The relationship between economic decentralization and regional economic growth has attracted wide academic attention. However, existing literature rarely explores the validity and applicability of decentralization theory from the perspective of location endowments. This study takes China’s county-to-city reform - a decentralization policy - as a point of entry to construct a decentralization model incorporating location endowments. Using county-level panel data from 1992 to 2009 and employing a difference-in-differences (DID) approach, the study evaluates the impact of county-to-city reform under the constraint of location endowments on county-level economic development. The findings reveal that the policy effects of local decentralization are constrained by location endowments. Specifically, in regions with poorer location endowments, county-to-city reform significantly inhibits local economic development. Indeed, mechanism analysis further indicates that in such disadvantaged regions, local decentralization under the county-to-city reform generates a “political resource curse” effect, which hinders economic growth through three channels such as distorted fiscal expenditure structures, corruption, and misallocation of land resources. The conclusions of this study provide a valuable perspective for understanding the conditions under which decentralization theory holds, while also offering rigorous empirical evidence for government agencies to design more targeted decentralization policies.

This study examines the mean-reversion behavior of trading volume in China’s A-share market, with a focus on the speed at which abnormal surges dissipate. We compare two competing hypotheses: the stealth-trading hypothesis, where persistent volume reflects order-splitting by informed traders, and the informational-efficiency hypothesis, which interprets faster reversion as a sign of efficient information absorption. Using the Ornstein–Uhlenbeck (OU) model, we estimate the reversion speed for over 3,000 stocks and link it to firm- and industry-level characteristics. We find that trading volume is strongly mean-reverting, with over 98% of stocks classified as stationary. The OU model forecasts reversion speed with less than 7% error. Faster reversion is associated with larger size, higher analyst coverage, lower volatility, and greater liquidity. Notably, reversion speed increased after the 2006 IFRS reform but declined following Stock Connect, suggesting that stock market policies can influence informational efficiency. Our OU-based methodology offers a simple, observable proxy for monitoring how quickly markets process information. These results position trading volume as a core variable in market microstructure research and policy evaluation.

We investigate how the loss of informative salient signals in financial markets influences stock return volatility, using the 2024 intraday disclosure reform of the mainland China-Hong Kong Stock Connect program as a natural experiment. The reform eliminated the real-time disclosure of northbound capital (NC) flows on trading platforms, rendering NC trading information invisible to Chinese investors during market hours. We find that the removal of NC signals induces increased investor belief dispersion and intensifies informed trading, thereby amplifying intraday volatility in NC-eligible stocks. Moreover, this effect is more pronounced for stocks with higher investor attention, indicating that attentive investors suffer stronger anchor loss when NC signals disappear. In contrast, lottery-type stocks and stocks with alternative NC trading clues exhibit weaker volatility responses, since the presence of strong alternative signals reduces the effect of NC signal loss. These findings highlight the informational role of insightful salient signals in stabilizing stock returns.

This study examines the evolution and spillover effects of informational efficiency across carbon markets following the launch of China ’s national carbon emissions trading system (NCET). Using a time-varying parameter VAR model, we analyze efficiency transmission among the National Carbon Emission Allowance (CEA), six China’s pilot markets, and the European Union Allowances (EUA). The results reveal substantial heterogeneity in efficiency dynamics. Since early 2023, the CEA and Shenzhen have shown improved efficiency and stability, while the EUA and other pilot markets have experienced declines in efficiency and increased volatility. Despite progress in domestic markets’ efficiency, the EUA remains the primary source of efficiency spillover effects, followed by the CEA, Shenzhen, and Beijing, whereas other pilot markets—particularly Shanghai—act mainly as net recipients. Spillover intensity increases significantly during major regulatory periods, especially around China’s annual “Two Sessions,” highlighting the influence of policy signals on market linkages. These findings offer empirical insights into the time-varying transmission of efficiency under institutional reform and inform the coordinated design of carbon trading policies.

