Program CFR / AFAS PhD Workshop 2017 Semester

Independent directors are normally elected to monitor management behaviour and protect the interests of minority shareholders, which maintains the effectiveness of internal governance. Based on the special context in China, where succeeding independent directors are often recommended by their predecessors, we examine the causes of this recommendation and the influence of these successors on corporate governance. Consistent with reciprocity theory, our results conclude that (1) the entirely compliant voting of successors or predecessors in historical records contributes to the likelihood of recommendation, and (2) recommended independent directors (RIDs) are positively associated with the related party transactions, the possibility and severity of violations in firms, and they are less likely to dissent from insiders particularly in firms with higher concentrated ownership and firms located in provinces with a weak market environment. In the supplementary analysis, we find that the recommendation is not motivated by the informational collaboration between RIDs and predecessors, which is invalid in dissenting from insiders. The pool of local independent director candidates is positively correlated with recommending compliant independent directors. Our empirical results are still robust even we consider various social ties, subsample analysis and endogeneity issues. We argue that RIDs may lose their independence, more supervision and assessment from the officials and investors over the election of independent directors is in demand to address this issue. Discussant: Anna Loyeung (UTS) General Discussions/Questions 2.15pm Speaker: Yanling Wu Title: Media Coverage and Initial Public Offering, Based on the Rent-seeking Perspective: Evidence from China Abstract: This paper investigates whether the media plays a positive role in the resource allocation of Initial Public Offering (IPO) by collecting and disseminating information, in other words, whether the media can help China Securities Regulatory Commission (CSRC) screen good companies to receive IPO approval. We use Chinese A-stock companies that have submitted IPO applications to CSRC during the period of 2006-2014, and manually collect and process a comprehensive dataset of newspapers to measure the tendency of media coverage. We show that the “paid silence” fees which the IPO Company pays to the media for rent-seeking prior to IPO, increases the positive media coverage and decreases the negative media coverage related to the company, and then improves the likelihood of the company passing IPO screening process. In order to further test “bad companies” seek rent to cover up defective conditions and get IPO approval by the media packaging, and rule out the alternative explanation that “good companies” seek rent to avoid the long examination process, save time cost and reduce the risk of IPO rejection, we find that positive media reports have a negative relationship with operating performance, cumulative abnormal return, and increase in the tunnelling activities after IPO. Our results further support our main hypothesis and rule out the alternative story. Our findings provide new evidence for the governance role of the media in the capital market. This paper investigates whether the media plays a positive role in the resource allocation of Initial Public Offering (IPO) by collecting and disseminating information, in other words, whether the media can help China Securities Regulatory Commission (CSRC) screen good companies to receive IPO approval. We use Chinese A-stock companies that have submitted IPO applications to CSRC during the period of 2006-2014, and manually collect and process a comprehensive dataset of newspapers to measure the tendency of media coverage. We show that the “paid silence” fees which the IPO Company pays to the media for rent-seeking prior to IPO, increases the positive media coverage and decreases the negative media coverage related to the company, and then improves the likelihood of the company passing IPO screening process. In order to further test “bad companies” seek rent to cover up defective conditions and get IPO approval by the media packaging, and rule out the alternative explanation that “good companies” seek rent to avoid the long examination process, save time cost and reduce the risk of IPO rejection, we find that positive media reports have a negative relationship with operating performance, cumulative abnormal return, and increase in the tunnelling activities after IPO. Our results further support our main hypothesis and rule out the alternative story. Our findings provide new evidence for the governance role of the media in the capital market.