In a standard q-theory model, corporate investment is negatively related to the cost of capital. Empirically, we find that the weighted average cost of capital matters for corporate investment. The form of the impact depends on how the cost of equity is measured. When the capital asset pricing...

This paper reexamines the controversy over capital structure adjustment speed. We show that firms move leverage towards target much faster than generally understood. To do this we use reduced rank regressions to extract 4 common factors for corporate leverage using 146 variables, including value...

In this paper we study how geographical proximity affects price efficiency. Using high-speed railway connections between firm cities and their nearest financial centers in China as exogenous shocks, we find that stocks closer to financial centers are more efficiently priced and that ease of...

This study documents the pervasive effect of IPO restrictions on Chinese equity markets. From 2007-2018, unlisted firms paid an average of $562M USD to listed firms for their shell value in reverse merger transactions. This large “shadow price” for public-listing explains many unusual...

We study firms that go public through reverse mergers (RMs) versus initial public offerings (IPOs) in China. Using a manually assembled data set, we show that pre-listing RM firms are larger, more profitable, and less politically connected than pre-listing IPO firms. Chinese RM firms also have...