Annual Conference

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Capital Market Development: China and Asia

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May 2013

Market Making Contracts, Firm Value, and the IPO Decision

Hendrik BESSEMBINDER, Jia HAO, Kuncheng (K.C.) ZHENG
We examine the effects of secondary market liquidity on firm value and the decision to conduct an Initial Public Offering (IPO). Competitive liquidity provision can lead to market failure as the IPO either does not occur or the IPO price is discounted to reflect that some welfare-enhancing secondary...
Keywords: designated market maker, affirmative obligation, Information asymmetry, Firm Value
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Measuring Economic Policy Uncertainty

Steven J. DAVIS, Scott R. BAKER, Nicholas A. BLOOM
We develop a new index of economic policy uncertainty (EPU) based on newspaper coverage frequency. Several types of evidence—including human readings of 12,000 newspaper articles—indicate that our index proxies for movements in policy-related economic uncertainty. Our U.S. index spikes near tigh...
Keywords: economic uncertainty, Policy uncertainty, Business Cycles, fluctuations
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Non-executive Employee Stock Options and Corporate Innovation

Angie LOW, Xin CHANG, Kangkang FU, Wenrui ZHANG
We provide empirical evidence on the positive effect of non-executive employee stock options on corporate innovation. The positive effect is more pronounced when employees are more important for innovation, when free-riding among employees is weaker, when options are granted broadly to most employee...
Keywords: Employee Stock Options, Corporate Innovation, Risk-taking Incentives, Employee Compensation
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Powerful Independent Directors

Randall MORCK, Kathy FOGEL, Liping MA
Shareholder valuations are economically and statistically positively correlated with independent director power, gauged by a composite of social network power centrality measures. Powerful independent directors’ sudden deaths reduce shareholder value significantly; other independent directors’ d...
Keywords: Corporate governance, Director independence, Milgram experiment, Power centrality, Behavioral finance
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Shell Games: The Long Term Performance of Chinese Reverse Merger Firms

Ran ZHANG, Kevin Ke LI, Charles LEE
We examine the financial health and performance of reverse mergers (RMs) that became active on U.S. stock markets between 2001 and 2010, particularly those from China (around 85% of all foreign RMs). As a group, RMs are early-stage companies that typically trade over-the-counter. Chinese RMs (CRMs),...
Keywords: reverse mergers, listing requirements, Chinese firms, accounting fraud, cash flow life cycle, private-equity (PIPE) financing
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