MOST Ta-You Wu Memorial Award - Dr. Shu-Cing Peng

Prize

Description

My main research area is empirical corporate finance and my dissertation studies whether CEO connectedness in China is more resilient to trade shocks from China. In 2000, the U.S. congress granted the Permanent Normal Trade Relation (PNTR) status to China, which became effective upon China’s access to World Trade Organization (WTO) in 2001. The passage of PNTR eliminated the possibility of sudden tariff spikes on Chinese imports and thus provided Chinese firms with greater incentives to enter the U.S. market. I study whether CEO connectedness in China is more resilient to trade shocks from China. I find that CEOs with China connection in high China import penetration industries obtain higher pay, more future directorships, larger foreign sales from China, better announcement returns of investment activities involving Chinese firms, and greater long-term firm value and operating performance when product market competition from China increases.
Besides, I have one co-authored publication at the top finance journal. The main idea is similar to my dissertation. The passage of PNTR provided U.S. firms with many new business opportunities in China by eliminating investment uncertainty in China and increasing their incentives to exploit China’s cheap labor and growing markets through establishing new business relationships with Chinese firms. Surprisingly, no researcher has investigated how firms exploit new opportunities in China arising from the passage of PNTR. In this study we examine how U.S. firms adjust their board structure in an effort to grab the opportunities in China after the U.S. granted China the PNTR status in 2000 and further improve firm operating performance. We find that, to overcome their lack of knowledge in culture and regulatory environments in China, these U.S. firms have strong incentives to adjust their board structure by newly appointing directors with China work experience. Compared to other firms, firms with more outside directors with China-related experience realize higher short-term abnormal returns and experience larger long-term post-completion operating performance. We further find that directors with China-related experience gain more directorship in other firms after the passage of PNTR. These results suggest that the change in government policy affects board functioning and firm value through the change in firms’ demand for directors’ new advisory service.
Degree of recognitionNational
Granting OrganizationsMinistry of Science and Technology (MOST)

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