Strengthening disclosure regulation and improving disclosure quality are central to China's transition to a full registration system and crucial for preventing capital market risks. Using prospectuses disclosed by IPOs on the STAR Market, ChiNext, and the Beijing Stock Exchange from 2019 to 2023, this study constructs four textual indicators from prospectuses—length, sentence complexity, technical term density, and uncertainty—and examines how they affect resource allocation efficiency under the registration system. We find that text length and sentence complexity improve resource allocation efficiency, consistent with an information effectiveness effect. In contrast, technical term density and uncertainty reduce efficiency, reflecting information redundancy. Further analysis shows that the registration system reform enhances the comprehensiveness and complexity of disclosures, but its net effect on efficiency depends on the balance between information effectiveness and redundancy. This study contributes to the international literature on “institutional environment—disclosure—resource allocation” with evidence from an emerging market, while also extending theories of information asymmetry and impression management. Our findings support Chinese regulators in optimizing prospectus standards and strengthening review oversight, and provide policy insights for other emerging markets seeking to improve capital allocation through more effective disclosure design.

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We construct the most comprehensive bankruptcy database of Chinese firms to date and document significant real effects arising from the establishment of specialized bankruptcy courts. Specifically, the recovery rate for unsecured creditors increases by 38.6 percentage points after the reform. This improvement is not driven by shorter case durations or lower direct bankruptcy costs, as intuition might suggest. Instead, it results primarily from greater efficiency in the discovery and disposal of assets during bankruptcy proceedings. The reform also increases the likelihood of reorganization and promotes capital infusion in such cases. Higher recovery rates generate broader spillovers: reductions in non-performing loans, expansion of unsecured lending by local banks, relaxation of firms’ financial constraints, shifts in capital structure and investment, and greater public willingness to file for bankruptcy when distressed.

This paper studies the economic impact of introducing a personal bankruptcy regime, using China’s recent pilot reforms as a natural experiment. We exploit the staggered rollout of personal bankruptcy frameworks across Chinese cities and construct a novel dataset of bankruptcy case filings, combined with survey-based measures of credit access and official firm registration records. Our difference-in-differences estimates show that the reforms significantly improve small business credit access - business loan take-up increases by 1.3 % (21% relative to pre-reform mean), with no offsetting rise in interest rates. Effects are concentrated among non-corporate firms, firms with less employees and female entrepreneurs. Moreover, the reform is also associated with a 9.7% increase in new firm registrations. To interpret these findings, we develop a simple but novel theoretical model in which personal bankruptcy reduces the downside risk of entrepreneurial failure while preserving creditor recoveries. These findings underscore how debtor protection policies, when designed to reduce enforcement costs without expanding exemption rights, can enhance credit supply and entrepreneurial activity.

Using a sample of 501 Chinese non-financial firms listed on the Hong Kong Stock Exchange from 2008 to 2020, we find that both foreign exchange (FX) derivatives and foreign currency (FC) debt significantly reduce firms’ probability of default. We further observe that larger, non-state-owned enterprises (SOEs), Hong Kong-headquartered firms, firms operating after China’s 2015 exchange rate reform and firms under high trade policy uncertainty (TPU) are more likely to use both FX derivatives and FC debt concurrently, thereby diversifying their strategies for managing default risk. Our analysis indicates that these tools reduce firms’ default risk primarily by improving firms’ profitability, raising their likelihood of obtaining credit ratings, and increasing their use of interest rate derivatives. Importantly, we reveal that FX derivatives and FC debt act as substitutes in mitigating firms’ default risk. Notably, this substitution effect is more pronounced for larger, non-SOEs, Hong Kong-headquartered firms, firms operating after exchange rate reform and firms facing high TPU. Finally, we find that using FX derivatives significantly dampens firms’ investment, which may explain why Chinese firms tend to prefer FC debt to manage their default risk.

This paper examines why tax incentives fail to stimulate participation in China's third-pillar commercial pension insurance, emphasizing the role of rational inattention. Using household survey data from China Family Panel Studies (CFPS) spanning 2014-2022 and a difference-in-differences-in-differences (DDD) design, we find that pilot policy generated a statistically insignificant average effect on participation, with rational inattention - proxied by financial literacy - explaining much of its ineffectiveness. We develop a dynamic consumption-portfolio model featuring costly information acquisition, and then resolve limitations of standard models through a dynamic framework with distinct savings channels and policy-focused rational inattention. The models show that rational inattention distorts perceptions of tax benefits and wage growth, raising participation costs, while multiple savings channels dilute incentives. Only households with higher financial literacy substantially respond to the policy. Our results reveal how cognitive frictions undermine pension reform and offer implications for designing behaviorally-informed retirement schemes.