Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - The effectiveness of public enforcement
T2 - evidence from the resolution of tunneling in China
AU - Hass, Lars Helge
AU - Johan, Sofia
AU - Müller, Maximilian
PY - 2016/9
Y1 - 2016/9
N2 - This paper examines the effectiveness of public enforcement by studying the effects of regulatory intervention to curb tunneling through intercorporate loans in China. Specifically, we explore whether public enforcement efforts in 2006 (blacklisting and sanctions) resulted in less tunneling, and ultimately in increased performance for tunneling firms. We show that tunneling is among the dominant factors increasing the likelihood of becoming blacklisted. We also find that firms’ tunneling mechanisms decreased significantly after the regulatory shock, and that their performance increased significantly compared to non-tunneling firms after the regulatory shock. Finally, we find a positive market reaction to the public announcement of tunneling both for firms that have been blacklisted and other tunneling firms that are not blacklisted. Collectively, these results suggest that public enforcement in the presence of a credible threat succeeds in deterring the effect on tunneling behavior in China.
AB - This paper examines the effectiveness of public enforcement by studying the effects of regulatory intervention to curb tunneling through intercorporate loans in China. Specifically, we explore whether public enforcement efforts in 2006 (blacklisting and sanctions) resulted in less tunneling, and ultimately in increased performance for tunneling firms. We show that tunneling is among the dominant factors increasing the likelihood of becoming blacklisted. We also find that firms’ tunneling mechanisms decreased significantly after the regulatory shock, and that their performance increased significantly compared to non-tunneling firms after the regulatory shock. Finally, we find a positive market reaction to the public announcement of tunneling both for firms that have been blacklisted and other tunneling firms that are not blacklisted. Collectively, these results suggest that public enforcement in the presence of a credible threat succeeds in deterring the effect on tunneling behavior in China.
KW - Corporate governance
KW - Tunneling
KW - Enforcement
U2 - 10.1007/s10551-014-2389-z
DO - 10.1007/s10551-014-2389-z
M3 - Journal article
VL - 134
SP - 649
EP - 668
JO - Journal of Business Ethics
JF - Journal of Business Ethics
SN - 0167-4544
IS - 4
ER -