Finance and Financial Management Commons^™

Political Turnovers, Ownership, And Corporate Investment In China, Jerry X. Cao, Julio Brandon, Tiecheng Leng, Sili Zhou

Research Collection Lee Kong Chian School Of Business

We examine the impact of political influence and ownership on corporate investment by exploiting the unique way provincial leaders are promoted in China. The tournament-style promotion system creates incentives for new governors to exert influence over investment in the early years of their term. We find a divergence in investment rates between state owned enterprises (SOEs) and private firms following political turnover. SOEs increase investment by 6.0% following the turnover while investment rates for private firms decline, suggesting that the political influence exerted over SOEs may crowd out private investment.

The Impact Of Rural Pensions In China On Labor Migration, Karen Eggleson, Ang Sun, Zhaoguo Zhan

Faculty and Research Publications

We study the impact of China’s new rural pension program on promoting migration of labor by applying a regression discontinuity analysis to this new pension program. The results reveal a perceptible difference in labor migration among adult children whose parents are just above and below the age of pension eligibility: The adult children with a parent just attaining the pension-eligible age are more likely to be labor migrants compared with those with a parent just below the pension-eligible age. We also find that with a pension-eligible parent, the adult children are more likely to have off-farm jobs. These abrupt changes …

Two Essays On Shareholder Base, Firm Behavior, And Firm Value, Yi Jian

Finance Theses & Dissertations

Most companies spend significant time and attention to managing their shareholder base out of the belief that significant stock market benefits can be reaped if they can identify and attract the right shareholders. Consistent with the opinion of practitioners, many financial economists suggest that the shareholder base is an important determinant of firm value and corporate policies (Lins and Warnock 2004; Brav, Graham, Harvey, and Michaley 2005; Bodnaruk and Ostberg 2013). Despite the importance of the shareholder base, research on the topic has been scant. What’s more, previous studies have reported conflicting results regarding the effect of the shareholder base …

Agents Of Change: The Role Of Foreign Financial Institutions In China’S Financial Transformation Since The Early 1990s, Anton Malkin

Theses and Dissertations (Comprehensive)

What role have foreign financial institutions (FFIs) played in China’s financial evolution since the early 1990s? My research finds that FFIs, which include foreign commercial and investment banks, as well as private equity (PE) firms, have played a role in China’s financial evolution in three respects. First, US financial institutions have leveraged their influence in the US government, their ties to other business groups, and mobilized connections with the Chinese elite, to help China to join the World Trade Organization in 2001. This outcome created a relatively open formal, legal environment to foreign actors—helping in the cause of liberalizing China’s …

Shadow Banking And Regulation In China And Other Developing Countries, Steven L. Schwarcz

Faculty Scholarship

The rapid but largely unregulated growth in shadow banking in developing countries such as China can jeopardize financial stability. This article discusses that growth and argues that a regulatory balance is needed to help protect financial stability while preserving shadow banking as an important channel of alternative funding. The article also analyzes how that regulation could be designed.

Covered Interest Rate Parity: The Usd And Cny, Kimberly D. Scott

Kimberly D Scott

One of many tests of international finance is a test termed Covered Interest Rate Parity (CIRP). This theorem posits that exchange rate forward premiums (discounts) are offset by the respective interest rate differential between two currencies (Bhargava, Dania, & Malhotra, 2011). To briefly describe another theorem of interest rate parity is the Uncovered Interest Rate Parity (UIRP). This theorem posits that a return on an uncovered foreign currency deposit should be equal to the return on a similar domestic deposit despite the national market the foreign deposit is located.

Cny & Usd: Foreign Exchange Rates, Kimberly D. Scott

Kimberly D Scott

A forward rate is related to a spot rate that is set to take place in the future (Bekaert & Hodrick, 2012). Interestingly, one issue that can be challenging when performing transactions is not knowing what the rate will yield in the future versus at present. Due to market pressures or even policy decisions, either a devaluation or revaluation of domestic currency to foreign currencies can transpire.

Chinese Yuan And The American Dollar, Kimberly D. Scott

Kimberly D Scott

The economic relationship between China and the United States has been a hit and miss discussion over the years. One question, in particular, has stimulated more than speculation, but empirical research of whether we know that China's currency is undervalued is certainly a trigger to perform further research.

How Do Choice Of Major And Industrial Structure Influence College Graduates' Unemployment Rate In China, Xiuwen Shi

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Recently, the higher education market is developing very fast, and China’s universities and colleges are increasing their enrollment. More and more college graduates with higher education backgrounds enter the labor market and the college graduates have to face higher unemployment pressure when they find jobs. For the college graduates’ unemployment problem, many literatures and research are focusing on over-enrollment problem, the influence of the major differences, and the influence of the industrial structure development.

