No abstract

Manuscript Type: EmpiricalResearch Question/Issue: To control for the omitted-variables and aggregation biases problem existing in previous crosscountry studies, our paper investigates the relationship of ownership concentration and legal investor protection across regions and over time in one emerging economy, China, during the period 1992 to 2003. Moreover, this paper examines whether state control affects this relationship. Research Findings/Results: For state-controlled firms, we cannot find the typical inverse relationship between ownership concentration and legal investor protection documented by La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1998), since state per se works as a substitute for formal legal investor protection in protecting property rights by exploiting political power. However, for non-state-controlled firms, the inverse relationship does hold. Theoretical Implications: Our findings suggest that the nature of the controlling shareholder should be taken into account when examining the relationship between ownership concentration and legal investor protection. Moreover, our findings give new insights, especially to the study on other emerging economies that share similar characteristics with China in terms of legal development and government control. Finally, the cross-region study within one country provides a new perspective on the research in this area. Practitioner Implications: First, to provide a level playing field for different types of investors, the state's dual role of controlling shareholder and political power holder should be separated. Second, it is important to build up a good legal system to protect investors in order for a country to develop its capital markets, especially for the development of the non-state sector.

PurposeThe purpose of this paper is to investigate how disclosure quality affects the relation between chief executive officer (CEO) power and the variability of firm performance. Moreover, it also examines the impacts of ownership structure and disclosure quality on the relationship between CEO power and performance variability.Design/methodology/approachEmpirical research was carried out.FindingsIt was found that: first, firms whose CEOs have more power will exhibit higher performance, but display more variability in firm performance. Second, disclosure quality can affect the relationship between CEO power and the variability of firm performance and more specifically, increase in disclosure quality reduces the performance variability caused by CEO power. Third, the effects of CEO power on the variability of firm performance are higher in state‐owned firms than in non‐state‐owned firms. Moreover, the effect of higher disclosure quality for lowering the variability of firm performance is stronger in state‐owned firms than in non‐state‐owned firms.Practical implicationsFirst, the authors find that when evaluating corporate governance practices, both firm performance and the variability of firm performance should be taken into account. Second, this paper fills the void in the extant literatures by demonstrating that CEO power, as well as disclosure quality, can affect firms' operational risk. Third, for firm owners, when firms are facing large uncertainty from institutional environment, a great trade‐off between firm performance and operational risk, when determining the degree of CEO power, will play an important role in corporate governance.Originality/valueThis paper complements the extant literatures by examining the impacts of CEO power to firm output from the dimensions of both firm performance and operational risk; and by examining the impacts of ownership structure and disclosure quality on the relationship between CEO power and performance variability.

No abstract

We examine the proposition that firms with disproportionately more analysts herding in their coverage, as measured by a larger herding index value, have higher crash risk. Our findings are consistent with the main proposition. The results suggest that information production, rather than monitoring, is the primary mechanism behind the positive relation between herding and crash risk. Our conclusion is robust to different measures of crash risk, crash risk windows, herding measures, subsamples, and instrumental estimation. In addition, using post‐earnings announcement drift, we report that analyst herding slows down bad news transmission in the market. Our findings extend the literature by documenting that analyst herding plays a role in enhancing crash risk. Analyst herding has economic consequences on the covered firms. We offer support for the concern in the literature regarding analyst herding and market fluctuations.

No abstract

Purpose For the past years, the population of firms in China has increased fast. However, the financial research has always fallen behind the financial practice. Also, the Western financial theory may not be completely consistent with China’s context. In addition, appearing internet technology with big data and its applications to business bring some challenges not only to financial practice but also to the financial literature. Thus, the purpose of this paper is to review historical development of research in corporate finance, discuss the current issues and propose 16 key research topics in China context. Design/methodology/approach This paper surveys Western classical literature and some important literature by Chinese scholars in the field of corporate finance. On this basis, the authors point out the shortcomings of existing research and opportunities for future research. Findings The authors propose 16 key research topics in the near future considering the current reforms on economic development strategy, financial and taxation system and SOE’s property right under the institutional background in China. Originality/value This paper makes a contribution to corporate finance research by exploring frontier topics for future research according to the China context and the global trend. These topics represent the demand from enterprises in China and are challenges for the academic world. It is of practical significance and great theoretical value to implement these studies. It will help the management to solve their financial problems and provide a fundamental basis for constructing the financial management theory with Chinese characteristics.

No abstract