This study investigates venture capital (VC) reputation impact on the pre-IPO performance of the entrepreneurial firms backed by three kinds of VCs. This study employs backward stepwise regression models following prior theoretical frameworks to examine the research question. Based on a database of the top 50 VC firms ranked during 2016 to 2020 and their portfolio firms. This study shows some contingent contribution to pre-IPO firm performance. Firstly, the reputation of the Chinese government-owned VCs is negatively associated with their portfolio firm performance. Still, there is a positive relationship between foreign and local private VCs. Secondly, entrepreneurial firm performance is significantly associated with industry policy and entrepreneur’s performance than VC reputation. This study has practical implications for entrepreneurs and limited partners regarding their corporation relationships with the Chinese VCs.

Recent financial frauds in China such as Kangmei Pharmaceuticals’ case have raised suspicion in the capital market and among academics about the reliability of accounting information of listed companies, and as a result, various non-financial information that is compulsory or encouraged to be disclosed by regulators and voluntarily disclosed by listed companies is gradually gaining attention from various stakeholders and academics. The corporate social responsibility (CSR) information is one of the most widely disclosed non-financial information by listed firms, but its reliability and motivation are also questionable, for example, is CSR commitment affected by firms’ financial information quality? Using China a-share listed companies that disclosed their corporate social responsibility reports from 2009-2019 as a sample, we investigate whether earnings management can influence corporate social responsibility by analysing the management’s motives embedded in earnings management, in order to further examine whether Chinese listed companies are morally motivated to undertake social responsibility or use social responsibility as a strategic tool to maintain the reputation of the firm and the management. The results of the study show that earnings management and CSR are positively correlated, and the finds continue to be robust when using 2SLS, Heckman two-step regression and propensity score matching to control for reverse causality and self-selection bias, proving that China's listed companies are ethically motivated to fulfil their social responsibility. Therefore, it is important to focus on the quality of earnings information in order to perceive the motivation of CSR when evaluating a company’s CSR commitment.

We investigate how marginal corporate tax rate affects corporate policy changes in response to a regulatory credit crunch. With a surge in debt due to a fiscal stimulus after 2008, the Chinese government rolled out the “deleveraging” program in 2015 which, through tightening monetary policies, restricting credit flows, and regulating shadow banks, significantly increased firms’ cost of debt and the incentive to deleverage. With a difference-in-differences design, we find that high-tax-rate firms reduce leverage to a less extent than low-tax-rate firms after the initiation of the deleveraging program. This effect is stronger in non-state-owned firms and firms with less non-debt tax shields. More importantly, through retaining more debt, high-tax-rate firms reduce dividend and switch to equity financing to a less extent, and also cut less investments in fixed assets, R&D and human capital. We conclude that tax constitutes an important factor in shaping the micro-economic consequences of a credit crunch.

This paper creates default-probability-(PD)-implied credit ratings for Chinese firms following the S&P global rating standard. The domestic credit rating agency (DCRA) ratings are higher than the PD-implied ratings by ten notches on average for the identical level of default risk, implying that the domestic ratings are significantly inflated. The PD-implied ratings outperform the DCRA ratings in detecting defaults and complement the latter in predicting yield spreads. The PD-implied ratings draw information from operating efficiency-related variables; in contrast, the DCRA ratings pay attention to scale-based firm characteristics in credit risk assessment.

This paper examines the Urban Construction Investment Bond (UCIB) as a tradable product in the financial market and a financial tool for local government in China. The development of this financial product is contextualised in infrastructure finance and local government debt. The creation of UCIB helps finance infrastructure investment and potentially reveal the relative risks through the secondary market. The spatial distribution of UCIB demonstrates different relative risks of this financial instrument in local conditions. The government uses this financial tool to bridge the emerging capital market and infrastructure finance, and the Chinese financial market now treats UCIB as an emerging asset class. The development of UCIB has sped up the pace of financialisation in China. Although relative risks help investors choose different UCIBs, the overall risk of UCIB cannot be ignored.

