This paper studies how globalization affects the corporate tax policies of U.S. manufacturing firms. Using U.S.-granting China Permanent Normal Trade Relations as a quasi-natural experiment, we find a significant increase in tax reduction activities for firms facing higher exposure to Chinese imports. The effect is more pronounced for firms with higher managerial slack. We also find that the effect is stronger for firms in less diversified products market and faster changing industries. We also show that U.S. firms facing higher Chinese import competition are more likely to engage in other tax-motivated activities: acquisition of subsidiaries in low-tax regions and suspected transfer pricing. Furthermore, we explore the 2017 tax cut and the recent U.S.-China trade dispute and find that firms engage less in tax reduction activities after the 2017 tax cut and after the tariff increase for Chinese imports.
- Ph.D., M.A., M.B.A., University of Florida
- B.E., South China University of Technology
Professor Chen LIN joined The University of Hong Kong (HKU) as Chair of Finance at the Faculty of Business and Economics (now HKU Business School) in 2013. Before joining HKU, he was on the faculty team of the Department of Finance at the Chinese University of Hong Kong (CUHK). At CUHK, he became Full Professor in Finance in 2010 and was awarded the Choh-Ming Li Professorship in Finance in 2012. He received his Bachelor of Engineering from the South China University of Technology in 2000 and a MBA (2004), M.A. (2005) and Ph.D. (2006) from Warrington College of Business Administration, University of Florida. His research interests include banking and financial institutions, corporate finance, financial technology, entrepreneurship and innovation, finance and economic development.
Chen’s papers are published or forthcoming in Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Review of Finance, Management Science, The Accounting Review, Journal of Accounting and Economics, Journal of Accounting Research, Review of Accounting Studies, Journal of Law & Economics, Journal of Law, Economics and Organization, The Economic Journal, Journal of Public Economics, Journal of Development Economics, Journal of International Business Studies, Journal of Corporate Finance, Journal of Banking & Finance, Journal of Risk and Insurance, Journal of International Money and Finance, Journal of Empirical Finance, Journal of Comparative Economics, Journal of Regulatory Economics, Review of Industrial Organization, and others. His papers also received various awards such as the Jensen Prize (First Prize) for the Best Papers Published in the Journal of Financial Economics in the Areas of Corporate Finance and Organizations, The JFE All Star paper, the Chicago Quantitative Alliance Asian Academic Competition Research Paper Award, the Hong Kong Asian Capital Market Research Prize awarded by CFA Institute and HKSFA, two Best Paper Awards at the 9th International Conference on Asia-Pacific Financial Markets, the Bureau van Dijk prize in Corporate Finance at the 31st Australasian Finance and Banking Conference and the best paper award at the 31st Asian Finance Association Annual Conference. He currently serves on the editorial boards of various international journals including Management Science, Journal of Banking and Finance, Journal of Corporate Finance and Journal of Comparative Economics. He has been invited by the Royal Swedish Academy of Sciences to nominate candidates for the Nobel Prize in economics. He is the Principal Investigator of many RGC Competitive Earmarked Research Grants, the Project Coordinator of a RGC Theme-based Research Grant focusing on Financial Technology, Inclusion and Stability, a Co-Principal Investigator of a RGC Theme-based Research Grant, the first large-scale, theme-based business research grant in Hong Kong and a Co-Principal Investigator of the first Fintech related Research Impact Fund in Hong Kong.
Chen’s works and views have been presented in major finance conferences such as American Finance Association annual conference, European Finance Association annual conference and Western Finance Association annual conference, and various conferences held by institutions such as Asian Development Bank, China Banking Regulatory Commission, China Security Regulatory Commission, Hong Kong Monetary Authority, Hoover Institute at Stanford University, International Monetary Fund, National Bureau of Economic Research and the World Bank and covered by BBC World TV, Bloomberg, Foreign Policy, Financial Times, Harvard Law School Forum on Corporate Governance and Financial Regulation, China Daily, CNNMoney, CFA Digest, Hong Kong Satellite TV, VoxEU, Wall Street Journal (Real Time Economics) and World Bank Doing Business Report. He has provided consulting services for the Asian Development Bank, the Bank of International Settlement, China Construction Bank (Asia), Hong Kong Financial Services Development Council, Qianhai Institute of Innovative Research, and the World Bank. He was a Distinguished Visiting Professor of Finance, Entrepreneurship and Innovation at Haas School of Business, University of California, Berkeley. He served as a panel member of the Research Grant Council of Hong Kong and the RAE exercise conducted by University Grants Committee of Hong Kong. He is also a Currency Board Committee member of the Hong Kong Exchange Fund Advisory Committee, a Fintech Advisory Group member of the Hong Kong Securities and Futures Commission (SFC) and an Advisory Council member and a research fellow at HKIMR of Hong Kong Monetary Authority.
