sum, GTEs conduct more M&As and they create value in the process.

We examine how the market values operating assets in the presence of time-varying ex ante risk that these assets may be tunneled away. We analyze pairs of Chinese publicly listed firms and their non-listed parents and examine the market valuation of current assets (cash balances, trade receivables, receivables due from the controlling shareholders, inventories) and fixed assets on the publicly listed firm's balance sheet. Our results show that in periods when the risk of tunneling from the publicly listed firm to its controlling shareholder increases, operating assets that are easy to tunnel (cash and receivables due from the controlling shareholder) are valued at larger discounts, while operating assets that are not easy to tunnel (trade receivables, inventories, fixed assets) are not valued at such discounts.

We create a culture dictionary using one of the latest machine learning techniques—the word embedding model—and 209,480 earnings call transcripts. We score the five corporate cultural values of innovation, integrity, quality, respect, and teamwork for 62,664 firm-year observations over the period 2001–2018. We show that an innovative culture is broader than the usual measures of corporate innovation – R&D expenses and the number of patents. Moreover, we show that corporate culture correlates with business outcomes, including operational efficiency, risk-taking, earnings management, executive compensation design, firm value, and deal making, and that the culture-performance link is more pronounced in bad times. Finally, we present suggestive evidence that corporate culture is shaped by major corporate events, such as mergers and acquisitions.

We use the advent of new credit default swap (CDS) trading conventions in April 2009—the CDS Big Bang—to study how a shock to funding liquidity impacts market liquidity. After the Big Bang, traders are required to pay upfront fees to execute CDS transactions, with the size of the fees depending on the level of CDS spreads. While CDS bid-ask spreads decline in aggregate after the Big Bang, they do so less for contracts that require larger fees. Furthermore, the funding effect is stronger for smaller and riskier firms and for noncentrally cleared contracts. The effect also becomes stronger after Deutsche Bank's exit.