Showing papers by "Oliver Zhen Li published in 2014"
TL;DR: In this article, the benefits associated with CSR disclosure in an international setting covering 31 countries were examined, using variables such as the legal status of labor protection, corporate social responsibility disclosure requirements, and public awareness of and attitudes toward CSR issues.
482 citations
TL;DR: In this paper, the authors examine how information processing cost affects investors' acquisition of firm-specific information using a natural experiment resulting from a recent mandate that US firms be required to adopt the eXtensible Business Reporting Language (XBRL) when submitting filings to the SEC.
Abstract: We examine how information processing cost affects investors’ acquisition of firm-specific information using a natural experiment resulting from a recent mandate that US firms be required to adopt the eXtensible Business Reporting Language (XBRL) when submitting filings to the SEC. XBRL filings make financial data standardized, tagged, and machine-readable. We find that XBRL adoption reduces firms’ stock return synchronicity. The reduction in synchronicity mainly applies to filings under the mandatory program as opposed to the voluntary program. Further, such an effect is more pronounced for opaque and complex firms. Finally, we find that XBRL adoption also reduces price delay.
65 citations
TL;DR: In this article, the authors investigate whether a sentiment effect arising from poor air quality impacts stock prices and find little evidence suggesting that local air quality directly affects stock prices, however, they do find that the negative association between air quality index and stock prices is not affected by economic fundamentals.
Abstract: We investigate whether a sentiment effect arising from poor air quality impacts stock prices. We find little evidence suggesting that local air quality directly affects stock prices. However, we show that the local air quality index (which is increasing in air pollution) relative to that of Beijing negatively affects stock prices. We apply a discontinuity design that focuses on observations with relative air quality index falling in the narrow band around zero and find a consistent result. Additional analysis uncovers a small subsequent reversal in returns in response to the relative air quality. Further, we find that the relative air quality is also negatively associated with trading volume. Finally, we show that the negative association between air quality index and stock prices is not affected by economic fundamentals. In sum, our findings suggest that poor air quality negatively affects stock prices and investor trading behavior.
14 citations
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TL;DR: In this paper, the authors examine efficiency improvement associated with audit firm mergers and find a significant reduction in audit hours, unaccompanied by a deterioration in audit quality, of merged audit firms.
Abstract: We examine efficiency improvement associated with audit firm mergers. Our analysis is made possible by a unique dataset of audit hours in China. We find a significant reduction in audit hours, unaccompanied by a deterioration in audit quality, of merged audit firms. Further, we find a larger reduction in audit hours when acquirers are Chinese domestic Big10 audit firms and when client firms are more complex. These results are consistent with the notion of economies of scale arising from horizontal mergers. However, enhanced efficiency does not necessarily reduce audit fees. Instead, we find an increase in audit fees when acquirers are international Big4 audit firms even when we control for possible changes in market power. This premium is at least partially due to the certification effect of international Big4 audit firms.
4 citations
TL;DR: In this article, the authors investigated the relationship between taxes and the cost of equity capital in an international setting that allows for exogenous, cross-sectional variation in corporate and investor tax rates.
Abstract: This paper investigates the association between taxes and the cost of equity capital in an international setting that allows for exogenous, cross-sectional variation in corporate and investor tax rates. Using a sample of firms from 33 countries over a 21-year period, we find that the cost of equity capital increases in leverage. This effect decreases in the corporate tax rate as well as the personal tax penalty on interest income relative to equity income, though the significance of this latter result is sensitive to model specification. Further, we find that the cost of equity capital increases in tax penalized dividend income and that cross-border equity investments affect the relation between taxes and the cost of equity capital. In sum, we offer further and confirming evidence, in an international setting, that taxes impact the cost of equity capital.
4 citations
TL;DR: Wang et al. as discussed by the authors found that firms facing a reduction in their individual investors' dividend tax rate are more likely to increase dividend payout, initiate dividends, and are less likely to omit dividends, compared with firms facing an increase in their own investors' tax rate.
Abstract: The 2012 Dividend Tax Reform in China uniquely ties individual investors’ dividend tax rates to the length of their share holding period We find that firms facing a reduction in their individual investors’ dividend tax rate are more likely to increase dividend payout, initiate dividends, and are less likely to omit dividends, compared with firms facing an increase in their individual investors’ dividend tax rate Such an effect is concentrated in firms with a low level of agency cost In addition, investors respond to this tax law change by reducing trading activities before the cum-dividend day to avoid entering into a higher dividend tax bracket Further, stock return patterns on the ex-dividend day suggest that reduced trading activities lower the marginal investor’s dividend tax penalty Overall, our evidence enhances the notion that individual investors’ tax profiles shape firms’ payout policies
2 citations
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TL;DR: Using historical archival records of civil service officials' ethics and the artistic quality of their poems during China's Tang Dynasty, this article found a positive association between poetry and ethics and thus preliminary circumstantial evidence that ethical people can be a basis for good organizations.
Abstract: Ethics is an important determinant of good governance. However, ethical value is hard to observe, and selecting employees and officials based on ethics can be a challenging task. Ancient Chinese philosophy suggests that poems reflect their authors’ “inner purpose.” During the Tang, one of the most prosperous dynasties in China, the government had a practice of selecting government officials based on the artistic quality of their poems. We thus hypothesize a positive association between the quality of poetry and its author’s ethics. Using historical archival records of civil service officials’ ethics and the artistic quality of their poems during China’s Tang Dynasty, we find a positive association between poetry and ethics and thus preliminary circumstantial evidence that ethical people can be a basis for good organizations.
1 citations
TL;DR: In this article, the authors investigate whether corporate tax avoidance is affected by a firm's relationship with its customers, and find a positive association between tax avoidance and its customers' relationship-specific investments, demonstrating that customers value the cash flow benefits generated by tax savings.
Abstract: We investigate whether corporate tax avoidance is affected by a firm’s relationship with its customers We find a positive association between a firm’s tax avoidance and its customers’ relationship-specific investments, demonstrating that customers value the cash flow benefits generated by a firm’s tax savings The absence of such a link in firms with weak corporate governance is consistent with the agency perspective of tax avoidance Further analyses show that such an association is more pronounced when a firm has less bargaining power and when certain complementary mechanism is in place We conclude that customer relationship is an important factor that determines a firm’s tax avoidance incentives