- Banking and Financial Institutions
- Corporate Finance
- Financial Technology
- Entrepreneurship and Innovation
- Financial Inclusion
- Finance and Economic Development
- “The Telegraph and Modern Banking Development, 1881-1936”,
(with C. Ma, Y. Sun, and Y. Xu), Journal of Financial Economics, forthcoming.
- “Epidemic Disease and Financial Development”,
(with J. An and W. Hou), Journal of Financial Economics, forthcoming.
- “How Did Depositors Respond to COVID-19?”,
(with R. Levine, M. Tai and W. Xie), Review of Financial Studies, forthcoming.
- “Globalization and U.S. Corporate Tax Policies: Evidence from Import Competition”,
(with T. Chen and X. Shao), Management Science, forthcoming.
- “Corporate Immunity to COVID-19 Pandemic”,
(with W. Ding, R. Levine and W. Xie), Journal of Financial Economics, forthcoming.
- “How Do Board Reforms Affect Debt Financing Costs Around the World?”,
(with L. Wei and H. Zhao), Journal of Financial and Quantitative Analysis, forthcoming.
- “Depoliticization and Corporate Transformation”,
(with D. Berkowitz and S. Liu), Journal of Law, Economics and Organization, forthcoming.
- “Deposit Supply and Bank Transparency”,
(with L. Jiang, R. Levine and W. Xie), Management Science, forthcoming.
- “Minimum Wage and Corporate Investment: Evidence from Manufacturing Firms in China”,
(with H. Geng, Y. Huang, and S. Liu), Journal of Financial and Quantitative Analysis, forthcoming.
- “Product Price Risk and Liquidity Management: Evidence from the Electricity Industry,”
(with T. Schmid and M. Weisbach), Management Science, forthcoming.
- “Geographical Diversification and Banks’ Funding Costs,”
(with R. Levine and W. Xie), Management Science, forthcoming.
- “Communication within Banking Organizations and Small Business Lending,”
(with R. Levine, Q. Peng and W. Xie), Review of Financial Studies, 33, 2020, 5750–5783
- “Political Investment Cycles of State-Owned Enterprises,”
(with Q. Li and L. Xu), Review of Financial Studies, 33, 2020, 3088–3129
- “Managerial Entrenchment and Information Production,”
(with L. Wei and W. Xie), Journal of Financial and Quantitative Analysis, 55, 2020, 2500-2529.
- “Bank Networks and Acquisitions,”
(with R. Levine and Z. Wang), Management Science, 66, 2020, 5216–5241.
- “The African Slave Trade and Modern Household Finance,”
(with R. Levine and W. Xie), The Economic Journal, 140, 2020, 1817–1841.
- “Cross-Border Acquisitions: Do Labor Regulations Affect Acquirer Returns?,”
(with R. Levine and B. Shen), Journal of International Business Studies, 51, 2020, 194-217.
- “Institutional Shareholders and Corporate Social Responsibility,”
(with T. Chen and H. Dong), Journal of Financial Economics, 135, 2020, 483-504.
- “Hello, Is Anybody There? Corporate Accessibility for Outside Shareholders as a Signal of Agency Problems,”
(with M. Firth, S. Wong, and X. Zhao), Review of Accounting Studies, 24, 2019, December.
- “Does Change in the Information Environment Affect Financing Choices?,”
(with X. Li and X. Zhan), Management Science, 65, 2019, 5676–5696.
- “Litigation Risk and Voluntary Disclosure: Evidence from Legal Changes,”
(with J. Houston, S. Liu and L. Wei), The Accounting Review, 94, 2019, 247-272.
- “Is Skin in the Game a Game Changer? Evidence from Mandatory Changes of D&O Insurance Policies,”
(with M. Officer, T. Schmid and H. Zou), Journal of Accounting and Economics, 68, 2019, August.
- “Competition and Bank Liquidity Creation,”
(with L. Jiang and R. Levine), Journal of Financial and Quantitative Analysis, 54, 2019, 513-538.
- “Does Information Acquisition Alleviate Market Anomalies? Categorization Bias in Stock Splits,”
(with D. Kong and S. Liu), Review of Finance, 23, 2019, 245-277.
- “Employee Representation and Financial Leverage,”
(with T. Schmid and Y. Xuan), Journal of Financial Economics, 127, 2018, 303-324.
- “Managerial Risk-Taking Incentives and Merger Decisions,”
(with M. Officer and B. Shen), Journal of Financial and Quantitative Analysis, 53, 2018, 643-680.
