An Industrial Organization Approach to Finance

By David Ong
 
Class time: Monday and Thursday 1:30-3:20pm C104.

Introduction

Financial institutions in emerging markets are generally far from meeting the assumptions of most standard models in finance. In emerging markets, institutions are underdeveloped, participants are strategic and information is scarce. As a consequence, participants trade on insider information, try to learn from and manipulate each other. A growing body of financial research has begun to take these factors into account for Western markets. This course will explore that new literature and seek out applications in emerging markets, in particular, China.
This will be a new course that will cover many disciplines. The pace will be relatively relaxed and necessarily require some flexibility. I expect a lot of discussion and participation since the scope will be broad, and you will know more on many issues than I will, especially in regards to China. Your participation will be very important.
The first phase of the development of this course is the working out of topics. I motivate the course with Wong and Piotroski  (2010) “Institutions and Information Environment of Chinese Listed Firms” which describes the effects on market performance of the two features which define the Chinese financial market: implicit bureaucratic control and scarcity of reliable information. Once the Chinese context is established, I will discuss Putniņš (2010) “Market Manipulation: a Survey,” which goes into specific strategies of market manipulation found in empirical studies. This will be followed by Hu, & Noe (1997) “The Insider Trading Debate” which surveys the literature on insider trading. I will discuss my field experiment with Prof. Jun Lu on detecting and punishing insider trading using market forces without government intervention. Once we have discussed some of the ways in which manipulation can occur, I will discuss Hirshleifer & Teoh (2008), 'Thought and behavior contagion in capital markets' which describes the research on all of the known ways in which people learn and influence each other in financial market settings. I will then discuss my herding lab experiment. Time permitting, I may also introduce a new section on politics of finance in China, mostly based on Fan and Mork (2012) “Capitalizing China: Translating Market Socialism with Chinese Characteristics into Sustained Prosperity”.
The general program of research for this course is to develop market based ways of improving the efficiency of capital markets by for example inducing competition among inside information traders. A natural first step to developing such institutions will be laboratory experiments. Thus, if there is time, I will also cover Bloomfield, Robert J. and Anderson, Alyssa G., “Experimental Finance” which surveys laboratory experiments in finance. I will then also go into my laboratory experiment work on herding.
While I lecture on these topics, the student’s role is to find an issue of particular interest. The student may choose any area of finance not covered in a traditional finance course and related to emerging markets. For the first literature review presentation, the student with my guidance should find a paper(s) which is (are) closest to their interest which they will present in a ½ hr presentation. See my suggested list below. They will then adapt the methodology of the paper to address an issue of particular interest to the student for the research proposal presentation (½) hr.

Grading

Grading will be based upon class participation, a midterm quiz, and 2 presentations:
25% literature review presentation:
45% research proposal presentation and defense, and finding data, data analysis:
15% from midterm quiz on lecture materials.
15% class participation

Doing Well in the Course

This is a research oriented course. Research is full of risk. However, I am willing to largely insure you against risk. If your attend, participate, and make an honest effort with your presentations, then, you will definitely pass, and are likely to do ok, e.g., have a grade  >80%. Two students who have failed another course like this in the past had poor attendance, did terrible presentations, and one even plagiarized.

Rules for Course

Here are things that I've come to expect from students in my classes. I'm sure that you know most of these things already, but I thought I would explain it all at once to avoid case by case corrections. 
Turn off cell phones in class and during our office hours discussions. Laptop computers must be closed at all times. I will provide handouts, so there is no need for them. You are required to pay attention in class regardless of whether I or a student are presenting. To encourage you to pay attention and participate, I will often ask you questions. Of course, no sleeping in class.
I will likely be quite free with office hours. However, I will ask that you make notes during and after discussion so I don’t have to repeat things, then to send me the notes through email so we have a permanent record.

