This paper examines the effect of political favoritism on economic inequality in the short run and political polarization in the long run. We exploit the sudden death of an authoritarian leader – President Chiang Ching-Kuo of Taiwan – in 1988 to generate plausibly exogenous variation in partiality. We find that Chiang’s nationalist regime conducted political favoritism broadly toward political immigrants via cronyism (allocating public sector positions) and also differentially toward specific subgroups of political immigrants via wage discrimination (offering higher wages to these subgroups within the public sector). Favoritism led to a 7.2 percent immigrant wage premium, which accounted for nearly three quarters of the immigrant-native wage gap at the time. This in turn propelled overall income inequality by 4.5 percent. Moreover, political favoritism breeds political polarization in the long run by pulling apart the political views of immigrants and natives. Compared with natives, immigrants who were exposed to favoritism tend to adopt political positions that are aligned with the nationalist party today: they are more likely to support unification with China, and are more inclined to trust the mainland Chinese government and its citizens. Exposed immigrant (native) swing voters are also more (less) likely to vote for the nationalist party today.

We provide the first systematic analysis of the stock return lead-lag effect among firms connected through shared analyst coverage in China’s A-share markets. We measure the shared analysts-weighted average returns of connected firms (CF) and show that CF return is a significant positive predictor of future returns of the focal firms in the following one to 12 months. The CF-based long-short portfolio earns an abnormal return of 10% to 12% per year. The effect is robust to controls for the industry and geographic momentum effects. Further evidence shows that the CF momentum spillover effect is stronger when the focal firm shares more analysts with connected firms, is covered by more non-star analysts or analysts with lower levels of education, or is held by more stress-resistant institutional investors. Our findings contribute to the cross-asset momentum literature by documenting a new, strong, and long-lasting momentum spillover effect in the Chinese stock markets.

This paper selects Chinese A-share listed manufacturing companies from 2011 to 2020 as a research sample and analyzes the impact of economic policy uncertainty on business performance. We find that economic policy uncertainty is detrimental to the improvement of business performance; service transformation can significantly offset the adverse effect of economic policy uncertainty on business performance, and this positive effect will increase with the depth of service transformation, Furthermore, embedded service transformation is more effective than mixed service transformation in weaking the adverse effects of economic policy uncertainty on business performance. The results of the heterogeneity test show that the negative relationship between economic policy uncertainty and firm business performance, as well as the positive effect of servitization transformation, is more noticeable in non-state-owned enterprises and low sale growth firms. The results are robust after various specifications of variables, possible endogeneity issues, and more control variables are considered.

This paper examines the impact of the carbon emissions trading scheme (ETS) on directed technological change in the context of Chinese pilot schemes. We focus on firms’ heterogeneity in driving innovation and explore policy variations across pilots. Using a matched difference-in-differences design with a zero-inflated Poisson model, we find that the low-carbon innovation is driven by firms at the intensive margin. On average, a firm files 0.16 additional low-carbon patents annually at the intensive margin. In addition, when looking across pilots, the effect on low-carbon innovation is significant in two pilots, Beijing and Shanghai. We further find that, when looking at firms with different productivity levels measured by output per worker, the pilot ETS encourages low-carbon innovation at the intensive margin but reduces entry into low-carbon innovation at the extensive margin for the more productive firms. Our results suggest that innovation inertia matters, and future policies should encourage smaller firms covered by ETS to start innovation in low-carbon technologies.

China has now entered the pilot phase of the digital currency electronic payment, and the impact of the digital currency electronic payment on China's bank credit system is unknown. This paper analyzes the long-run equilibrium and short-run variation relationship between digital currency electronic payment and narrow money multiplier based on the long-run cointegration equation and short-run VECM using data from the first quarter of 2014 to the second quarter of 2022 for the scale of digital currency electronic payment usage and narrow money multiplier variables. It is found that the introduction of digital currency electronic payment will expand the narrow money multiplier by reducing the cash leakage rate and the excess reserve ratio, thus enhancing the credit creation capacity of China's banks; among the determinants of the narrow money multiplier, the proportion of factors that the central bank can control increases, and the central bank's monetary regulation capacity is enhanced. Finally, this paper proposes that the central bank should improve the technical construction of the central bank's digital currency, strengthen the cooperation with various participants, and enhance the supervision of merchant banks.

China commodity futures market network is constructed. Commodity is the node of the network, and the network link is defined by the price correlation matrix. We analyze the relationship between the centrality of each commodity in the commodity futures market network and the optimal weight of the commodity portfolio, empirically examine the market system factors and commodity personalized factors that affect the centrality of commodity, and evaluate the effect of network structure on the optimization of commodity portfolio selection under the mean-variance framework. It is found that the commodities with high network centrality are often related to industrial products and have high volatility. Commodities with higher centrality have lower portfolio weights. We put forward a kind of commodity futures investment strategy based on network, according to the network centricity grouping the commodities, the network centricity lower edge of the commodity structure of the portfolio, cumulative yield is better than that of centricity higher core product portfolio, the whole market portfolio yield, but due to large maximum retracement, lead to the stability and ability to resist risk compared with the other two groups of goods combination. The main contribution of this paper is to optimize portfolio selection by establishing the relationship between portfolio weight and commodity centrality by using commodity futures market network as a tool.

To explore what kinds of roles foreign investors take in a gradually opening financial market, we propose the abnormal holding value ratio (AHVR) of northbound investors among stocks through China’s Stock Connect Mechanism. We find that AHVR positively predicts the expected stock returns and significantly relates to firms’ quality-related fundamental information, especially profitability. Foreign investors learn the firm fundamentals before they invest in the Chinese market, which is different from the trading behavior of domestic individual investors. The AHVR premium is larger among firms with higher attention of analysts who focus on effective information and with lower attention of individual investors who have behavioral bias. In all, the northbound inflows are smart money, which will increase the efficiency of the Chinese market instead of simply chasing stars that only grab investors’ attention.

Employing an event study approach on the US-China trade conflict, we find that Chinese listed firms with institutional investor holdings exhibit smaller announcement loss than their counterparts. We also examine the heterogeneous effects of firms. Specifically, the positive effect of institutional investor holding is larger for firms with foreign exposure or in provinces with higher degree of marketization. Besides, institutional investor holding also reduces firms' financial cost of refinancing and improves their long-run performance given the same announcement loss. These findings help understand the role of institutional investor in achieving financial stability from the micro perspective.

This study investigates the effect of enterprise digital transformation on stock price crash risk using a sample of Chinese listed companies during the period 2007-2020. We find that the digital transformation of enterprises can significantly reduce stock price crash risk, and shows a certain structural heterogeneity. The above conclusions still hold after a series of robustness tests. Further, we identify that the relationship is more pronounced in high-tech enterprises and economically developed regions. Overall, the paper can provide empirical evidence for understanding how to reduce stock price crash risk in the capital market, and provide relevant implications for better driving the digital transformation of enterprises.

This paper studies the effect of top management team (TMT) network centrality on bank loan contracts. We show that firms with high TMT network centrality obtain bank loans with lower loan spreads, larger loan size, longer maturity, and fewer collateral requirements. From the mediating effect analysis, we find that TMT interlocking networks affect loan pricing by reducing agency costs, improving the quality of accounting information, expanding resource channels, and enhancing the credibility of companies. In addition to easing financial constraints, TMT network centrality is also beneficial to investment efficiency and innovation output of corporates, but it will decrease firm performance.