Xiang (Sean) Gao

This paper provides empirical evidence of the chief executive officer (CEO) staffing practices as well as the ownership pattern in Chinese subsidiaries of multinational corporations (MNCs). The two aspects are modeled as correlated decisions grounded on a corporate finance point of view. A number of factors influencing the joint choices between the two pairs of alternatives are identified by reviewing the reasons for employing either parent country nationals or local managers and the reasons for various ownership patterns. Using the bivariate Probit model, the influence of each of these factors is empirically tested with a collection of data from 224 MNCs. A sensitivity test on sample size is conducted at the end of this paper to investigate impacts of small sample size on the robustness of the results. The study contributes in providing empirical evidence in an area dominated by conceptual assertions and in explaining the strategic decision of MNCs.

This paper shows that firms with high initial capital and promising Research and Development (R&D) projects have a good probability to be financed by external funds. However, the financing decision made by outside investors might be hampered by the hidden information of R&D projects' quality. Monitoring is one way to attack this problem. By incorporating monitoring as a choice variable to outside investors, the model reveals the willingness to lend given that investors are equipped with certain degree of knowledge about the quality. The optimal level of monitoring varies in responding to not only the amount borrowers invest in but also the completeness and accuracy of the information they have acquired.

This paper analyzes the Consumption based Capital Asset Pricing Model (C-CAPM) using assets return data from the Hong Kong financial market. The nonparametric methodology of Hansen and Jagannathan (1991) bounds as well as the standard statistical GMM methods are applied to evaluate the performance of the C-CAPM. With respect to the specifications of utility, in addition to the standard power utility, the paper adopts both the recursive preferences model proposed by Epstein and Zin (1989) and the time-non-separable internal habit persistence utility, approach of Constantinides (1990). By examining the findings with the minimum distance test of Hansen and Jagannathan (1997), the paper concludes that all the three utility specifications produce stochastic discount factors consistent with the data, i.e. with a mean-standard pair inside the bound. Also, the paper finds an impatience factor smaller than 1 by using GMM. However, relatively high degrees of risk aversion are implied for the models to be consistent, although incorporating habit formation partially reduces the levels. It is far from the height which was documented for the US and UK data, but high enough to raise the equity premium puzzle.