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This paper studies the impact of bureaucratic checks on firm value using the revision of the regulations on disciplinary actions of the Communist Party of China (CPC) in 2015 as a natural experiment. We document a positive and substantial market reaction following this unexpected policy change that tightens and formalizes the constraints on bureaucrats’ misconduct. The impact is less pronounced for firms with state controlling shareholders or state ownership, firms having CEOs or directors with CPC memberships, and these operate in regions with better institutional quality. The subsequent revision in 2018 that promoted political obedience is not associated with positive market reactions. Our results have policy implications for the design of the incentive structure within bureaucratic organizations.

Manuscript TypeEmpiricalResearch Question/IssueThe paper examines whether the fund managers in a given investing institution behave in a coordinated manner, in terms of their trading around the announcement of a major takeover by a company in which the institution has two or more separate holdings.Research Findings/InsightsOur data show that many institutional holdings consist of subholdings managed by separate fund managers. We find that trading around takeover announcements is coordinated in a majority of cases, but there is material disagreement within institutions in a substantial minority of cases, depending on how disagreement is measured. This suggests that blocks, at the level of the institution, do not always exist in the sense of being controlled by a single agent. Institutional ownership is less concentrated than it might appear to be from lists of shareholders in annual reports and databases.Theoretical/Academic ImplicationsResearch in corporate governance tends to assume implicitly that an institutional holding is a single block. Our findings indicate that it is not safe to make this assumption, especially in the case of larger blocks which are more likely to consist of several subholdings. Some types of research would benefit from using data at the level of the managed fund.Practitioner/Policy ImplicationsThere is much discussion about the merits of coordinated shareholder action between investing institutions, for example in the Kay Review. The findings imply that there is scope for greater coordination within institutions as well as across institutions.

This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets.

This paper investigates whether personal tax could help explain the size of the historic equity premium in the UK measured before personal tax. If there has been a higher tax burden on equity, some of the premium could be viewed as compensation for tax. It is estimated here that personal tax reduces the arithmetic mean nominal return on equity from 13.3% to 11.1% pa during the period 1919–1998, and the mean return on gilts from 7.1% to 5.6% pa. Thus, personal tax accounts for a slightly higher proportion of the before-tax return on gilts than on equity, implying that the equity premium is not a compensation for a higher tax burden on equity.

The mutualisation of two English third division football clubs in 2001 and the creation of a number of supporters' trusts has offered hope to supporters of many larger clubs who see mutual status as protection from the vagaries of shareholder ownership and private control. This paper assesses whether mutuality would be of economic benefit for football clubs, drawing heavily on the experiences of mutuals in the financial sector. The economic case rests on the distinctive feature of customer loyalty to a club, which will usually be much stronger than loyalty to a financial institution. However, club members must expect to shoulder some financial risk.

UK companies and their shareholders have increasingly opted to have newly issued shares privately placed rather than selling them via a rights issue. We present a model of the choice between these two methods. We view a rights issue as similar to the type of issue envisaged by Myers and Majiluf (1984), in which information asymmetry persists until after the shares are sold. In contrast, the placement process is assumed to enable potential placees to investigate the value of the issuer and to reveal the true value via the placement price, as in Hertzel and Smith (1993). The model yields several testable predictions which are strongly supported by evidence from a large sample of seasoned equity offers.