Menu of Possible Presentation References

 

Market Manipulation

Allen, F. & Gale, D. (1992), 'Stock-price manipulation', Review of Financial Studies 5(3), 503--529.
Chakraborty, A. & Yilmaz, B. (2008), 'Microstructure bluffing with nested information', The American Economic Review 98(2), 280--284.
Chakraborty, A. & Yılmaz, B. (2004), 'Informed manipulation', Journal of Economic Theory 114(1), 132--152.
Bettman, J.; Hallett, A. & Sault, S. (2007), 'The Impact of Electronic Message Board Takeover Rumors on the US Equity Market', Technical report, Working Paper.
Benabou, R. & Laroque, G. (1992), 'Using privileged information to manipulate markets: Insiders, gurus, and credibility', The Quarterly Journal of Economics 107(3), 921--958.
Barbosa, António M.R.G., Manipulation and Information Acquisition (August 27, 2011). Midwest Finance Association 2012 Annual Meetings
Chakraborty, A. & Yılmaz, B. (2004), 'Informed manipulation', Journal of Economic Theory 114(1), 132--152.
Charness, G. & Garoupa, N. (2000), 'Reputation, honesty, and efficiency with insider information: An experiment', Journal of Economics & Management Strategy 9(3), 425--451.
Clarkson, P.; Joyce, D. & Tutticci, I. (2006), 'Market reaction to takeover rumour in Internet Discussion Sites', Accounting & Finance 46(1), 31--52.
Chou, H.; Tian, G. & Yin, X. (2010), 'Rumors of Mergers and Acquisitions: Market Efficiency and Markup Pricing', .
Fotak, Veljko, The Impact of Blog Recommendations on Security Prices and Trading Volumes (September 15, 2007).
Huber, J.; Angerer, M. & Kirchler, M. (2011), 'Experimental asset markets with endogenous choice of costly asymmetric information', Experimental Economics 14(2), 223--240.
Indjejikian, Raffi J., Lu, Hai and Yang, Liyan, Rational Information Leakage (August 1, 2011).
Iori, G. & Tedeschi, G. (2010), 'Herding Effects in Order Driven Markets: The Rise and Fall of Gurus', City University Economics Discussion Papers.
Jouini, E. & Napp, C. (2011), 'Gurus and beliefs manipulation', .
Kong, Dongmin and Wang, Maobin, The Manipulator's Poker: Order-Based Manipulation in the Chinese Stock Market (May 29, 2011).
Khwaja, A. & Mian, A. (2005), 'Unchecked intermediaries: Price manipulation in an emerging stock market', Journal of Financial Economics 78(1), 203--241.
Kimmel, A. (2004), 'Rumors and the financial marketplace', The Journal of Behavioral Finance 5(3), 134--141.
Kyle, A. & Viswanathan, S. (2008), 'How to define illegal price manipulation', The American Economic Review 98(2), 274--279.
Lerman, Alina, Individual Investors' Attention to Accounting Information: Message Board Discussions (April 2011).
Smith, N. (2011), 'Herding and Speculation in Experimental Asset Markets',
Tālis J. Putniņš， Market Manipulation: A Survey,
Veiga, H. & Vorsatz, M. (2010), 'Information aggregation in experimental asset markets in the presence of a manipulator', Experimental Economics 13(4), 379--398.
Veiga, H. & Vorsatz, M. (2009), 'Price manipulation in an experimental asset market', European Economic Review 53(3), 327--342.

Insider Trading

Bruno Biaisa, Larry Glosten, Chester Spatt, Market microstructure: A survey of microfoundations, empirical results, and policy implications, Journal of Financial Markets 8 (2005) 217–264
Choi, J.; Jin, L. & Yan, H. (2012), 'Informed Trading and Expected Returns', .
Jie Hu, Thomas H. Noe 1997 “The insider trading debate” Federal Reserve Bank of Atlanta in its journal Economic Review.
Glosten, L., and P. Milgrom. 1985. “Bid, Ask, and Transaction Prices in a Specialist Market with Heterogeneously Informed  Agents.” Journal of Financial Economics, vol. 14, no. 1 (March): 71–100.
Kyle, A. 1985. “Continuous Auctions and Insider Trading.” Econometrica, vol. 53, no. 6 November):1315–35.
Ananth Madhavan 2002,  Market Microstructure: A Practitioner’s Guide, AIMR
 
