This study empirically investigates the impact of supply chain network centrality on corporate greenwashing behavior. By constructing supply chain networks of Chinese A-share listed companies, we find a strong positive correlation between supply chain network centrality and corporate greenwashing behavior, with an increase of approximately 6.20%. The paper identifies the underlying mechanism as the contagion of the green bandwagon effect within the supply chain, which is observed specifically in the downstream network, particularly among corporate-customers. Additionally, we observe that the positive effects are more pronounced in companies with lower information asymmetry, as well as in labor- and capital-intensive industries and regions with disadvantaged economic conditions. These findings offer important insights for improving corporate environmental responsibility and curbing greenwashing practices.

This study examines the relationship between industry litigation risk and corporate misconduct using China's A-share listed companies’ data from 2007 to 2022. The findings indicate a significant and negative association, where companies in industries with higher median litigation amounts relative to their assets exhibit reduced incidents of misconduct. This suggests that businesses in high-risk litigation sectors may adopt more cautious practices to mitigate legal challenges and protect their reputations. The robustness of these findings is confirmed through a variety of tests, including a quasi-experimental setting of the chief judges rotation implemented in 2008. Furthermore, the study finds that external monitors including financial analysts’ site visits and local law firms moderate the negative relationship between litigation risk and misconduct. We further show that legal enforcement and moral capital are the two channels through which industry litigation risk impacts corporate misconduct. Our findings underscore the role of litigation risk in shaping peer firms' behavior.

This paper develops a network to analyze inter-industry risk spillovers during high and low volatility periods. Our findings indicate that China's Industrials and Consumer Discretionary exhibit the greatest levels of spillovers in both high and low volatility states. Notably, our results demonstrate the "event-driven" character of structural changes to the network during periods of pronounced risk events. At the same time, the economic and financial network exhibits clear "small world" characteristics. Additionally, in the high volatility stage, the inter-industry risk contagion network becomes more complex, featuring greater connectivity and direct contagion paths. Furthermore, concerning the spillover connection between finance and the real sector, the real economy serves as a net exporter of risk. The study's findings can assist government agencies in preventing risk contagion between the financial market and the real economy. The empirical evidence and policy lessons provide valuable insights for effective risk management.

This paper investigates the effect of exchange-traded funds (ETFs) on the ESG performance of their underlying firms. Using data from China, we find that ETFs enhance the ESG performance of their underlying firms. This finding remains consistent after several robustness and endogeneity tests. Further, we show that the effect is more pronounced for non-SOEs, firms in low-polluting industries, and firms at growth and maturity stages. Studying the mechanisms behind these results, we find that ETFs mitigate the corporate agency problems, enhance the willingness of managers to invest in ESG, and improve the ESG performance.

Identifying and addressing the factors influencing the within-firm pay gaps has become a pressing issue amidst the widening global income inequality. This study investigates the impact of corporate ESG ratings on employee income and pay gaps using data from Chinese-listed companies between 2017 and 2021. The results suggest that ESG ratings significantly increase employee income. Further research indicates that ESG ratings exacerbate the within-firm pay gaps and income inequality due to the varying bargaining power among employees. This effect is particularly pronounced in non-state-owned and large-scale companies. This is also true for all kinds of companies in traditional and highly competitive industries. However, reducing agency costs and improving information transparency can help vulnerable employees with weaker bargaining power in income distribution to narrow their pay gaps. The research findings offer important insights to promote fair income distribution within companies and address global income inequality.

This paper examines the spillover effect of environmental regulations on firms’ green technological innovation, from the perspective of supply chain relationships. Analyzing data from Chinese listed companies, we find that the average environmental regulatory pressure faced by the client firms of a supplier firm enhances the green patent applications filed by the supplier firm, indicating that environmental regulatory pressure from clients spills over to suppliers. When the industries of suppliers are more competitive or the proportion of their sales from the largest client is higher, suppliers feel more pressured to engage in green innovation, resulting in more green patent applications. Thus, via their negotiation power, client firms can prompt supplier firms to innovate to meet their demand for green technologies. Finally, we show that this effect is particularly pronounced when supplier firms are located in highly marketized regions, receive low R&D government subsidies, or have high ESG ratings.

This study explores the proclivity of institutional investors in China towards highESG stocks amidst the growth of ESG investment funds. Using A-share data from 2015-2022 and a Tobit model analysis, it is found that these investors indeed favor such stocks, particularly under extensive analyst coverage and in non-state-owned firms. However, rating discrepancies can impact this preference. The attraction lies in reduced operational risks and improved net profits. Notably, independent investors show a stronger ESG preference, especially within high-pollution industries. Thus, fostering ESG investment among institutional investors can improve resource allocation in China's capital market, favoring eco-friendly companies.

Using China's Strategic Emerging Industries Classification (CSEIC), which is enacted in 2018, as a quasi-natural experiment, this study investigates its impact on corporate innovation behaviors. In basic research, we find that: (1) The CSEIC significantly enhances both substantive and strategic innovation; (2) The effect of CSEIC is influenced by the characteristics of the enterprise. Specifically, in state-owned enterprises (SOEs), the CSEIC significantly enhances substantive innovation and strategic innovation, while in non-SOEs, the CSEIC only significantly enhances substantive innovation. In further research based on entrepreneurial spirit, we find that: (1) The effect of CSEIC on strategic innovation is suppressed if entrepreneurial patriotism is higher, no matter whether the enterprise is SOEs or non-SOEs; (2) The effect of CSEIC on substantive innovation is enhanced, if and only if entrepreneurial integrity is higher in SOEs or International Vision is higher in non-SOEs. These findings offer valuable insights for policymakers aiming to foster innovation through targeted support for enterprise leaders, highlighting the need for tailored approaches considering the distinct characteristics of SOEs and non-SOEs.

This paper proposes a conditional factor model embedded with heterogeneous group structure, called grouped Instrumented Principal Component Analysis (Grouped IPCA) model, to study the enhancement of industry classifcations on the pricing power of frm characteristics. We derive an inferential theory on the alternating least square (ALS) estimators of the grouped IPCA model under an unbalanced panel data. Based on this, we use two BIC-type information criteria to determine the number of latent factors. We further examine the group heterogeneity with a bootstrap test statistics. Simulations are conducted to evaluate both our asymptotic theory and test statistics. In the empirical study, we show that the in-sample performance of Grouped IPCA model excels the IPCA model, and fnd a strong evidence on the incremental pricing power of industries.

The Treaty of Shimonoseki was signed in 1895 and led to the deregulation of Chinese private enterprise investment in state monopolized industries. Newly founded enterprises necessitated cooperation amongst member-owners for access to primitive capital. A spirit of cooperative behavior thus resulted in the birth of enterprises in China. We used Chinese prefecture-level panel data between 1880 and 1899 to demonstrate that an increase in the number of enterprises brought by the deregulation is more likely to form in regions that culturally nurture cooperative behavior. We also found a persistent influence of cooperative culture on foundation of enterprises today.