Where legal systems and market forces enforce contracts inadequately, vertical integration can circumvent these transaction difficulties. But, such environments often also feature highly interventionist government, and even corruption. Vertical integration might then enhance returns to political...

Weak institutions ought to deter foreign direction investment (FDI), and mass media stories highlight China's institutional deficiencies, yet China is now one of the world's largest FDI destinations. This incongruity characterizes China's paradoxical growth. Cross-country regressions show that...

In generating fast economic growth, China is also generating growing concern about its environmental record. Using 2000-2009 data, we find that, while spending on environmental infrastructure has visible positive environmental impact, city spending is strongly tilted towards transportation...

We show that firms in industries in which firm-specific stock price variation is larger use more external financing and allocate capital with greater precision in the sense that their marginal q ratios are closer to one. According to the Efficient Markets Hypothesis, greater firm-specific stock...

It is often claimed that multinational firms avoid taxes by shifting income from high-tax to low-tax countries. Using a five year panel of data for two hundred large U.S. manufacturing firms, we find that U.S. tax liability, as a fraction either of U.S. sales or U.S. assets, is related to the...

Every firm in a developed economy relies on the mere existence of countless other firms to keep prices competitive up and down all supply chains. Without this network externality, no firm forms; and without many firms, no network forms; locking in a low-income trap. Business group governance...

Japan, an isolated, backward country in the 1860s, industrialized rapidly to become a major industrial power by the 1930s. South Korea, among the world's poorest countries in the 1960s, joined the ranks of First World economies in little over a single generation. China now seems poised to follow...

We examine information spillover as a source of stock return synchronicity, where information about highly-followed "prominent" stocks is used to price other "neglected" stocks sharing a common fundamental component. We find that stocks followed by few analysts co-move significantly with...

We observe less efficient capital allocation in countries whose banking systems are more thoroughly controlled by tycoons or families. The magnitude of this effect is similar to that of state control over banking. Unlike state control, tycoon or family control also correlates with slower...

Different economies at different times use different institutional arrangements to constrain the people entrusted with allocating the economy's capital and other resources. Comparative financial histories show these corporate governance regimes to be largely stable through time, but capable of...