Agrawal, A. & Nasser, T. (2012), 'Insider trading in takeover targets', .
Beny, L. (2007), 'Do investors in controlled firms value insider trading laws? International evidence', University of Michigan Legal Working Paper Series, 61.
Beny, L. (2005), 'Do insider trading laws matter? Some preliminary comparative evidence', American Law and Economics Review 7(1), 144--183.
Beny, L. N. (2005), 'Directors' Dealings, Market E_ciency, and Strategic Insider Trading in the German Stock Market', .
Betzer, A.; Gider, J.; Metzger, D. & Theissen, E. (2011), 'Strategic trading and trade reporting by corporate insiders', Schumpeter Discussion Papers.
Bhattacharya, U. & Daouk, H. (2009), 'When No Law is Better Than a Good Law*', Review of Finance 13(4), 577--627.
Brenner, S. (2011), 'On the irrelevance of insider trading for managerial compensation', European Economic Review 55(2), 293--303.
Byun, H.; Hwang, L. & Lee, W. (2011), 'How does ownership concentration exacerbate information asymmetry among equity investors?', Pacific-Basin Finance Journal.
Chang, M. & Wee, M. (2012), 'How Do Insider Trading Policies Affect the Information Content of Insider Trades?', .
Chen, H. & others (2011), 'Insider trading law enforcement and gross spreads of ADR IPOs', Journal of Banking & Finance 35(8), 1907--1917.
Clark, S. (2010), 'Insider Trading and Financial Economics: Where Do We Go From Here?', Stan. JL Bus. & Fin. 16, 43--141.
Collin-Dufresne, P. & Fos, V. (2012), 'Do Prices Reveal the Presence of Informed Trading?', .
Cumming, D.; Johan, S. & Li, D. (2011), 'Exchange trading rules and stock market liquidity', Journal of Financial Economics 99(3), 651--671.
Denis, D. & Xu, J. (2011), 'Insider Trading Restrictions and Top Executive Compensation', .
Dolgopolov, S. (2004), 'Insider trading and the bid-ask spread: A critical evaluation of adverse selection in market making', Cap. UL Rev. 33, 83.
Fan, J.; Morck, R. & Yeung, B. (2011), 'Introduction: Capitalizing China: Translating Market Socialism with Chinese Characteristics into Sustained Prosperity', University of Chicago Press.
Fidrmuc, J.; Korczak, A. & Korczak, P. (2008), 'Insider Trading and corporate governance: international evidence', Technical report, Working Paper, February.
Frijns, B.; Gilbert, A. & Tourani-Rad, A. (2011), 'Do Criminal Sanctions Deter Insider Trading', .
Frijns, B.; Gilbert, A. & Tourani-Rad, A. (2009), 'Elements of Effective Insider Trading Laws', working paper.
Frijns, B.; Gilbert, A. & Tourani-Rad, A. (2008), 'INSIDER TRADING, REGULATION, AND THE COMPONENTS OF THE BID–ASK SPREAD', Journal of Financial Research 31(3), 225--246.
Frino, A.; Satchell, S.; Wong, B. & Zheng, H. (2009), 'How much does an illegal insider trade?', Technical report, Working Paper, University of Sydney, January.
Gilbert, A. & Tourani-Rad, A. (2008), 'The Impact of Regulations on the Informational Basis of Insider Trading', Australian Journal of Management 33(2), 407--435.
Hu, J. & Noe, T. (2001), 'Insider trading and managerial incentives', Journal of banking & finance 25(4), 681--716.
Jiang, H. (2009), 'Three essays on ownership concentration in New Zealand', .
Jiang, H.; Habib, A. & Hu, B. (2011), 'Ownership concentration, voluntary disclosures and information asymmetry in New Zealand', The British Accounting Review 43(1), 39--53.
Korczak, A.; Korczak, P. & Lasfer, M. (2010), 'To trade or not to trade: the strategic trading of insiders around news announcements', Journal of Business Finance & Accounting 37(3-4), 369--407.
Lebedeva, O.; Maug, E. & Schneider, C. (2012), 'Trading Strategies of Corporate Insiders', .
Prevoo, T. & Ter Weel, B. (2010), 'The Effects of a Change in Market Abuse Regulation on Abnormal Returns and Volumes: Evidence from the Amsterdam Stock Market', De Economist 158(3), 237--293.
Sureda Gomila, A. & others (2010), 'Essays on the behavior and regulation of insiders', .
Tonks, I. (2010), 'Discussion of To Trade or Not To Trade: The Strategic Trading of Insiders around News Announcements', Journal of Business Finance & Accounting 37(3-4), 408--421.
Tourani-Rad, A.; Frijns, B. & Gilbert, A. (2011), 'A Proclivity to Cheat: How Culture influences Illegal Insider Trading', .
Wang, S. (2011), 'Margin Regulation and Informed Trading: Evidence from China', .
Wong, T. & Piotroski, J. (2010), 'Institutions and Information Environment of Chinese Listed Firms', Technical report, Working paper.
Xia, W. (2011), 'Discussion of the Information Disclosure of Chinese Listed Companies on GEM', Science, 02.
Yamin, Z. (2011), 'The Stock Trading Behavior of Insider Relatives', Journal of Financial Research, 03.
Zhang, X. (2011), Empirical analysis of the insider trading's characteristics in China stock market, in 'Artificial Intelligence, Management Science and Electronic Commerce (AIMSEC), 2011 2nd International Conference on', pp. 6628--6631.
 