This paper examines whether a government can play an important role in determining a firm’s related party transactions associated with tunnelling. Through the lens of political turnover in 31 Chinese provinces for 2000-2018, we show that political turnover is negatively associated with state-owned enterprises’ (SOEs’) related party transactions (RPTs) but has no impact on non-SOEs’. Political turnover engenders uncertainty to SOEs, which curtail tunnelling-related RPTs. We identify two channels – corruption and policy-induced RPTs – leading political turnover to reduce RPTs. Corruption RPTs fall more significantly in highly corrupt provinces and before the 2012 anti-corruption campaign. Policy RPTs of SOEs with delisting risk and in high public debt provinces decrease considerably. Financially constrained firms, older officials and within-province appointments diminish the impact of political turnover on RPTs. On average, the fall in RPTs starts a year before a political turnover and ends a year after.

Whether responsible investing reduces portfolio risk remains open to discussion. We study the relationship between ESG performance and downside risk at fund level in the Chinese equity mutual fund market. We find that fund ESG performance is positively associated with fund downside risk during the period between July 2018 and March 2021, and that the positive relationship weakens during the COVID-19 pandemic. We propose three channels through which fund ESG performance could affect fund downside risk: (i) the firm channel in which the risk-mitigation effect of portfolio firms’ good ESG practices could be manifested at fund level, (ii) the diversification channel in which the portfolio concentration of high ESG-rated funds could amplify fund downside risk, and (iii) the flow channel in which fund ESG performance may attract greater investor flows that could reduce fund downside risk. We show evidence that the observed time-varying relationship between fund ESG performance and downside risk is driven by the relative force of the three channels.

We study how professional fund managers’ growth expectations affect the actions they take with respect to equity investment and in turn the effects on prices. Using novel data on China’s mutual fund managers’growth expectations, we show that pessimistic managers decrease equity allocations and shift away from more-cyclical stocks. We identify a strong short-run causal effect of growth expectations on stock returns, despite statistically significant delays in price discovery from short-sale constraints. Finally, we find that an earnings-based measure of price informativeness is increasing in fund investment.

Over the last decade, China’s P2P lending industry has been seen as an important credit source but it has recently suffered from a wave of bankruptcies. Using 126,090 P2P loan deals from RenRen Dai, one of the biggest online P2P websites in China, this paper attempts to predict credit default probabilities for P2P lending by implementing machine-learning techniques. More specifically, thisstudy proposes a stacking ensemble machine-learning model to assess credit default risk for P2P lending platforms. A Max-Relevance and Min-Redundancy (MRMR) method is used for feature selection and then irrelevant features are eliminated by using k-means clustering method. Finally, the stacking ensemble model is performed to produce accurate and stable predictions in the feature subset. Experimental results show that stacking ensemble model yields high performance, not only in prediction accuracy but also in precision and recall. In comparison to single classifiers, the stacking ensemble machine-learning model has a minimum error rate and provides more accurate credit default risk prediction. The results also confirm the efficiency of the proposed stacking ensemble model through the area under the ROC curve.

Can bank competition help attenuate the prevalence of zombie firms? Motivated by a stylized model, this paper studies the effect of bank competition on the formation of zombie firms in two stages: the formation of distressed firms and distressed firms obtaining zombie lending. Using China’s 2009 bank entry deregulation as a quasi-natural experiment, the paper finds that bank competition lowers the probability of the formation of distressed firms, while it increases the probability of distressed firms obtaining zombie lending. Overall, bank competition decreases the formation of zombie firms. In addition, the findings show that a higher ex ante proportion of bad loans and higher probability of bad loan recovery will lead to a higher probability of distressed firms receiving zombie lending. Both factors encourage banks to sustain lending to distressed firms to keep them alive and to gamble that those firms may recover in the future.