This study explores the anchoring effect of previous bid premiums on acquirers’ bidding behavior in serial acquisitions. We demonstrate that, after controlling for deal characteristics, learning, and unobserved factors, the current bid premium is positively correlated with the acquirer’s previous bid premium. The strength of this anchoring effect diminishes with longer time intervals between acquisitions and increases with the industry similarity of targets. Notably, it remains unaffected by the acquirer’s state ownership or acquisition frequency. Additionally, the anchoring effect is less pronounced during periods of high economic uncertainty and can reverse following a change in the acquirer’s CEO. Our findings suggest that serial acquisitions are interrelated events, challenging the notion that each bid is an isolated occurrence. This research provides insights into the underperformance of serial acquirers compared to single acquirers and the declining trend in announcement returns across successive deals.

We empirically investigate the impact of state ownership on the private economic value and the scientific value of Chinese publicly listed firms’ innovation from 2003 to 2020, and explore its mechanism. We show that the stock-market-based methodology of estimating patent value proposed by Kogan et al. (2017) applies to the Chinese economy, and follow their approach to evaluate patents issued to Chinese listed firms. Using this new data and patent citation data, we find that state-owned enterprises have lower private value of innovation than non-state-owned enterprises, while their scientific values of innovation are not significantly different. We also provide evidence that the state-owned enterprises’ low profit-oriented R&D performance is due to their insufficient capabilities rather than ownership-specific corporate objectives.

We examine whether large language models (LLMs) can extract contextualized representation of Chinese news articles and predict stock returns. The LLMs we examine include BERT, RoBERTa, FinBERT, Baichuan, ChatGLM and their ensemble model. We find that tones and return forecasts extracted by LLMs from news significantly predict future returns. The equal- and value-weighted long minus short portfolios yield annualized returns of 90% and 69% on average for the ensemble model. Given that these news articles are public information, the predictive power lasts about two days. More interestingly, the signals extracted by LLMs contain information about firm fundamentals, and can predict the aggressiveness of future trades. The predictive power is noticeably stronger for firms with less efficient information environment, such as firms with lower market cap, shorting volume, institutional and state ownership. These results suggest that LLMs are helpful in capturing under-processed information in public news, for firms with less efficient information environment, and thus contribute to overall market efficiency.

Recent studies highlight the resurgence of state capitalism, with the state increasingly acting as equity investors in private firms. Why do state--business equity ties, including partial and indirect state ownership in private firms, proliferate in weakly institutionalized contexts like China? While conventional wisdom emphasizes state-driven explanations based on static evidence, I argue that regulatory risk reshapes business preferences, prompting firms to seek state investors and expanding state--business equity ties. These ties facilitate information exchange and signal political endorsement under regulatory scrutiny. Focusing on China's crackdown on the Internet and IT sectors, difference-in-differences analyses of all investments from 2016 to 2022 reveal a rise in state--business equity ties post-crackdown. In-depth interviews with investors along with quantitative analysis, demonstrate that shifts in business preferences drive this change. This study shows the resurgence of state capitalism is driven not only by the state but also by businesses in response to regulatory risks.

This study attempts to shed new light on how the state as a minority shareholder can affect the tax planning of non-state-owned enterprises(non-SOEs). We examine publicly traded non-SOEs in China and find that non-SOEs are more tax avoidance when the government is a minority shareholder, indicating that minority state ownership has played a "shelter effect" on tax avoidance of non-SOEs. Further analysis shows that the sheltering effect of minority state ownership is more prominent for firms located in areas with more social burden, worse tax enforcement and firms with stronger incentive to avoid taxes. Furthermore, non-SOEs with minority state ownership increase excessive capital expenditure and employ redundant employees, but still have higher firm value. Overall, our findings suggest the state as a minority shareholder shapes the tax-planning activities of non-SOEs in a “two-way favor exchange” manner and it is beneficial for non-SOEs to maintain a close relationship with the government in China where the government controls key resources.

This study examines the enduring effects of China’s planned economy on contemporary social attitudes. By leveraging spatial disparities in the historical distribution of state-owned enterprises and external shocks such as the First Five-Year Plan and the Third Front Construction movement, we find that a one percentage point increase in the historical SOE proportion of industrial output corresponds with a 0.57% to 0.89% increase in the contemporary preference for state-owned sectors. The results are robust after controlling the contemporary SOE employment share, and this effect does not apply to the younger generation born after the marketization reform. Furthermore, we provide evidence that city-level state ownership preferences significantly impact the likelihood of SOEs receiving subsidies, with this effect notably amplified in cities governed by locally-born leaders, but the share of locally-born leaders has been trending down.

This paper explores the impact of political network on insider trading activities in China. We find that stronger political network discourages insider trading. Such effect is more pronounced among long-standing and high-level connections, and persists in the events of M&A and public policy announcement when insiders may make profitable informed trading. This finding points to new cost of being politically connected. In exploring the underlying mechanisms, we confirm that the muted insider trading is related to preferable financial and policy support, and are more pronounced for SOEs in provinces with stronger market force and legal enforcement.

This study explores the role of sentiment in predicting future stock return volatility in the Chinese A-share market. Specifically, we conduct a composite sentiment index capturing both investor and manager sentiment. The former is measured by overnight returns, and the latter is measured by a textual tone based on the information in the Management Discussion and Analysis section of the annual reports. Empirically, we find that the composite index is positively associated with subsequent stock realized volatility and the result remains robust after controlling for a set of firm characteristics and state ownership. Besides, the result also shows that investor attention can help dissect the sentiment—volatility relation.

This paper investigates the varying impact of government subsidies on corporate investment efficiency using micro-level data from Chinese listed firms. Through meticulous compilation of information on government subsidies revealed in financial statements, and the implementation of an innovative categorization methodology based on the nature and timing of funds (ex-ante versus ex-post), we shed light on the divergent effects of these subsidies. Our findings are as follows: (1) Government subsidies enhance corporate investment efficiency, yet their effects exhibit asymmetry by alleviating underinvestment while exacerbating overinvestment. (2) Functional subsidies exert a stronger influence on investment efficiency compared to selective subsidies. Specifically, functional subsidies prove more effective in addressing underinvestment, but also possess a higher likelihood of exacerbating overinvestment. (3) State ownership, firm size and dividend payments lead to heterogeneity in the effects of subsidies. (4) Corporate financial constraints serve as one of the mechanisms through which subsidies affect investment efficiency. This suggests that firms with easier access to financing may not effectively utilize subsidies, while those facing severe financial constraints are less prone to misusing them.

Recent research indicates that the relationship between state ownership, firm size, and technological innovation outcomes in Chinese firms is a complex and intriguing topic. However, we propose a new perspective based on institutional complexity and examine the combined effects of these two factors. By considering the interplay between the economic efficiency rationale and the institutional logic associated with state ownership and firm size within the context of Chinese firms, we argue that the effects of state ownership and firm size can counterbalance each other. In order to test our hypotheses, we analyze a sample of 385 publicly listed firms spanning the period from 2015 to 2019. The findings reveal that while state ownership and firm size individually exert a negative influence on both exploratory and exploitative innovation in Chinese firms, their interaction actually yields a positive impact. This study contributes to our comprehension of how state ownership influences exploratory and exploitative innovation in the presence of competing institutional logics, as well as the contingent effect of firm size.