This study employs an imbalanced panel dataset of 524 Chinese commercial banks from 2009 to 2020 to investigate the influence of Basel III on banks' loan loss provisions. Our findings reveal no significant change in the relationship between loan loss provisions and capital adequacy, although it indicates a heightened impetus for Tier 1 capital management. Furthermore, the study finds that earnings management motivations, particularly related to pre-provision profits, influence banks' loan loss provisions. Basel III's enactment reduces the ability of high-earning banks to manipulate earnings using loan loss provisions. This research provides empirical evidence from China for the global assessment of Basel III's impact on commercial banks.

This research examines the impact of short selling on the financing cost of corporate bonds using panel data from Chinese A-share listed companies spanning the period from 2007 to 2022. The study aims to investigate the potential cross-market information spillover effects within the short selling system. The findings indicate that short selling significantly reduces the financing cost of corporate bonds, with a more pronounced effect observed under greater short selling forces. The robustness of the results is confirmed by controlling for various potential influencing factors and addressing the endogeneity issue through Propensity Score Matched Difference in Differences (PSM-DID) methodology. Moreover, the research reveals that the alleviation of information asymmetry serves as the primary mechanism through which short selling exerts its impact, particularly in regions with well-developed financial markets and favorable legal environments. This study offersa novel perspective of short selling in China and it sheds light on its cross-market spillover effects. By effectively enhancing resource allocation efficiency in capital markets, short selling emerges as a potent tool for mitigating information disparities between bond investors and enterprises.

We collect the geographical dataset of bank physical branch in China from 2008 to 2023, obtaining the 261,382 branches. Through careful data processing, we calculate the bank branch closure at city-level and merge it with regional entrepreneurship in China. With the panel dataset at city-industry-year level, we find that bank branch closure (BBC) significantly reduces neighbor entrepreneurship, which is proxied by the number of new firm entry. In mechanism analysis, we document that bank branch closure affects entrepreneurship through the financing channel and mobility channel. We also find that commercial bank branch closure plays a crucial role in affecting entrepreneurship. The reduction effect of BBC is more pronounced for those observations located in geographical intersections, coastal lines. Further, we explore the impact of BBC on the direction of entrepreneurship, showing that there is less new firm formation in manufacture industry after the BBC. In addition, we show that BBC may contribute to the entrepreneurship failure as well. Our findings may shed light on the policy makers, bank owners and those who want to form a new firm.

In an increasingly open and transparent information environment, negative media coverage of Environmental, Social, and Governance (ESG) issues would detriment focal firms’ legitimacy and performance. However, we have a limited understanding of whether negative media coverage of supply chain partners would spill over to focal firms. Using a panel dataset from Chinese listed firms, we examine the research question at a dyadic (i.e., focal firm and supplier or customer) level. This study reveals that negative media coverage about supply chain partners’ ESG issues can cause a spillover effect, negatively impacting the focal firms’ financial performance. Notably, the extent of this impact is contingent on the reach of the media sources and the severity of the coverage. We also show that focal firms are more impacted by supply chain partners with stronger relationships and greater market power. Our findings underscore the importance of actively managing partners’ ESG issues to avoid potential financial losses within a multi-tier supply chain. This study has fruitful contributions to the literature on supply chain sustainability and the spillover effect in dyadic relationships.

Banks have a significant funding-cost advantage if their liabilities are protected by bailout guarantees. We construct a corporate finance-style model showing that banks can exploit this funding-cost advantage by just intermediating funds between investors and ultimate borrowers, thereby earning the spread between their reduced funding rate and the competitive market rate. This mechanism leads to a crowding-out of direct market finance and real effects for bank borrowers at the intensive margin: banks protected by bailout guarantees induce their borrowers to leverage excessively, to overinvest, and to conduct inferior high-risk projects. We confirm our model predictions using U.S. panel data, exploiting exogenous changes in banks' political connections, which cause variation in bailout expectations. At the bank level, we find that higher bailout probabilities are associated with more wholesale debt funding and lending. Controlling for loan demand, we confirm this effect on bank lending at the bank-firm level and find evidence on loan pricing consistent with a shift towards riskier borrower real investments. Finally, at the firm level, we find that firms linked to banks that experience an expansion in their bailout guarantees show an increase in their leverage, higher investment levels with indications of overinvestment, and lower productivity.

This study investigates the impact of CIO on the Environment, Social, and Governance (ESG) performance. Our analysis is based on a panel dataset comprising 2395 Chinese listed companies throughout the period from 2007 to 2020. Evidence from empirical results shows that CIO is positively correlated with ESG performance. In other words, CIO enhance the corporate ESG performance. The issue of endogeneity was duly considered, and appropriate measures were made to address it. Furthermore, robustness tests were conducted, and the findings remained consistent and reliable. The examination of the mechanism indicates that CIO enhance internal control quality that facilitates the advancement of ESG activities within firms. This paper contributes to the existing body of knowledge by examining the impact of external governance systems on the promotion of ESG activities in Chinese enterprises. This study adds to the existing body of scholarship on the implications of Common institutional ownership. Findings recommend several possible policy and economic ramifications that might support Chinese enterprises in their endeavors to incorporate ESG initiatives and contribute to the overall sustainability of society.

Local financial development is crucial for advancing regional financial supply side structural reform, enabling local governments to leverage financial instruments to effectively mobilize land resources and foster competitive growth. The introduction of numerous financial products linked to land-related rights and interests has resulted in a pronounced transmission and interconnection of fiscal and financial risks across regions. This study examines the impact of local financial development on land financialization in China using panel data from prefecture-level cities and detailed information on land mortgages. The findings indicate that the establishment of city commercial banks (CCBs) contributes to the progress of land financialization by incentivizing local government financing vehicles to participate in land mortgage financing, increasing the transfer of debt risks to the financial sector. Notably, the impact of CCBs on land financialization is more pronounced in regions with urban agglomeration, high GDP manipulation, inadequate local financial regulation, and robust implicit government guarantees. Further analysis reveals that CCB establishment has negative spillover effects on land financialization in neighboring areas, while expansion strategies such as establishing intercity branches, engaging in cross-regional mergers, and relaxing regulations have mitigated the rise of land financialization at the regional level. This study provides policy recommendations that focus on reducing local governments’ reliance on land financing and enhancing the prevention and management of financial risks.

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.

Compared to previous literature on external FinTech, this paper is more interested in the role played by bank FinTech. Based on panel data from Chinese commercial banks spanning 2010 to 2021, this paper investigates the impact of digital transformation on bank soundness and its potential mechanisms. The empirical findings demonstrate a positive association between digital transformation and bank soundness, driven primarily by strategic and management digitization. Mechanistic analysis indicates that digital transformation improves bank soundness by mitigating risk-taking behavior and promoting diversification. The positive effect of digital transformation is more pronounced in state-owned and joint-stock banks, banks with higher liquidity mismatch as well as in sub-samples with greater levels in external FinTech development and economic policies uncertainty. Additional analysis suggests that digital transformation can still enhance bank soundness even in the presence of relatively easy monetary and macroprudential policies, highlighting the harmonization and complementarity between internal innovation from digital transformation and external regulatory policies in maintaining banking stability. Overall, this paper contributes to the literature on bank FinTech, factors influencing bank stability. And it also provides a novel explanation for the relationship between financial innovation and financial stability.

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.