This thesis examines the consequence of the over-enrollment problem with a group of data set and linear regressive analysis model. The finding indicates that there is …

Innovation Outcomes Of Knowledge-Seeking Chinese Foreign Direct Investment, Xianming Wu, Nathaniel C. Lupton, Yuping Du

Faculty Publications

Purpose

The purpose of this paper is to investigates how organizational learning, absorptive capacity, cultural integration, specialization of the acquired firm and characteristics of transferred knowledge impact innovation performance subsequent to overseas acquisitions.

Design/methodology/approach

Survey responses from 222 Chinese multinational enterprises engaged in overseas acquisitions.

Findings

Differences between acquiring and acquired firms’ capabilities, while having a positive direct influence, suppress the positive impact of organizational learning and absorptive capacity, suggesting that multinationals require some basic level of capabilities to appropriate value from overseas acquisitions.

Research limitations/implications

This paper investigates the impact of knowledge-seeking overseas acquisition of Chinese multinationals on innovation …

Corruption And Economic Growth In China: An Emirical Analysis, Nicholas D'Amico

Senior Honors Projects

This paper will begin with a review of the relevant literature on corruption and its effect on economic growth, both in general and in China specifically. The following sections will discuss the state of corruption in China and outline China’s historic economic growth since it opened up to the global economy. Next, the methodologies of the empirical study of this paper and a model for measuring the effects of corruption on economic growth will be presented. Finally, the results of this study will be analyzed, followed by a discussion of policy implications as China moves forward in the 21^{st …}

Is China’S Outward Investment In Oil A Global Security Concern?, Ilan Alon, Aleh Cherp

Faculty Publications

The dramatic increase in investment by Chinese SOEs in overseas oil assets is primarily driven by energy security concerns. Whether such investment will benefit or harm energy security of other countries is hotly contested. On one hand, this investment can supplement the overall lack of investment in the sector, benefiting all consumers. On the other hand, it may exacerbate environmental and political problems associated with fossil fuels.

Executive Compensation, Firm Performance And Liquidity Under Imperfect Corporate Governance, Yongli Luo

Theses and Dissertations - UTB/UTPA

This dissertation examines the relationship between executive compensation, firm performance and liquidity under imperfect corporate governance institution by using a novel Chinese dataset over 2001-2010. The first essay examines the determinants of Chinese executive compensation from the agency-based theoretical framework. I find that there is a positive relationship between Chinese executive compensation and firm performance. The weak corporate governance in China exhibits strong liquidity and control effects after the split-share structure reform. It seems that CEO duality, the establishment of compensation committee, and the involvement of state ownership in Chinese public firms may lead executive compensation to a relation-based rather …

Overview Of The Evolution Of China's Central Bank And Monetary Policy: Correlation To The European Union, Alida S. Skold

Alida S. Skold

As an innovator in the financial system, China was the first to use paper currency. Eventually the form of currency was held responsible for devastating inflation and was abandoned during the Ming Dynasty. Going forward in time, uprisings and discontent have emphasized the importance of controlling inflation. The central bank is pivotal in issuing monetary policy to control inflation and to maintain financial stability as the government transforms itself from a planned economy to a mixed market economy. The transforming economy is moving toward a free market system through series of economic reforms. The correlation between China’s structure and the …

The Persistence Of Pricing Differentials In Dual-Listed Companies In Hong Kong And China, Justin Spitzer

CMC Senior Theses

Over the past two decades a number of Chinese companies have issued shares on both the Hong Kong Stock Exchange and on one of the Chinese stock exchanges. The Hong Kong-listed H-shares of Chinese dual-listed companies have traded at a persistent discount rate relative to the China-listed A-shares. As these shares represent the same ownership rights and cash flows, the shares should theoretically trade at the same price. The price differential between H-shares and A-shares should decrease as international markets continue to converge. The paper analyzes the persistence of the discount rates and the effects of both market and investor …

An Analysis Of The Effects Of The Probability Of Informed Trading (Pin) On Corporate Diversification Discount And Ceo Pay-Performance Sensitivity : Evidence From China, Man Jin

Theses & Dissertations

This thesis includes estimating the probability of informed trading, PIN, developed by Easley, Kiefer and O’Hara (1996, 1997a, 1997b), for a large sample of listed firms in China from 2002 to 2008, and I use PIN to explore two independent research questions in corporate finance.

First, the probability of informed trading is applied to explain the discount in value for firms with diversified business operations. Although aiming to increase firm value, the corporate diversification decision usually results in a firm value discount, for a variety of reasons, one of which is the transparency problem. My study directly tests the relation …

Three Essays On Cross-Listing, Liu Wang

Theses and Dissertations in Business Administration

This dissertation examines the role of cross-listing in shaping corporate earnings quality, stock price informativeness, and firm valuation, as well as its impact on a listing firm's home country information asymmetry and stock misvaluation.

