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We examine a period in which the in-principle prohibition of share repurchases was relaxed in 2018 to allow for the repurchase of shares whose prices dropped materially or were below book value. We find that share-loan pledges by controlling shareholders are significantly and positively associated with share repurchases for a sample of 3,531 Chinese firms. This finding is robust using entropy and propensity score matched samples, 2SLS IV regressions, regression discontinuity design (RDD), and two exogenous shocks (the China-US trade war in 2018 and the COVID-19 pandemic in 2020). The association remains robust but becomes less strong with state ownership and with above industry average firm agency problems, leverage ratios and financial constraints/distress (i.e., other share repurchase motives). Our findings highlight the importance of financial market regulations on share-loan pledging and share repurchases in emerging markets during periods of heightened firm-specific and systemic margin call risk and impending liquidation of share-loan pledges.

This study examines the probability of survival of online peer‐to‐peer (P2P) lending platforms in China. Our empirical findings show that shareholder's background, platforms’ risk management and institutional environment are three major factors that influence the probability of survival of P2P platforms in China. In addition, the effects of risk control and institutional environment are less pronounced in state‐owned P2P platforms. We also show that platforms that die from abscondence of owners tend to be more short‐lived than others, while platforms that die from liquidity problems are usually due to lack of high‐quality risk management techniques.

Based on pilot margin trading in China, this study examines how short selling affects internal control quality in listed firms. Using the difference‐in‐differences approach, we find that compared with control firms, firms that are eligible for short selling significantly improve their internal control after they are designated as underlying securities. We consider the effects of state ownership and external auditors. The improvement in internal control is only significant for non‐state‐owned firms and firms audited by non‐Big 4 auditors. These findings indicate that short selling can improve firms’ internal control and play a role in their corporate governance.

This study examines the impact of tax avoidance on the cost of debt using a natural experiment in China. Existing literatures identify two channels about how debt holders perceive tax avoidance behaviour. But there is no census on why and when one channel prevails or dominates the other one. Using China's New Regulation on bonds issuance in 2015 as a natural experiment, we find a negative (positive) association exists between tax avoidance and the cost of debt before (after) the New Regulation. We also find that both going public and state ownership have significant impacts on the tax avoidance and cost of debt relationship. Our findings suggest that debt holders’ perception on tax avoidance behaviour varies with external corporate governance regulations.

This paper examines how institutional characteristics of emerging economies influence the effect of control-ownership divergence on market liquidity. We find that the divergence is negatively associated with liquidity, and that this negative relationship is more pronounced in firms with more severe agency problems and information asymmetry. We argue that in an emerging market, the negative effect of the divergence on liquidity is worsened by state ownership and poorer shareholder protection, both of which result in more severe agency conflicts; we also find, however, that this effect is alleviated by the NTS reform, which aligns the interest of different shareholders.