Stock returns of domestically listed Chinese firms are lower than that of externally listed firms and listed firms from large developed and emerging countries. The performance gap, measured by net cash flows, between domestically listed and externally listed and matched unlisted Chinese firms,...

A major threat to the development of financial markets in emerging markets is “tunneling.” In China, this took on the form of controlling shareholders diverting assets from listed firms or coercing firms to serve as guarantors on questionable loans. A new set of rules enacted in 2005...

We examine the contracting and negotiation process in mergers using an incomplete contracts framework. Our multi-period model allows for the arrival of new information and renegotiation after the signing of an initial merger agreement but before deal completion or termination. A properly...

We evaluate the efficiency of capital deployment for acquiring firms before M&As, defined as the return on invested capital net of the cost of capital, and link this measure to firms' post-acquisition performance. Acquirers with higher, pre-acquisition net returns on investment have superior...

During the year prior to management buyout (MBOs) announcements, target firms exhibit abnormally high discretionary expenses in selling, general and administration, abnormally low discretionary accruals, and realize losses from asset sales. Higher discretionary expenses and losses from asset...

This paper recasts the consumption asset pricing model in terms of observable accounting outcomes by recognizing accounting principles that connect those outcomes to consumption and the risk to consumption. The model prompts the construction of a pricing factor from observed accounting...

This paper exploits a natural experiment to investigate the causal effects of the auditing fees on auditing quality: China recently imposed a minimum auditing fee requirement which forces some auditing firms to charge higher fees to their clients. We find a significant decrease in auditing...

This paper constructs a fundamental pricing factor based on observed accounting information. In contrast to standard models where accounting data often enter via data dredging, the factor is founded on consumption-based asset pricing theory and accounting principles that connect accounting...

Prior studies conclude that an unintended consequence of firms complying with the Sarbanes-Oxley Act is lower levels of risk-taking activities, including investment. We first show that prior studies cannot isolate the effects of SOX from other contemporaneous events. We then use the...