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Frontiers of Corporate Governance

Paper Session

Friday, Jan. 5, 2018 10:15 AM - 12:15 PM

Loews Philadelphia, Commonwealth Hall B
Hosted By: American Finance Association
  • Chair: Kelly Shue, University of Chicago

The Value of Offshore Secrets: Evidence From the Panama Papers

James O'Donovan
Hannes Wagner
Bocconi University
Stefan Zeume
University of Michigan


We use the data leak of the Panama Papers on April 3, 2016 to study whether and how the use of secret offshore vehicles affects firm value. The data provide insights into the operations of more than 214,000 offshore vehicles incorporated in tax havens by the Panama-based law firm Mossack Fonseca & Co. We find that the Panama Papers leak erases U.S. $135 billion in market capitalization among 397 public firms that we trace as users of offshore vehicles exposed in the Panama Papers. Firm value declines only when offshore activities are previously secret. In addition, we show that the leak reduces the net benefits of using secret offshore vehicles to bypass anti-bribery regulations and evade taxes. Taken together, firms use secret offshore vehicles for value-enhancing but potentially illegal activities that go beyond tax avoidance. Offshore intermediaries facilitate such activities.

The Economic Impact of Religion: Evidence From Ramadan Loans

Cem Demiroglu
Koc University
Oguzhan Ozbas
University of Southern California
Rui C. Silva
London Business School
Mehmet Ulu
Turkish Central Bank


We examine the effect of religious behavior on decision-making in the context of Ramadan observance, using an administrative data set of all personal and business bank loans in Turkey during 2003-2013. We find that small business loans originated during Ramadan are about 10 to 15 percent more likely to become delinquent within two years of origination than loans originated outside of Ramadan. Despite their worse performance, Ramadan loans have lower credit spreads than non-Ramadan loans at origination. Consistent with Ramadan-induced judgment errors of loan officers, we find no relation between origination in Ramadan and the performance of personal loans which are mostly automated, and large business loans where approval decisions are made by credit committees. Loans granted by banks whose loan officers are more likely to observe the Ramadan perform worse, and so do loans originated on hot Ramadan days when adverse physiological effects of fasting are greatest, and loans that resemble charitable lending involving financially weak borrowers and financially strong lenders.

The Impact of Delay in Going Public: Evidence from China

Lin William Cong
University of Chicago
Sabrina Howell
New York University
Ran Zhang
Peking University


In exchange for the benefits of an IPO, an entrepreneurial firm must increase disclosure, professionalize, and separate its value from specific human capital. Among Chinese firms on the cusp of an IPO, we explore how access to public markets affects this process. Unique features of China’s approval-based listing process permit quasi-experimental variation in the prospect of public listing. Among firms approved to IPO at similar times, surprise IPO suspensions of indeterminate length provide plausibly exogenous variation in listing delay and thus access to public markets. We find that suspension-induced delay affects a basket of standardization measures. It reduces patent applications both during delay and in the medium term after listing. Delay also reduces earnings when the CEO is the firm’s founder, reduces the likelihood of hiring a CFO, and increases the number of underwriting co-managers. The reduction in patenting is larger for firms with venture capital (VC) backing. Across measures, however, foreign VC backing counteracts the pernicious effects of delay. Suspension-induced delay does not affect contemporaneous investment, employment, or leverage, making it unlikely that our results are due to a negative capital supply shock.
Mara Faccio
Purdue University
Claire Celerier
University of Toronto
Manju Puri
Duke University
JEL Classifications
  • G3 - Corporate Finance and Governance