Social Learning and Herding in Financial Markets

Acemoglu, D. & Ozdaglar, A. (2011), 'Opinion dynamics and learning in social networks', Dynamic Games and Applications 1(1), 3--49.
Acemoglu, D.; Dahleh, M.; Ozdaglar, A. & Tahbaz-Salehi, A. (2010), Observational learning in an uncertain world, in 'Decision and Control (CDC), 2010 49th IEEE Conference on', pp. 6645--6650.
Andreoni, J. & Mylovanov, T. (2012), 'Diverging opinions', American Economic Journal: Microeconomics 4(1), 209--232.
Anderson, Lisa R. and Holt, Charles A."Information Cascades in the Laboratory." American Economic Review, 1997, 87(5), pp. 847-62.
Avery, Christopher and Zemsky, Peter. "Multidimensional Uncertainty and Herd Behavior in Financial Markets." American Economic Review, 1998, 88(4), pp. 724-48.
Benjamin, D.; Raymond, C. & Rabin, M. (2011), 'A Model of Non-Belief in the Law of Large Numbers', .
Berkovich, E. (2011), 'Search and herding effects in peer-to-peer lending: evidence from prosper. com', Annals of Finance 7(3), 389--405.
Beshears, J.; Choi, J.; Laibson, D.; Madrian, B. & Milkman, K. (2011), 'The effect of providing peer information on retirement savings decisions', Technical report, National Bureau of Economic Research.
Bloomfield, R.; O’Hara, M. & Saar, G. (2009), 'How noise trading affects markets: An experimental analysis', Review of Financial Studies 22(6), 2275--2302.
Bloomfield, R.; Tayler, W. & Zhou, F. (2009), 'Momentum, reversal, and uninformed traders in laboratory markets', The Journal of Finance 64(6), 2535--2558.
Brunner, C. (2010), 'Cascades in Experimental Asset Markets', .
Brunner, C. & Goeree, J. (2009), 'Wise crowds or wise minorities?', .
Banerjee, Abhijit V. "A Simple Model of Herd Behavior." Quarterly Journal of Economics, 1992, 107(3), pp. 797-817.
Caldieraro, F.; Cunha Jr, M.; Shulman, J. & Zhang, J. (2011), 'Is Silence Golden?–How Non-Verifiable Information Influences Funding Outcomes On Peer-to-Peer Lending Platforms', .
Celen, Bogaghan and Kariv, Shachar. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory." American Economic Review, 2004, 94(3), pp. 484-98.
Cipriani, Marco and Antonio Guarino, "Herd Behavior in a Laboratory Financial Market", American Economic Review, Vol. 95, No. 5 (Dec., 2005), pp. 1427-1443
Chen, G. (), 'Herd Induced By Uninformed Traders In Efficient Financial Markets', .
Choi, S.; Gale, D. & Kariv, S. (2009), 'Social learning in networks: A quantal response equilibrium analysis of experimental data', WP, May.
Celen, B. & Hyndman, K. (2011), 'Social Learning through Endogenous Information Acquisition: An Experiment', .
Çelen, B.; Kariv, S. & Schotter, A. (2006), 'An experimental test of advice and social learning', Levine's Bibliography.
Cipriani, M. & Guarino, A. (2009), 'Herd behavior in financial markets: an experiment with financial market professionals', Journal of the European Economic Association 7(1), 206--233.
Drehmann, M.; Oechssler, J. & Roider, A. (2007), 'Herding with and without payoff externalities—an internet experiment', International Journal of Industrial Organization 25(2), 391--415.
Egebark, J. & Ekstrцm, M. (2011), 'Like What You Like or Like What Others Like?', .
