This paper examines the causal effects of the coverage by financial analysts of the incidence of corporate misconduct in China. Using a unique dataset consisting of Chinese listed companies that committed misconduct in information disclosure and were consequently fined by the regulatory bodies, we show that firms covered by a larger number of financial analysts are less likely to engage in corporate misconduct. This could be explained by the information production role of analyst, which is especially important in emerging markets. We show that the presence of more covering analysts helps provide quality information and reduce information asymmetry regarding the firms. Because of information production by analysts, a firm could employ more intensive policies: increasing executive pay-performance sensitivity and executive turnover-to-performance sensitivity, which promote managerial incentives in improving corporate governance, thus leading to less corporate misconduct.
In 2010, the Chinese Government issued a policy to require enterprises to disclose environmental information. Using the environmental disclosure information of 204 Chinese listed companies in 20 polluting sectors over the period of 2011–2015, we find that managers tend to withhold environmental information and selectively disguise sensitive environmental information in the face of financial pressure, and where the disclosure of sensitive environmental information would significantly increase the cost of debt financing. Furthermore, agency conflicts and information asymmetry between managers and outside investors promote the managers' tendencies to withhold environmental information when facing financial pressure.
Using a proprietary account-level database from a commercial bank in China, we document that credit card holders can ease their credit constraints through the practice of cash-out based on bogus transactions using credit cards. We find that such behaviour might be beneficial to both cardholders and banks. First, we find that a 1% increase in the cumulative number of credit card cash-out transactions lowers the probability of default by 9.59%. Second, for private businesses, a 1% increase in the number of abnormal cash-out transactions lowers overdue risk by 13.45%. Third, by lowering the overdue risk, the cardissuing bank earns a larger profit. Our results are consistent with the notion that unconventional credit card cashout can mitigate the extent of capital misallocation in emerging markets.
K E Y W O R D Scredit card cash-out transaction, credit constraints, overdue risk, taoxian
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