- “Shareholder Protection and the Cost of Capital,”
(with J. Houston and W. Xie), Journal of Law & Economics, 61, 2018, 677-710.
- “Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit,”
(with R. Levine and W. Xie), Journal of Financial and Quantitative Analysis, 53, 2018, lead article.
- “Insider Trading and Innovation,”
(with R. Levine and L. Wei), Journal of Law & Economics, 60, 2017, 749-800.
- “Does Information Asymmetry Affect Corporate Tax Aggressiveness,”
(with T. Chen), Journal of Financial and Quantitative Analysis, 52, 2017, pp. 2053-2081.
- “Competition and Bank Opacity,”
(with L. Jiang and R. Levine), Review of Financial Studies, 29, 2016, pp. 1911-1942.
- “Spare Tire? Stock Markets, Banking Crises, and Economic Recoveries,”
(with R. Levine and W. Xie), Journal of Financial Economics, 120, 2016, pp. 81-101.
- “The Financial Implications of Supply Chain Changes,”
(with J. Houston and Z. Zhu), Management Science, 62, 2016. pp. 2520-2542.
- “Alliances and Return Predictability,”
(with J. Cao and T. Chordia), Journal of Financial and Quantitative Analysis, 51, 2016, pp. 1689-1717.
- “Do Analysts Matter for Governance: Evidence from Natural Experiments,”
(with T. Chen and J. Harford), Journal of Financial Economics, 115, 2015, pp. 383-410.
- “Do Property Rights Matter? Evidence from a Property Law Enactment,”
(with D. Berkowitz and Y. Ma), Journal of Financial Economics, 116, 2015, pp. 583-593.
- “Why Do Firms Evade Taxes? The Role of Information Sharing and Financial Sector Outreach,”
(with T. Beck, Y. Ma), Journal of Finance, 69, 2014, pp. 763-817.
- “Political Connections and the Cost of Bank Loans,”
(with J. Houston, L Jiang, Y. Ma), Journal of Accounting Research, 52, 2014, pp. 193-243.
- “Directors’ and Officers’ Liability Insurance and Loan Spreads,”
(with M. Officer, R. Wang, H. Zou), Journal of Financial Economics, 110, 2013, pp. 37-60.
- “Corporate Ownership Structure and the Choice between Bank Debt and Public Debt,”
(with Y. Ma, P. Malatesta, Y. Xuan), Journal of Financial Economics, 109, 2013, pp. 517-534.
- “The Client is King: Do Mutual Fund Relationships Bias Analyst Recommendations?,”
(with Firth, M., P. Liu, Y. Xuan), Journal of Accounting Research, 51, 2013, pp. 165-200.
- “Regulatory Arbitrage and International Bank Flows,”
(with Houston, J., Y. Ma), Journal of Finance, 67, 2012, pp. 1845-1895.
- “Corporate Ownership Structure and Bank Loan Syndicate Structure,”
(with Y. Ma, P. Malatesta, Y. Xuan), Journal of Financial Economics, 104, 2012, pp. 1-22, (lead article).
- “The Real and Financial Implications of Corporate Hedging,”
(with Campello, M., Y. Ma, H. Zou), Journal of Finance, 66, 2011, pp. 1615-1647.
- “Ownership Structure and Financial Constraints: Evidence from a Structural Estimation,”
(with Y. Ma, Y. Xuan), Journal of Financial Economics, 102, 2011, pp. 416-431.
- “Directors’ and Officers’ Liability Insurance and Acquisition Outcomes,”
(with M. Officer, H. Zou,), Journal of Financial Economics, 102, 2011, pp. 507-525.
- “Media Ownership, Concentration and Corruption in Bank Lending,”
(with Houston, J. , Y. Ma), Journal of Financial Economics, 100, 2011, pp. 326-350.
- “Ownership Structure and the Cost of Corporate Borrowing,”
(with Y. Ma, P. Malatesta, Y. Xuan,), Journal of Financial Economics, 100, 2011, pp. 1-23, (lead article).
- “Creditor Rights, Information Sharing and Bank Risk Taking,”
(with Houston, J., P. Lin, Y. Ma), Journal of Financial Economics, 96, 2010, pp. 485-512.
- “Friend or Foe? The Roles of State and Mutual Fund Ownership in the Split Share Structure Reform in China,”
(with Firth, M., H. Zou), Journal of Financial and Quantitative Analysis, 45, 2010, pp. 685-706.
- “Property Rights Protection and Corporate R&D: Evidence from China,”
(with P. Lin, F. Song), Journal of Development Economics, 93, 2010, pp. 49-62.
- “Political Decentralization and Corruption: Evidence from Around the World,”
(with Fan, S., D. Treisman), Journal of Public Economics, 93, 2009, pp. 14-34.
