We examine the impact of managerial ability on the shareholder tax sensitivity of dividends. We find that managerial ability increases the sensitivity of dividends to the dividend tax penalty. In addition, the positive association between managerial ability and the shareholder tax sensitivity of dividends decreases in institutional ownership. Further, managerial ability increases the shareholder tax sensitivity of the substitution of dividends with share repurchases. Finally, evidence from tax reforms reveals that high ability managers are more responsive to a reduction in dividend tax penalty than to an increase. We conclude that managerial ability influences the formation of tax-efficient dividend policies.

We examine whether Chinese firms whose controlling persons have foreign residency rights are more likely to engage in corporate fraud. We find a positive association between foreign residency rights and corporate fraud with causality likely going from the former to the latter. Such a finding is robust to an estimation of a bivariate probit model that incorporates undetected fraud. In the cross section, higher managerial ownership, greater analyst coverage and higher institutional holdings mitigate this association. The link, however, diminishes in more recent years after high-profile extraditions of businessmen and regulatory focus on foreign residency rights in the political sector. We conclude that a lower expected probability of getting caught and punished associated with executives with foreign residency rights induces corporate fraud.

Managers of China's state-owned firms work in a closed pyramidal managerial labor market. They enjoy non-transferable benefits if they choose to stay within this system. The higher up are they in this labor market hierarchy (their political ranks), the fewer are their outside employment opportunities. Due to career and wealth concerns, they are cautious and risk-averse when managing firms. We examine the effect of managers' political ranks on firms' stock price crash risk and find a negative association. This association mainly exists in firms with younger managers and managers with shorter tenure. Further, this effect is only significant in regions with weak market forces, in firms without foreign investors, without political connections, and during periods with no local government leaders' or managers' political promotions. We conclude that the political ranking system reduces the stock price crash risk.