Eyster, E.; Galeotti, A.; Kartik, N. & Rabin, M. (2012), 'Congested Observational Learning'.
Eyster, E. & Rabin, M. (2010), 'Naive herding in rich-information settings', American economic journal: microeconomics 2(4), 221--243.
Eyster, E. & Rabin, M. (2011), 'Rational Observational Learning', .
Fahr, R. & Irlenbusch, B. (2007), 'Who Follows the Crowd–Groups or Individuals?'.
Feri, F.; Meléndez-Jiménez, M.; Ponti, G. & Vega-Redondo, F. (2011), 'Error cascades in observational learning: An experiment on the Chinos game', Games and Economic Behavior 73(1), 136--146.
Fernández, B.; Garcia-Merino, T.; Mayoral, R.; Santos, V. & Vallelado, E. (), 'The Role Of The Interaction Between Information And Behavioral Bias In Explaining Herding', .
Guarino, A. & Cipriani, M. (2011), 'Estimating a Structural Model of Herd Behavior in Financial Markets', .
Guarino, A.; Harmgart, H. & Huck, S. (2011), 'Aggregate information cascades', Games and Economic Behavior.
Guarino, A. & Jehiel, P. (2009), 'Social learning with coarse inference',
Hirshleifer, D. & Teoh, S. (2008), 'Thought and behavior contagion in capital markets', .
Ivanov, A.; Levin, D. & Peck, J. (2011), 'Behavioral Biases, Informational Externalities, and Efficiency in Endogenous-Timing Herding Games: an Experimental Study'(1004), Technical report, VCU School of Business, Department of Economics.
Koessler, F.; Noussair, C. & Ziegelmeyer, A. (2005), Individual behavior and beliefs in experimental parimutuel betting markets, Max-Planck-Inst. for Research into Economic Systems, Strategic Interaction Group.
Kremer, S. & Nautz, D. (2011), 'Can Correlated Trades in the Stock Market be Explained by Informational Cascades? Empirical Results from an Intra-Day Analysis', .
Larson, N. (2011), 'Inertia in social learning from a summary statistic', MPRA Paper.
Miklós-Thal, J. & Zhang, J. (2011), 'Strategic demarketing', Technical report, Working paper, Massachusetts Institute of Technology.
Nikandrova, A. (2007), 'Informational Cascades in Financial Markets with Costly Information', .
Oechssler, J.; Schmidt, C. & Schnedler, W. (2011), 'On the ingredients for bubble formation: informed traders and communication', Journal of Economic Dynamics and Control.
Park, A. & Sabourian, H. (2006), 'Herding and contrarian behavior in financial markets', .
Stone, D. & Miller, S. (2011), 'Leading, learning and herding', .
Stone, D. & Zafar, B. (2012), 'Do we follow others when we should outside the lab? Evidence from the AP Top 25', .
Sutter, M.; Huber, J.; Kirchler, M. & others (2008), Bubbles and information: An experiment, Department of Economics (Inst. für Wirtschaftstheorie und Wirtschaftsgeschichte).
Tas, B.; Imisiker, S. & Ozcan, R. (2012), 'Price Manipulation by Intermediaries', .
Venezia, I.; Nashikkar, A. & Shapira, Z. (2009), 'Herding in trading by amateur and professional investors', .
Weizsacker, G. (2010), 'Do we follow others when we should? A simple test of rational expectations', The American Economic Review 100(5), 2340--2360.
Ziegelmeyer, A.; March, C. & Krügel, S. (2012), '“Do We Follow Others when We Should? A Simple Test of Rational Expectations”: Comment', Jena Economic Research Papers, 006.

