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Abstract:We examine the wealth effects of three regulatory changes designed to improve minority-shareholder protection in the Chinese stock markets. Using the value of a firm's related-party transactions as an inverse proxy for the quality of corporate governance, we find that firms with weaker governance experienced significantly larger abnormal returns around announcements of the new regulations than did firms with stronger governance. This evidence indicates that securities-market regulation can be effective in protecting minority shareholders from expropriation in a country with weak judicial enforcement. We also find that firms with strong ties to the government did not benefit from the new regulations, suggesting that minority shareholders did not expect regulators to enforce the new rules on firms where block holders have strong political connections.JEL classifications: G32, G34, G38

Inflammatory responses involving microglia, the resident macrophages of the brain, are thought to contribute importantly to the progression of Alzheimer's disease (AD) and possibly other neurodegenerative disorders. The present study tested whether the mevalonate-isoprenoid biosynthesis pathway, which affects inflammation in many types of tissues, tonically regulates microglial activation. This question takes on added significance given the potential use of statins, drugs that block the rate-limiting step (3-hydroxy-3-methylglutaryl coenzyme A reductase (HMG-CoA reductase)) in mevalonate and cholesterol synthesis, in AD treatment. Both mevastatin and simvastatin caused a concentration-and time-dependent activation of microglia in cultured rat hippocampal slices. This response consisted of a transformation of the cells from a typical resting configuration to an amoeboid, macrophage-like morphology, increased expression of a macrophage antigen, and up-regulation of the cytokine tumor necrosis factor-␣. Evidence for proliferation was also obtained. Statin-induced microglial changes were blocked by mevalonate but not by cholesterol, indicating that they were probably due to suppression of isoprenoid synthesis. In accord with this, the statin effects were absent in slices co-incubated with geranylgeranyl pyrophosphate, a mevalonate product that provides for the prenylation of Rho GTPases. Finally, PD98089, a compound that blocks activation of extracellularly regulated kinases1/2, suppressed statin-induced up-regulation of tumor necrosis factor-␣ but had little effect on microglial transformation. These results suggest that 1) the mevalonate-isoprenoid pathway is involved in regulating microglial morphology and in controlling expression of certain cytokines and 2) statins have the potential for enhancing a component of AD with uncertain relationships to other features of the disease.High levels of cholesterol, and in particular of cholesterol esters (1), influence the generation and aggregation of ␤-amyloid peptides in dissociated cell cultures (2-6) and transgenic mice (7). Patients with high plasma cholesterol levels and cardiovascular diseases have increased risk of Alzheimer's disease (AD) 1 (8 -10), and there is evidence that statins, a family of compounds that inhibit the rate-limiting enzyme in cholesterol synthesis (3-hydroxy-3-methylglutaryl coenzyme A reductase: HMG-CoA reductase), decrease the incidence of the disease (11, 12). These observations have led to an extensive and ongoing evaluation of statins as preventive treatments for Alzheimer's disease (13-16).Mevalonate, a cholesterol precursor, the synthesis of which is blocked by statins, is converted into several bioactive compounds. Among these, the isoprenoids are of particular importance because, among other functions, they provide for the covalent addition of lipid moieties (prenylation) to regulatory proteins (17) and thereby affect critical cell functions. Prenylation by the mevalonate products farnesyl diphosphate and geranylgeranyl diphosphate, ...

Abstract:We examine changes in market values and accounting returns for a sample of publicly traded Chinese firms around announcements of large block-share transfers among government agencies ("State Bureaucrats"), market-oriented State-owned enterprises ("MOSOEs") and private investors ("Private Entities"). We find evidence that these large block transfers are true control transactions for all types of block holders, resulting in positive abnormal returns around the transfer announcements. Moreover, we provide evidence that transfers from State Bureaucrats and MOSOEs result in larger increases in market value and accounting returns than transfers from Private Entities-consistent with their superior incentives and expertise relative to State block holders. We also find that CEO turnover occurs more quickly when shares are transferred to Private Entities. We conclude that corporate governance can be improved at State-controlled firms by improving the incentives and managerial expertise of controlling block holders, and that this is better accomplished by transferring ownership to private investors rather than by shuffling ownership among State-controlled entities.JEL classification: G32; G34; G38

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