The first essay addresses the information asymmetry between Chinese local A-share and foreign B-share markets and its impact on the B-share discount puzzle. In contrast with the widespread belief that domestic investors are better informed than foreign investors, this study indicates that foreign investors actually possess more value-relevant, firm-specific information in an emerging market such as China, where information transparency and investor protection are relatively weak. …

Sino-Turkish Relations In A Globalising Asia-Pacific, Rosita Dellios, Nadir Kemal Yilmaz

Rosita Dellios

Relations between China and Turkey are quiescent. In a globalizing Asia-Pacific, however, they are unlikely to remain so. High economic interdependence in the presence of the rise of Asian and Eurasian powers suggest that China and Turkey as multiregional states have a common interest in regional cooperation. It is within this context that bilateral relations are likely to develop. China’s rapid rise means that its impact will not be confined to Pacific Asia. Increasingly, with the quest for energy security, China is setting its diplomatic compass westward to Eurasia and the Middle East. With Russia - another multiregional state - …

Motivations For Us Foreign Direct Investment, Christina Buoninfante

Honors College Theses

The purpose of this thesis is to determine US firms’ motivations for foreign direct investment and to explore to what extent US firms continue to invest into China and India. I first correlate the agricultural, industrial, and service sectors in the United States with those of China and India. I find that there is a positive relationship between the correlation of US sectors and the host country’s sectors and foreign direct investment into each sector. This supports the theory of Vernon’s product life cycle hypothesis, which explains that firms expand into lesser developed countries when their product becomes more sensitive …

Asian Corporate Governance Or Corporate Governance In Asia?, Shaomin Li, Anil Nair

Management Faculty Publications

Corporate governance has become an important issue for Chinese and Indian firms as they increasingly interact with regulators and investors from developed markets. For instance, tapping into global capital markets to raise funds to finance their domestic and international growth requires firms from China and India to demonstrate strong corporate governance credentials, so that investors do not discount their stock (LaPorta, Lopez-de-Silanes, Shleifer, & Vishny, 2000). The swift action of Chinese and Indian authorities in response to recent corporate scandals – such as the one at Satyam Computers – reveals that even governments in emerging countries such as China and …

The Customer Is King : Mutual Fund Relationships And Analyst Recommendations, Ping Liu

Theses & Dissertations

I investigate whether the business relations between mutual funds and brokerage firms influence sell-side analyst coverage and recommendations. Using a comprehensive sample of analyst recommendations in China over the 2004-2008 period, I find that the likelihood of analyst coverage and analysts’ relative recommendations, benchmarked against consensus recommendations, are positively associated with the mutual fund business relationship. I measure the business relation by the weight of a stock in the mutual fund client’s portfolio and the commission revenue generated from the mutual fund clients. My results show that mutual funds take advantage of these optimistic recommendations by selling the stocks. I …

Brink's Entry Into China 2007, Roger R. Schnorbus, Littleton M. Maxwell

Robins School of Business White Paper Series, 1980-2022

This case was prepared from various referenced sources and was developed solely for classroom discussion; the case is not intended to serve as an endorsement, source of primary data or an illustration of either effective or ineffective handling of a business situation.

Ron Rokosz, the President of Brink's International was both pleased and distressed as he reviewed the financial results of International operations for fiscal 2006. Revenue had increased by 14% to $1,568.6M, driven by strong gains in both EMEA (Europe, Middle East, Africa) and LA (Latin America). In addition, operating profit in International was up by 68%. (Exhibit 1) …

Two Essays On Lead-Lag Patterns Between Trading Volume And Stock Return In China Stock Markets, Xiaotian Zhu

Theses and Dissertations in Business Administration

This dissertation systematically investigate the lead-lag relations between the trading volume and stock return patterns in China A share and B share markets through two streams of behavioral postulations. In the first part, we summarize all the potential lead-lag patterns between trading volume and stock returns and link them to the corresponding behavioral explanations. In particular, Lee and Swaminathan's (2000) Momentum Life Cycle theory best explains the strong negative relations between lagged trading volume and subsequent return in China A share market. The strong positive relations between lagged market return and subsequent trading volume found in both China's B share …

Does Underwriter Reputation Affect The Performance Of Ipo Stocks?, Chunchi Wu, Sheen Liu, Junbo Wang

Research Collection Lee Kong Chian School Of Business

In this paper we examine the relationship between performance of the Chinese IPO firms and the reputation of investment bankers underwriting their stocks. Similar to previous studies on well-developed stock markets, we find that the initial return on the first day of trading is strongly positive for Chinese IPO stocks due to underpricing. This initial return is negatively related to the underwriter's reputation, suggesting that the better the reputation of the underwriter, the less underpricing and hence, the lower the initial return of the IPO stock. Extending the analysis to a ten-day window after the first trading day, we find …