- “Corruption in Bank Lending to Firms: Cross-Country Micro Evidence on the Beneficial Role of Competition and Information Sharing,”
(with Barth, J., P. Lin, F. Song), Journal of Financial Economics, 91, 2009, pp. 361-388.
Does a bank’s dependence on different external funding sources shape its voluntary disclosure of information? We evaluate whether economic shocks that increase the supply of bank deposits alter the cost–benefit calculations of bank managers concerning voluntary information disclosure. We measure information disclosure using 10-K filings, 8-K filings, and earnings guidance. As for the funding shock, we use unanticipated technological innovations that triggered shale development and booms in bank deposits. Further analyses suggest that greater exposure to shale development reduced information disclosure by relaxing the incentives for managers to disclose information to attract funds from external capital markets.
Take the recent study by Chen Lin and Mingzhu Tai from the HKU Business School, conducted with collaborators from the University of California, Berkeley and the Chinese University of Hong Kong. Their paper addressed a fundamental worry for almost everyone during the pandemic: Money. Specifically, they examined how people in the U.S. saved money in response to COVID-19.
The online trading platform Alibaba provides financial technology (FinTech) credit for millions of micro, small, and medium-sized enterprises (MSMEs). Using a novel data set of daily sales and an internal credit score threshold that governs the allocation of credit, we apply a fuzzy regression discontinuity design (RDD) to explore the causal effect of credit access on firm volatility. We find that credit access significantly reduces firm sales volatility and that the effect is stronger for firms with fewer alternative sources of financing. We further look at firm exit probability and find that firms with access to FinTech credit are less likely to go bankrupt or exit the business in the future. Additional channel tests reveal that firms with FinTech credit invest more in advertising and product/sector diversification, particularly during business downturns, which serves as effective mechanisms through which credit access reduces firm volatility. Overall, our findings contribute to a better understanding of the role of FinTech credit in MSMEs.
This paper studies how minimum wage policies affect capital investment using the industrial census of manufacturing firms in China, where minimum wage policies vary across counties. Exploiting minimum wage policy discontinuities at county borders, we find that minimum wages increase capital investment. The investment response to minimum wages is stronger for firms that are labor-intensive, that have more room for technological improvement, and that cannot sufficiently pass on labor costs to consumers. A natural experiment based on county jurisdictional changes further assures the causal relationship.
We study the impact of an epidemic disease on modern financial development by exploiting geographic variations in the precolonial survival conditions of the TseTse fly, which transmits an epidemic disease that is harmful to humans and fatal to livestock in Africa. Using newly georeferenced data, we discover that firms and households in regions historically more exposed to the epidemic disease have less access to external financing today. Exploring the channels, we find that people in historically infested regions are less likely to trust others and financial institutions, to share credit information and to learn and adopt new financial technologies.
Why did banks experience massive deposit inflows during the pandemic? We discover that deposit interest rates at bank branches in counties with higher COVID-19 infection rates fell by more than rates at branches—even branches of the same bank—in counties with lower infection rates. Credit drawdowns, national policies, such as the Payment Protection Program, and a flight-to-safety do not account for these cross-branch changes in deposit rates. Evidence suggests that higher local COVID-19 infection rates are associated with households’ greater anxiety about future job and income losses, anxiety that induces households to reduce spending and increase deposits.
The Zhongguancun (ZGC) Forum was successfully held from September 24 to 28 in Beijing, China. Professor Chen Lin, Associate Dean in Research and Knowledge Exchange and Chair of Finance, was invited as a keynote speaker for the parallel forum – Financial Technology Forum.
The telegraph was introduced to China in the late 19th century, a time when China also saw the rise of modern banks. Based on this historical context, this paper documents the importance of information technology in banking development. We construct a data set on the distributions of telegraph stations and banks across 287 prefectures between 1881 and 1936. The results show that the telegraph significantly expanded banks’ branch networks in terms of both number and geographic scope. The effect of the telegraph remains robust when we instrument it using proximity to the early military telegraph trunk.
We evaluate the connection between corporate characteristics and the reaction of stock returns to COVID-19 cases using data on more than 6,700 firms across 61 economies. The pandemic-induced drop in stock returns was milder among firms with stronger pre-2020 finances (more cash and undrawn credit, less total and short-term debt, and larger profits), less exposure to COVID-19 through global supply chains and customer locations, more corporate social responsibility activities, and less entrenched executives. Furthermore, the stock returns of firms controlled by families (especially through direct holdings and with non-family managers), large corporations, and governments performed better, and those with greater ownership by hedge funds and other asset management companies performed worse. Stock markets positively price small amounts of managerial ownership but negatively price high levels of managerial ownership during the pandemic.