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ItemExpropriation Risk and Investment: Evidence from a Natural Experiment( 2020-08-14)This paper investigates the importance of property rights protections for private firm investment. We use China's 2007 Property Law enactment as an exogenous shock that reduced the risk of local governments expropriating private firms' assets. Using a difference-in-differences design, we find that the Law results in an increase in investment for firms in provinces with high pre-Law expropriation risk. This effect is robust to using firms located in contiguous counties and is stronger in cities with larger government deficits. Furthermore, the increases in investment are tied to higher employment and asset growth, which are primarily financed by owners' personal capital.
ItemWining, Dining, and Contracting in M&A( 2020-08-14)Wining and dining, as a socially embedded venue for bonding and face-face communication, induces more favorable M&A outcomes. On average, an increase in wining and dining fees of 1 million is associated with a reduction in goodwill impairment that accounts for 2.67% of the purchase price. Utilizing an exogenous shock that curbs wining and dining for a subset of acquisitions as the identification strategy, we find that affected deals experience a greater increase in goodwill impairment, but a greater decline in integration and performance target achievability than unaffected deals, suggesting trust building and information acquisition as two underlying channels.