We (re)evaluate the general-equilibrium effects of (environmental) policies from the perspectives of input-output networks and firm dynamics and heterogeneity. Using China’s carbon emission trading system (ETS) as an example, we find that ETS leads to more patent applications, especially the ones associated with low-carbon technologies in the targeted sectors. The effects are muted at the firm level due to selection effects, whereby only larger firms are significantly and positively affected. Meanwhile, larger firms occupy a small share in number but a large share of aggregate outcomes, contributing to the discrepancy between the effects of ETS at the individual firm and aggregate sector levels. The effects also diffuse in input-output networks, leading to more patents in upstream/downstream sectors. We build and estimate the first firm dynamics model with input-output linkages and regulatory policies in the literature and conduct policy experiments. ETS’s effects are amplified given input-output networks.

Using data from Chinese A-share listed firms from 2015 to 2022, we employ a difference-in-differences model to empirically examine the impact of bankruptcy regimes, marked by the establishment of bankruptcy courts, on firms’ total factor productivity (TFP). The results show a significant decline in TFP among firms in regions following the establishment of bankruptcy courts. This finding remains valid after a series of robustness tests. Mechanism tests reveal that establishing bankruptcy courts increases firms’ risk aversion incentives by endowing creditors with excessive rights. Consequently, firms tend to reduce liabilities, curtail R&D investment, and accumulate liquid assets as coping measures, ultimately contributing to a decline in TFP. Furthermore, this effect is more pronounced for firms with high financial risk. However, the improvement of the market mechanism can alleviate the negative impact of bankruptcy courts excessively strengthening creditor protection. Specifically, when firms are located in regions with weak government intervention and strong financial development, as well as in market environments with low uncertainty and strong competition, this negative impact can be mitigated. These findings provide fresh insights into the dual nature of creditor protection and offer valuable references for governments to improve the bankruptcy legal system.

This study examines how localized carbon reduction policies affect corporate environmental productivity. Leveraging a quasi-experiment from China’s low-carbon pilot policy rollout across cities, we implement a difference-in-differences approach to estimate the causal impact of these interventions. Pilot policies significantly increased regulated polluting corporate environmental productivity by around 3 percentage points. The productivity gains persisted over time and were greater for financially constrained firms, firms facing less market competition and with lower capital intensity. Additional analysis reveals the pilots enhanced executive environmental awareness. Overall, our results demonstrate appropriately designed local regulations can improve environmental productivity.

Exploiting a unique market-oriented media reform initiated in 1996 in China, we investigate the role of media environment in affecting firm behaviour. We find robust evidence that market-oriented media environment is conductive to firm innovation, with the reform promoting patent quantity and quality substantially. The effect is more pronounced for firms with higher information asymmetry. Matching firm data with 1.3 million news reports, we find the market-oriented media reform significantly improves the criticalness and unbiasedness of news coverage and shapes an innovation-friendly environment. Our findings highlight economic outcomes of relaxing media control and underline substantial gains from deepening the reform.

Do firms adjust their hiring decisions after receiving environmental punishments? Using data on over 4.3 million job postings for Chinese listed firms from 2015 to 2021, we find that firms subjected to environmental punishments will subsequently increase their corporate green hiring (i.e., employees with green skills). Pressure from local environmental concerns and regulatory efforts incentivizes firms to increase their demand for employees with green skills. Environmental punishments have a more pronounced effect on corporate green hiring for non-state-owned enterprises and firms with lower financial constraints. Moreover, green hiring can have a remediation effect on firms' environmental performance and stimulate their green innovation activities and spillover effects on other firms within the industry. Overall, our findings shed light on corporate hiring decisions under environmental regulations.

We evaluate the impact of digital finance on the ESG performance of manufacturing enterprises and whether digital and traditional finance play a complementary or substitute role in promoting the ESG performance. First, we find that developing digital finance can alleviate financing constraints and promote technological innovation, thereby increasing enterprises' investment in environmental, social, and governance, providing sufficient technical support, and improving their ESG performance. Furthermore, digital finance and traditional finance have a direct impact on the ESG performance and further enhance their influence through complementary effects. Therefore, this paper may provide a valuable reference for finance to support manufacturing enterprises' development effectively.

Purpose – This paper takes the Shanghai-Shenzhen-Hong Kong Stock Connect as a quasi-natural experimentand investigates the impact of capital market liberalization on the corporate debt maturity structure. It also aimsto provide some policy implications for corporate debt financing and further liberalization of the capital marketin China. Design/methodology/approach – Employing the exogenous event of Shanghai-Shenzhen-Hong Kong StockConnect and using the data of Chinese A-share firms from 2010 to 2020, this study constructs a difference-in-differences model to examine the relationship between capital market liberalization and corporate debt maturitystructure. To validate the results, this study performed several robustness tests, including the parallel test, theplacebo test, the Heckman two-stage regression and the propensity score matching. Findings – This paper finds that capital market liberalization has significantly increased the proportion of long-term debt of target firms. Further analyses suggest that the impact of capital market liberalization on thedebt maturity structure is more pronounced for firms with lower management ownership and non-Big 4 audit.Channel tests show that capital market liberalization improves firms’ information environment and curbsself-interested management behavior. Originality/value – This research provides empirical evidence for the consequences of capital marketliberalization and enriches the literature on the determinants of corporate debt maturity structure. Further thisstudy makes a reference for regulators and financial institutions to improve corporate financing through thegovernance role of capital market liberalization.

This paper investigates whether Environmental, Social, and Governance (ESG) performance influences the stock idiosyncratic risk and extreme risk. We find that the ESG performance of listed companies significantly reduces the stock idiosyncratic risk and extreme risk. Furthermore, we identify that this mitigating effect is shaped by the nature of enterprise ownership and the firm life cycle. Through additional mechanistic analysis, we confirm that ESG performance affects the stock price volatility risk of listed companies by reducing levels of corporate earnings management and bolstering corporate reputation, thereby alleviating both idiosyncratic risk and extreme risk in stock prices.

This paper investigates whether regional negative public sentiment associated with extreme non-financial social shocks (e.g., violence or crime) will affect the resident firms’ M&A announcement return. Using a sample of 3,200 M&A deals in China, our empirical results consistently show that M&A announcement return is significantly lower after the firm’s headquarter city has experienced negative social shocks. We further find that better CSR performance helps to mitigate the impact of these negative shocks. Overall, we show that firm operations will be largely affected by the resident environment and location, and better CSR performance acts as an effective risk management strategy.

Under the guidance of the dual-carbon target, the development of the carbon financial system is of great significance to compensate for the gap between green and low-carbon investment. Considering the current state of the development of carbon financial system, China has initially formed a carbon financial system, including participants, carbon financial products and macro and micro operation structures, but the system is still in the initial development stage. Given the current restrictions on the development of carbon finance, it can be seen that there are still problems such as unreasonable economic structure, insufficient market construction, single product category, low utilization rate and urgent construction of relevant judicial guarantee system. Therefore, the system should be improved at the economic level and the legal level. The economic level includes adjusting the layout of economic development structure, strengthening the construction of market infrastructure, encouraging the diversification of carbon financial products and strengthening publicity and education promotion strategies. The legal level includes improving the top-level design, formulating judicial interpretation to promote carbon financial trading, promoting commercial law amendment, and promoting the linkage mechanism between specialized environmental justice and carbon finance and other safeguard measures. Finally, improving the carbon finance system is required to promote and protect the orderly development of carbon finance. To promote the reform of the pattern of economic development, the concept of ecological and environmental protection in the financial sector needs to be implemented to form an overall pattern of pollution reduction, carbon reduction and synergistic efficiency improvement.