We propose "Entertainment and Travel Costs" (ETC) expenditures as a measure of corruption in Chinese firms. These expenses are publicly reported in firms' accounting books, and on average they amount to about 3% of firms' total value added. We find that ETC is a mix that includes "grease money"...

This paper provides robust empirical evidence that trade liberalization significantly impact corporate financing decisions. Trade liberalization results in changes in tariff schedules in both domestic and foreign markets, which are most likely exogenous to individual firms. Our empirical...

Trust is vital for market development, but how can trust be enhanced in a marketplace? A common view is that more trusting may help to build trust, especially in less developed economies. In this paper, we argue that more trusting may lead to less trust. We set up a rational expectation model in...

We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second,...

This paper studies the urban land market in China in 2003--2007. In China, all urban land is owned by the state. Leasehold use rights for land for (re)development are sold by city governments and are a key source of city revenue. Leasehold sales are viewed as a major venue for corruption,...

Entertainment and Travel Costs (ETC), an expenditure item in standard accounting books of firms in China, amount to about 20% of total wage bills in a sample of 3470 Chinese firms. Using a detailed dataset of these firms, we analyze the composition of ETC and effects of ETC on firm performance....

We consider the problem of motivating privately informed managers to engage in entrepreneurial activity to improve the quality of the firm's investment opportunities. The firm's investment and compensation policy must balance the manager's incentives to provide entrepreneurial effort and to...

This paper examines whether competition pressures enhance firms' incentives to hide profits. By developing a novel empirical procedure to trace out the extent of profit hiding at firm level and applying it to a database that covers more than 20,000 large-and-medium-sized industrial firms in...