Using the sample of Chinese A-share listed firms from 2020 to 2021, this study investigates the impact of EPU on corporate ESG performance. We find that EPU improves corporate ESG performance, and the results largely hold after a series of robustness tests. Furthermore, EPU has a significantly positive effect on each dimension of corporate ESG performance (environment, society and governance). In addition, we document that the positive effect of EPU on corporate ESG performance is more pronounced for state-owned firms, and firms with better internal governance, better external governance, and firms that are more financially-constrained. This study provides large-sample empirical evidence for the effect of EPU on corporate ESG performance, which provides implications for management to make use of corporate ESG performance in the face with uncertain economic policy environment.

Using a comprehensive dataset for Chinese listed companies from 2009 to 2021, we find that online media is negatively associated with cash dividend level, and the proportion of positive news has a negative moderating effect on this relationship. Our results support the "information intermediary" effect and exclude the "external governance" and "market pressure" effects. We further propose that online media weakens the positive relationship between cash dividends and past earnings (rather than the future), indicating that cash dividends contain signals of improvement in past earnings and are replaced by online news. We also find that only firms with more positive news pay dividends that have signaling effects, and there is a synergistic effect between positive news and dividend signal. Additional results show that the effect of online media on dividend policy is more pronounced than traditional media, which has almost no influence. Our main conclusions remain valid after addressing potential endogeneity issues and conducting various robustness tests.

Purpose – The aim of this paper is to provide additional insights on the association between real earnings management (REM) and crash risk, particularly from the perspective of an emerging market economy. It also examines the moderation role that internal and external corporate governance may play in this area. Design/methodology/approach – Relying on archival data from the RESSETand CSMAR databases over a timeframe from 2010 to 2018 of China listed company, the authors test the hypotheses by regressing common measures of crash risk on the treatment variable (REM) and crash risk control variables identified in the prior crash risk literature. The authors also introduce monitoring proxies (internal controls as an internal governance and institutional ownership as an external governance) and assess how effective internal and external governance moderate the relation between REM and stock price crash risk. Findings – The results suggest firms with higher REM have a significantly greater stock price crash risk, and that this association is mitigated by external monitoring. That is, greater institutional ownership, particularly pressure insensitive owners, mitigates the impact of REM on stock price crash risk. However, internal control does not mitigate the association between REM and stock price crash risk. Originality/value – Following the passage of the Sarbanes–Oxley (SOX) Act, prior research has documented an increase in the use of REM and a positive association between REM and cash risk. The authors demonstrate that they persist in one of the largest emerging markets where institutional regulations, market conditions and corporate behaviors are different from those in developed markets. Also, the assessment of the moderation effect of internal and external governance mechanisms could have meaningful implications for investors and regulators in Chinese and other emerging markets.

Distinct from existing studies on general institutional investors and institutional investor cliques, this study examines how common institutional owners, who simultaneously hold more than 5% equity blocks in at least two publicly traded firms within the same industry, influence firms’ bad mergers and acquisitions (M&As) in China. Contrary to the “conspiracy tort” view, according to which common institutional owners are more likely to vote for bad M&A deals to pursue internalized gains from industry portfolios (Antón et al., 2022b), our results strongly support the “synergy governance” view, according to which common institutional owners perform more actively and effectively in monitoring against bad M&As and improving M&A quality. There is further evidence that common institutional owners with greater peer linkages and industry power and longer-term holdings are more likely to oppose deals with negative acquirer returns. Finally, we find that the effect of common institutional ownership on M&As is more pronounced among firms with stronger earnings management, moderate stock return synchronicity, less management shareholding and higher management expenses. The results are consistent with the “synergy governance” hypothesis whereby common institutional owners are able to leverage their advantages of industry information and supervisory experience to improve the information environment and corporate governance of the firms they hold. Overall, in China’s market, common institutional owners play an active external governance role and effectively improve M&A quality.

Environmental information disclosure is an effective way for corporate to fulfill environmental protection responsibilities and encourage environmental self-inspection and management. In this paper, we utilize the environment fee to tax reform implemented in 2018 as a quasi-experiment, to investigate the impact of mandatory environmental regulation change on firm environmental information disclosure quality. Using data from listed companies in China between 2015-2020, we found that the mandatary environment regulation positively affects the monetary and non-monetary environmental information disclosure in heavy polluting industries. We also found that, firms with higher environmental subsidies and market value tend to disclose more information. The mechanism analysis shows that external governance and internal control mediate the effect of mandatory environmental regulation on environmental information disclosure quality. Compared to a growing literature on voluntary regulation, our findings provide evidence emphasizing the role of mandatory regulation of government incentives in environmental improvement.

We examine empirically whether internal corporate governance mechanisms play a role in reducing the probability of being sued by lending banks due to bank loan default and the market reaction to the announcement of bank loan litigation. Using bank loan litigation events in Chinese financial markets, our results show that companies with better internal corporate governance mechanisms are associated with a lower probability of being sued. We also find a significant negative market reaction to the announcement of a bank loan filing while insignificant market reaction to the announcement of bank loan litigation verdict. Moreover, we test whether internal corporate governance mechanisms can play a role in mitigating the effect of market reactions. Our findings indicate that there is no evidence of internal corporate governance in mitigating this effect. Our paper suggests that internal corporate governance mechanisms are important in preventing the trigger of external governance mechanisms (litigation) but do not play any role once external governance (litigation) takes over.

We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. Looking at equity prices from 1990 to 2001, we find that these mechanisms are strong complements. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10 - 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to mimic the importance of internal governance generates annualized abnormal returns of 8%, though only in the presence of ‘high’ vulnerability to takeovers. Further, we show that the complementary relation exists for firms with lower industry-adjusted leverage and is stronger for smaller firms. The complementary relation is confirmed using accounting measures of profitability. Using data on acquisitions, firm level Q’s and accounting performance, we explore possible interpretations, providing preliminary evidence for a risk effect as well.