Exploiting the staggered deregulation of short sales in China as a quasi-experiment, we investigate whether firms change investor relations (IR) strategy when they face short-selling pressure. We document significant increases in IR efforts as measured by the frequency of company visits when firms' stocks become shortable in the market. Our cross-sectional tests further reveal that pilot firms' engagements of such IR activities vary with their ex-ante operating performance, accounting quality, short-selling threat and ownership structure. Moreover, we find that pilot firms with higher IR efforts experience fewer subsequent short sales. We further document that corporate IR efforts are associated with more positive media coverage and facilitate subsequent external financing and capital investment. In addition to the site visits, we also find that pilot firms increase their response rates on online IR platforms. Collectively, results are consistent with our prediction that firms take proactive IR actions as strategic signaling to assist investor communication and discourage short sellers. The findings also suggest that IR activities are effective to reconstruct market perceptions and mitigate downside impacts on firms' operations produced by short sales.
Parallel import, as a pattern of international trade, is often under criticism because of infringement of intellectual property. However, the establishment of China (Shanghai) Pilot Free Trade Zone has contributed to the rapid development of parallel import, which has existed in the “grey zone” in China for a long time. Generally speaking, parallel import not only minimizes damages to related intellectual property owners, but also maximizes flow of goods and promotes formation of a unified market, which is beneficial to free trade and economic integration as well as the welfare of consumers. This paper investigates two industries most affected by parallel import, namely the automobile industry and the pharmaceutical industry. Two cases, “Peugeot Unfair Competition” and “Compulsory Licensing of the Indian Pharmaceutical Industry”, are analyzed. This paper draws the conclusion that the general welfare of society must be considered and a clear boundary of intellectual property rights should be established in the development of trade policies on parallel import. Effective use of parallel import can ultimately promote social development.
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