Peer-to-Peer Lending|

Bachmann, A.; Becker, A.; Buerckner, D.; Hilker, M.; Kock, F.; Lehmann, M.; Tiburtius, P. & Funk, B. (2011), 'Online Peer-to-Peer Lending–A Literature', Journal of Internet Banking and Commerce 16(2).
Barasinska, N. & Schдfer, D. (2011), 'Does Gender Affect Funding Success at the Peer-to-Peer Credit Markets? Evidence from the Largest German Lending Platform', .
Berkovich, E. (2011), 'Search and herding effects in peer-to-peer lending: evidence from prosper. com', Annals of Finance 7(3), 389--405.
Ceyhan, S.; Shi, X. & Leskovec, J. (2011), Dynamics of bidding in a P2P lending service: effects of herding and predicting loan success, in 'Proceedings of the 20th international conference on World wide web', pp. 547--556.
Erzo, R. & Shue, F. (2010), 'Inferring Asset Quality: Determining Borrower Creditworthiness in Peer-to-Peer Lending Markets', .
Everett, C. (2008), 'Group membership, relationship banking and loan default risk: the case of online social lending', Technical report, Mimeo.
Freedman, S. & Jin, G. (2011), 'Learning by Doing with Asymmetric Information: evidence from Prosper. com', Technical report, National Bureau of Economic Research.
Iyer, R.; Khwaja, A.; Luttmer, E. & Shue, K. (2009), 'Screening in new credit markets: can individual lenders infer borrower creditworthiness in peer-to-peer lending?', Technical report, National Bureau of Economic Research.
Lin, M.; Prabhala, N. & Viswanathan, S. (2009), 'Social networks as signaling mechanisms: Evidence from online peer-to-peer lending', WISE 2009.
Miller, S. (2011), 'Information and default in consumer credit markets: Evidence from a natural experiment', .
Pope, D. & Sydnor, J. (2008), 'What’s in a Picture? Evidence of Discrimination from Prosper. com', Journal of Human Resources.
Pцtzsch, S. & Bцhme, R. (2010), 'The role of soft information in trust building: Evidence from online social lending', Trust and Trustworthy Computing, 381--395.
Weiss, G.; Pelger, K. & Horsch, A. (2010), Mitigating Adverse Selection in P2P Lending–Empirical Evidence from Prosper, in 'Available at SSRN: http://ssrn. com/abstract'.
Zhang, J. & Liu, P. (2011), 'Rational Herding in Microloan Markets'.

Experimental Finance

Sunder, Shyam , What Have We Learned from Experimental Finance?. Lecture Notes in Economics and Mathematical Systems, Vol. 590, pp. 93-100, Sobei H. Oda, (ed.), Springer, Berlin, 2007
Bloomfield, Robert J. and Anderson, Alyssa G., Experimental Finance (April 27, 2010). Johnson School Research Paper Series No. 23-2010.
Bossaerts, Peter L., The Experimental Study of Asset Pricing Theory (June 14, 2010). Foundations and Trends in Finance, Vol. 3, No. 4, pp. 289-361, 2009. Available at SSRN: http://ssrn.com/abstract=1624971

The political economy of finance

Aivazian, V.; Ge, Y. & Qiu, J. (2005), 'Corporate governance and manager turnover: An unusual social experiment', Journal of Banking & Finance 29(6), 1459--1481.
 
Bai, C.; Hsieh, C. & Qian, Y. (2006), 'The return to capital in China', Technical report, National Bureau of Economic Research.
 
Bai, C.; Xu, L.C. (2005), 'Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises', Journal of Comparative Economics 33(3), 517--539.
 
Beck, T. (2011), 'The Role of Finance in Economic Development: Benefits, Risks, and Politics', European Banking Center Discussion Paper(2011-038).
 
Bernardo, A.; Luo, J. & Wang, J. (2006), 'A theory of socialistic internal capital markets', Journal of Financial Economics 80(3), 485--509.
 
Boyreau-Debray, G. & Wei, S. (2005), 'Pitfalls of a state-dominated financial system: The case of China', Technical report, National Bureau of Economic Research.
 
Campos, N. & Coricelli, F. (), 'Dynamics of financial liberalizations and reversals: Economic and political factors', .
 
Chen, Q.; Goh, C.; Sun, B. & Xu, L. (2011), 'Market integration in China', World Bank Policy Research Working Paper Series, Vol.
 
Cheng, X. & Degryse, H. (2006), 'The impact of bank and non-bank financial institutions on local economic growth in China', .
 
Claessens, S. (2009), 'Competition in the financial sector: overview of competition policies', The World Bank Research Observer 24(1), 83--118.
 
Cull, R. & Xu, L. (2000), 'Bureaucrats, state banks, and the efficiency of credit allocation: The experience of Chinese state-owned enterprises', Journal of Comparative Economics 28(1), 1--31.
 
Demetriades, P.; Du, J.; Girma, S. & Xu, C. (2008), 'Does the Chinese banking system promote the growth of firms?', .
 
Ding, S.; Guariglia, A. & Knight, J. (2010), 'Does China overinvest? Evidence from a panel of Chinese firms', .
 
