This study examines the influence of global board reforms on cross-border mergers and acquisitions (CBMAs). Using a difference-in-differences methodology, we find that CBMA flows increase significantly following board reforms in both home and host countries. The effect is more pronounced for countries with relatively weaker external governance mechanisms compared to their counterparts. Our findings suggest that board reforms enhance board functions, thereby facilitating firms' outbound investments. Simultaneously, improved board governance mitigates acquisition risks, attracting inward investments and, consequently, stimulating CBMA flows.

We investigate the relationship between IPO long-run underperformance (Ritter, 1991; Loughran and Ritter, 1995) and the idiosyncratic risk puzzle (Ang, Hodrick, Xing, and Zhang, 2006) or the phenomenon of abnormally low returns for stocks with high idiosyncratic risk. We find that IPO long-run underperformance is a manifestation of surprisingly low returns for high idiosyncratic risk stocks. IPO underperformance disappears after we control for idiosyncratic risk. On the other hand, we find that the idiosyncratic risk puzzle is magnified by IPO underperformance. Our results are robust to various specifications or sample requirements. We evaluate a couple of potential common causes for the two puzzles and conclude that investors’ preferences for stocks with lottery features is the primary mechanism linking the two puzzles.

We extend the IPO literature analysing the role of financial market integration in the development of IPO markets and the pricing of newly listed stocks. Using a hierarchical linear model, we show that differences in underpricing between markets with high and low financial integration levels are economically significant and may explain the choice of location in the listing process. Firstly, market integration negatively affects the level of IPO underpricing by increasing the importance and efficiency of the financial intermediation process via tradable securities. Secondly, the presence of a deeper market integration has a moderation effect, which weakens the explanatory power of country institutions in the cross-country variation of IPO underpricing. Finally, we suggest a hierarchical structure be assumed for the modelling of cross-country IPO studies with heterogeneous country characteristics. Our results are robust to alternative measures of financial integration and several model specifications.

We examine the role of bank capital in moderating the relationship between bank liquidity creation and the failure risk in U.S. banks over the period of 2003–2014. We find that, conditional on bank capital, bank liquidity creation is related to bank failure risk negatively. The negative relationship is moderated positively (i.e., strengthened) by (changes in) bank capital. This finding is consistent with the view that banks may strengthen their solvency through increased capital in response to the illiquidity risk associated with liquidity creation; and higher capital enhances the ability of banks to create liquidity. The result is robust to different estimation methods, and alternative measures of liquidity creation, bank failure risk, and bank capital. Further analysis shows that the significant and negative effect is more prominent for small banks, and the impact of bank capital was more pronounced during the recent financial crisis of 2007–2009.

The extant corporate investment literature has documented that information asymmetry and agency conflicts between managers and outside investors prevent firms from making optimal investment decisions. In this study, we investigate whether government intervention, as another form of friction, distorts firms' investment behavior and leads to investment inefficiency. Using Chinese data, we test this by measuring government intervention at two different levels. First, we compare investment efficiency between SOEs and non-SOEs. We find that the sensitivity of investment expenditure to investment opportunities is significantly weaker for SOEs. Second, we measure government intervention by whether a firm is politically connected through the employment of top executives with a government background. We find that political connections significantly reduce investment efficiency in SOEs. However, we do not find such evidence in non-SOEs. Taken together, our findings suggest that government intervention in SOEs through majority state ownership or the appointment of connected managers distorts investment behavior and harms investment efficiency.

Using a large international sample of firms, we examine the relation between carbon management ability (CMA) and firm-level climate risk exposure. We find that CMA is negatively associated with climate risk exposure. More importantly, we show that firms with high-CMA managers tend to achieve a reduction in climate risk exposure through enhancing regulatory compliance (evidenced by fewer stakeholder rights violations), reducing environmental, social, and governance-related controversies, investing in research and development, undertaking more investment in environmental initiatives, and cultivating a favorable corporate culture. Cross-sectional analyses indicate that the negative association between CMA and climate risk exposure is stronger for firms in carbon-intensive sectors and firms with a dedicated corporate sustainability committee. Further, we reveal that CMA exerts a greater influence on climate risk exposure in stakeholder-oriented countries and in countries that have signed the Paris Agreement. Finally, we reveal that firms with high-CMA managers tend to have better financial performance. Overall, our findings indicate that CMA plays a crucial role in driving firms towards more sustainable and responsible business practices, leading to better corporate performance and enhanced corporate reputation.

We argue a positive association between common ownership and liquidity creation because common ownership increases risk-absorption capacity through higher profit margins, greater equity capital, and improved disclosure quality. Accordingly, we find solid evidence that banks with greater common ownership create 3.56%–4.54% more liquidity. The beneficial effect on liquidity creation is dominant for banks with high risk-absorption capacities, enhanced disclosure quality, low competition, greater long-term shareholdings, and low performance-sensitive managerial incentives, substantiating our theoretical conjectures and establishing five significant channels. Finally, we show that banks have incentive to create more liquidity when they have significant co-ownerships among themselves. Our main findings remain robust to multiple proxies, alternative specifications, and three methods to address endogeneity concerns – difference-in-differences based on the Blackrock–Barclays Global Investors merger in 2009, two-stage least squares analysis with instrumental variables based on Russell 2000 index inclusion, and propensity score matching.