Do Insiders Trade on Government Subsidies?

We examine whether and how insiders trade on government subsidies, a major instrument through which the governments intervene in the economy. Using a novel dataset of government subsidies of Chinese listed firms, we find that net insider purchase increases significantly during the month of subsidy receipt. The effect of subsidies on insider trading is weaker in firms with a more transparent information environment and when subsidies are granted in a more predictable manner. In contrast, the effect is more pronounced for politically connected firms. Further analysis shows that the subsidy-trading relation may reflect both insiders’ informational advantage concerning subsidies and their superior ability to detect mispricing-related opportunities. Our findings provide new insights into the capital market consequences of government subsidies through the lens of insider trading

Leisure Preference and Corporate Tax Planning

Using a novel cross-country measure of leisure preference to quantify managerial effort aversion, we examine its relation to corporate tax avoidance, and document a negative association between the two. The result is stronger for firms located in countries with a more complex tax system, and for firms with less access to tax consulting services — situations in which corporate tax planning can be especially onerous. Finally, tax planning appears to be one mechanism mediating the negative relation between leisure preference and firm value, implying that effort aversion is a source of agency costs that impedes value-enhancing tax planning activities

Agency Costs of Socialistic Internal Capital Markets: Empirical Evidence from China

See article Also presented at 2008 China International Conference in Finance, Dalian; 2008 AAA Annual Meeting, Anaheim, Augus

Does top executive gender diversity affect earnings quality? A large sample analysis of Chinese listed firms

Using a large sample of Chinese listed firms, this paper examines whether the gender of top executives affects earnings quality. Unlike the findings documented in developed markets such as the U.S., our results show that earnings quality proxies, including earnings persistence, the accuracy of current earnings in forecasting future cash flows, the association between earnings and stock returns, and the absolute magnitude of discretionary accruals do not display significant differences for firms with female and male top executives. This study is the first to examine the relationship between gender and earnings quality in emerging markets such as China that offers managerial and policy implications