Dollar, D.; Wang, S.; Xu, L. & Shi, A. (2004), 'Improving city competitiveness through the investment climate: Ranking 23 Chinese cities', Available at SSRN 530744.
 
Dougherty, S.; Herd, R. & He, P. (2007), 'Has a private sector emerged in China's industry? Evidence from a quarter of a million Chinese firms', China Economic Review 18(3), 309--334.
 
Du, J.; He, Q. (2011), 'Channels of interprovincial risk sharing in China', Journal of Comparative Economics 39(3), 383--405.
 
Duchin, R. & Sosyura, D. (2012), 'Divisional managers and internal capital markets', Journal of Finance, Forthcoming.
 
Feng Lu, S. & Yao, Y. (2009), 'The effectiveness of law, financial development, and economic growth in an economy of financial repression: evidence from China', World Development 37(4), 763--777.
 
Ferri, G. (2009), 'Are new tigers supplanting old mammoths in China’s banking system? Evidence from a sample of city commercial banks', Journal of Banking & Finance 33(1), 131--140.
 
Ferri, G. & Liu, L. (2010), 'Honor Thy Creditors Before Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?*', Asian Economic Papers 9(3), 50--71.
 
Freixas, X.; Lóránth, G. & Morrison, A. (2007), 'Regulating financial conglomerates', Journal of Financial Intermediation 16(4), 479--514.
 
Girma, S. & Gong, Y. (2008), '“Putting people first”? FDI and employment adjustment of state-owned enterprises in Urban China', International Journal of Industrial Organization 26(2), 573--585.
 
Guariglia, A. & Poncet, S. (2008), 'Could financial distortions be no impediment to economic growth after all? Evidence from China', Journal of Comparative Economics 36(4), 633--657.
 
Héricourt, J. & Poncet, S. (2009), 'FDI and credit constraints: Firm-level evidence from China', Economic Systems 33(1), 1--21.
 
Ho, C. (2011), 'Market structure, welfare, and banking reform in China', Journal of Comparative Economics.
 
Ito, J. (2006), 'Economic and institutional reform packages and their impact on productivity: A case study of Chinese township and village enterprises', Journal of Comparative Economics 34(1), 167--190.
 
Jha, S. (2011), 'Sharing the Future: Financial Innovation and Innovators in Solving the Political Economy Challenges of Development'.
 
Li, C. (2010), 'Savings, investment, and capital mobility within China', China Economic Review 21(1), 14--23.
 
Li, H.; Meng, L.; Wang, Q. & Zhou, L. (2008), 'Political connections, financing and firm performance: Evidence from Chinese private firms', Journal of Development Economics 87(2), 283--299.
 
Lin, C. (2001), 'Corporatisation and corporate governance in China's economic transition', Economics of Planning 34(1), 5--35.
 
Pagano, M. & Volpin, P. (2005), 'The political economy of corporate governance', The American Economic Review 95(4), 1005--1030.
 
Pagano, M. & Volpin, P. (2001), 'The political economy of finance', Oxford Review of Economic Policy 17(4), 502--519.
 
Poncet, S.; Steingress, W. & Vandenbussche, H. (2010), 'Financial constraints in China: firm-level evidence', China Economic Review 21(3), 411--422.
 
Prasad, E.; Rajan, R. & Subramanian, A. (2007), 'Foreign capital and economic growth', Technical report, National Bureau of Economic Research.
 
Prasad, E. & Wei, S. (2007), The Chinese approach to capital inflows: patterns and possible explanations'Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences', University of Chicago Press, , pp. 421--480.
 
Tressel, T. & Verdier, T. (2008), 'Does Financial Globalization Discipline Politically Connected Firms?', .
 
Walentin, K. (2006), Essays on financial frictions, New York University.
 
Xu, N.; Xu, X. & Yuan, Q. (2011), 'Political Connections, Financing Friction, and Corporate Investment: Evidence from Chinese Listed Family Firms', European Financial Management.

Political Connection

 
Boubakri, N.; Guedhami, O.; Mishra, D. & Saffar, W. (2012), 'Political connections and the cost of equity capital', Journal of Corporate Finance.
 
Cai, H.; Li, H.; Park, A. & Zhou, L. (2010), 'Family ties and organizational design: evidence from Chinese private firms', The Review of Economics and Statistics(0).
 
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