As a bridge between Chinese mainland and international financial markets, the Stock Connect program allows investors on both sides to gain mutual access. By analyzing how cross-border flows respond to macro-related shocks, we show that compared with possibly homemade foreign investors, genuine foreign investors are more likely affected by the U.S. monetary shocks, the exchange rate risk, the U.S. market performance as well as the cross-market valuation disparity. The paper highlights the importance of profiling different groups of cross-border participants over market integration.

The pilot carbon emission trading schemes (ETSs) of China were created to combat climate change in a cost-effective and economically efficient manner, and their potential impact on regulated firms has drawn increasing attention. This study is conducted to provide empirical evidence on the effect of China’s pilot ETSs on firm-level financial performance during the period from 2008 to 2017. The empirical results show that the ETS pilots have a positive impact on firms’ profitability and value, and a negative impact on operational costs. We also find that the ETS pilots improve total factor productivity (TFP) but that changes in technology have an indirect suppressing effect on the relation between the ETS and short-term financial performance, providing support for the weak version of the Porter Hypothesis. Further, we show that the carbon emission price has a negative impact on firms’accounting-based performance but increases firms’ market value. Finally, we find evidence that, in contrast to state-owned enterprises (SOEs), non-SOEs do not experience significant improvements in their financial performance, led by the ETS pilots. Our findings have policy implications for firms’sustainable development and the transition to a low-carbon economy.

以中国的二氧化碳排放权交易机制(Carbon dioxide Emission Trading System, CO2ETS)为准自然实验，本文旨在探讨环境规制对企业金融化的影响。获取 2007年至 2020 年中国上市公司的面板数据和采用滞后型双重差分法，我们发现，二氧化碳排放权交易机制显著抑制了企业金融化。经过一系列稳健型检验，本文的主要结果仍然稳健。此外，我们发现碳排放权交易机制通过两个渠道影响企业金融化：信息不对称和企业投资机会。在异质性分析中，我们发现环境规制对非国有企业和非重污染行业企业金融的抑制效果更大。本文得到结论，二氧化碳排放权交易制度可以有效地实现减少 CO2 排放和抑制企业金融化的双赢局面。

The reform of China’s one-child policy allows families to have more children and thus may affect anticipation of intergenerational succession of family businesses and drive family firms to improve their corporate social responsibility (CSR). Using a difference-in-differences design, we find that the reform positively affects family firm CSR. We also find that the positive impact is more pronounced for family firms whose owners have fewer children, have no son, and are of reproductive age, which confirms the theory that intergenerational succession anticipation drives family firm CSR. Moreover, we find that the positive impact is more pronounced for firms that operate in environments where CSR is more strategically important. We validate our findings by showing that the reform curtails family firms’ short-termism.

Using the staggered opening of governmental public data platforms in China, we employ the difference-in-difference approach to investigate how public data access affects stock price synchronicity. We find that stock price synchronicity significantly drops after the public data platform is established in a firm’s headquarters city. The underlying mechanism is reducing information acquisition costs rather than increasing market attention or corporate information disclosure quality. Furthermore, the informational role of public data platforms magnifies under higher informed trade risk, poorer corporate governance, or better regional economic and innovation capacity. We highlight the role of public data in facilitating financial market efficiency.

Using the establishment of the Chinese Integrated Circuit Industry Investment Fund in 2014 as a quasi-natural experiment, we investigate whether and how the national industrial investment fund affects corporate R&D investment. We find that the policy has a significant and positive effect on corporate R&D investment, and this effect is more pronounced in firms with more severe financial constraints, poorer internal governance, and laxer external supervision. Furthermore, the mechanism tests show that this policy helps alleviate firms’ financial constraints and agency conflict, thereby increasing corporate R&D investment.

Serfling (2016) examines how the increase in firing costs impacts the capital structure decisions of firms and hypothesizes that higher firing costs of labor lead to a decline in a firm’s financial leverage use by directly increasing its distress costs and indirectly lifting its operating leverage. Stricter labor protection laws passed in China in 2007 provide an opportunity to revisit the issue within a controlled environment. Employees of SOEs already enjoy the benefits that the new labor law imparts. So, SOEs are exposed to lower firing costs than their non-SOE counterparts. Additionally, the exposure to bankruptcy is more limited for SOEs than non-SOEs. We hypothesize and show that non-SOE firms’ financial leverage decreases more than SOEs, confirming the leverage-lowering effect of labor protection laws. Further, the decline in financial leverage is more pronounced for a labor-intensive firm or one that encounters steep competition.

We study how government intervention in the bank loan granting process affects firms’ leverage dynamics. We exploit the setup of administrative approval centers (AACs) in China, a program aiming to reduce bureaucracy in business activities, as a quasi-natural experiment. On average, AACs help to shorten the leverage rebalancing period by as much as a quarter. This acceleration pattern persists in under-leveraged firms, which issue more debt to rebalance accordingly. Cross-sectional analyses show that the positive effect of AACs on leverage adjustment is more pronounced for firms that are in poorer legal environment, with more financial constraints, or less politically connected. ics.

As “sin” stocks and “brown” stocks generally earn higher returns than “green” stocks, fund managers face a trade-off between profitability and sustainability preferences when investing in environmental, social and governance (ESG). We explore the investment styles of ESG funds in the Chinese A-share market and analyze the behavior of ESG funds in terms of asset allocation and portfolio adjustment. We find that ESG funds prefer stocks with high return performance over stocks with high ESG performance. Textual analyses of prospectuses reveal a degree of “greenwashing” behavior by ESG funds. Overall, we show that ESG funds not purely ESG-driven.

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.