A strong reputation is a cornerstone of corporate finance theory, widely believed to relax financial constraints and lower capital costs. We challenge this view by identifying an ‘reputation paradox’: under modern risk-sensitive regulation, for firms with long-term liabilities, a better reputation may paradoxically increase capital strain. We argue that the improvement of firm’s reputation alters customer behavior , , which extends liability duration and amplifies measured risk. By using the life insurance industry as an ideal laboratory, we develop an innovative framework that integrates LLMs with actuarial cash flow models, which confirms that the improved reputation increases regulatory capital demands. A comparative analysis across major regulatory regimes—C-ROSS, Solvency II, and RBC—and two insurance products, we further demonstrate that improvements in reputation affect capital requirements unevenly across product types and regulatory frameworks. Our findings challenge the conventional view that reputation uniformly alleviates capital pressure, emphasizing the necessity for insurers to strategically align reputation management with solvency planning.

A unique natural experiment in China – the city-level staggered introduction of admin-istrative approval centers (AAC) – reduces bank loan processing times by substantially speeding up the process of registering collateral without affecting credit decisions. Fol-lowing the establishment of an AAC, firms significantly reduce their cash holdings. State-owned enterprises are less affected. Cash flow sensitivity of cash holdings de-creases, as does the cash flow sensitivity of investment. The share of short-term debt increases, while inventory holdings and reliance on trade credit decrease. Defaults also decrease. These results suggest that timely access to credit has important implications on firms’ financial management.

This paper reconciles the debates on carbon return estimation by introducing the concept of equity duration. Our findings reveal that equity duration effectively captures the multifaceted effects of carbon transition risks. Regardless of whether carbon transition risks are measured by emission level or emission intensity, brown firms earn lower returns than green firms when the equity duration is long due to discount rate channel. This relationship reverses for short-duration firms conditional on the near-term cash flow. Our analysis underscores the pivotal role of carbon transitions' multifaceted effects on cash flow structures in understanding the pricing of carbon emissions.

We examine the relationship between customer concentration and capital structure adjustment speed using a sample of US listed firms from 1977 to 2020. We found that the customer-concentrated firms have a lower speed of leverage adjustment. Customer concentration affects leverage adjustment speed mainly through increased cash flow volatility and asset specificity. The negative association is more pronounced in firms with high relationship-specific investments and low switching costs for their customers. Stock market reacts to leverage deviation strongly for firms with concentrated customers. Our findings highlight the vital role of customers as key stakeholders in capital structure decisions.

Although firms suffer from regional climate risk in their production and operation, they are still highly expected by the public to play a leading role in addressing regional climate risk. In this paper, we study how regional climate risk affects corporate social responsibility (CSR). By constructing regional climate risk indicators and employing the OLS method to conduct empirical analyses, we find that regional climate risk can significantly promote CSR. Furthermore, regional climate risk can suppress firm’s cash flow, thereby exerting internal pressure on firms to assume CSR. Meanwhile, regional climate risk can raise higher public expectations for firms, imposing external pressure on them to assume CSR. We suggest that external pressure from the public plays a dominant role in CSR decision-making. Besides, we confirm that CSR can achieve a win-win goal for both firms and the public by mitigating the damage of regional climate risk on the firm’s long-term performance. We provide a new perspective for studying firm’s motivation to assume CSR under the influence of regional climate risk.

This paper reconciles the debates on carbon return estimation by introducing the concept of equity duration. We demonstrate that emission level and emission intensity yield divergent results for green firms, driven by inherent data problems. Our findings reveal that equity duration effectively captures the multifaceted effects of carbon transition risks. Regardless of whether carbon transition risks are measured by emission level or emission intensity, brown firms earn lower returns than green firms when the equity duration is long. This relationship reverses for short-duration firms. Our analysis underscores the pivotal role of carbon transitions’ multifaceted effects on cash flow structures in understanding the pricing of carbon emissions.

Utilizing the removal of the bank lending interest rate floor (IRFD) in China as an exogenous shock of banking liberalization, we find that IRFD leads to a significant rise in firms’ cost of equity capital, which is consistent with the prediction from the MM theory. The identified effects are more pronounced among firms with weaker ex-ante corporate governance and more severe ex-ante agency problems. We also find that IRFD witnesses an increase in the amount of acquired bank loans, a decrease in the average interest rate, and an increase in free cash flow. Further evidence also suggests IRFD provokes a drop in firms’ investment quality. Overall, our findings highlight an unexplored role of banking sector deregulation on firms’ cost of equity capital.

Green innovations are crucial in promoting environmental sustainability, especially in the long run. Environmental pollution liability insurance (EPLI) facilitates firms better dealing with pollution-related risks, encouraging firms to invest in green innovation activities. This paper studies the impact of firms’ EPLI coverage on green innovation activities using data from Chinese heavily polluting firms. Results show that EPLI increases firms’ green innovations, both in terms of quantity and quality. Further mechanisms study suggests that EPLI improves the cash flow conditions and reduces agency costs of the board, which explains the positive effect of EPLI on green innovations.

This paper investigates the free cash flow productivity of SOEs compared with non-SOEs and examines its possible determinants. We find that SOEs have slightly weak free cash flow productivity but significantly stronger than non-SOEs. Similar performance exists among commercial class I and II SOEs and public-benefit SOEs. Further analyses suggest that firm size, age, sales growth, ownership concentration, government subsidies, and industry monopoly factors cannot explain this phenomenon. The common driver for all types of SOEs to generate stronger free cash flows than nonSOEs is their stronger expense control capability.

Using administrative universal business registration data as well as primary offline and online surveys of small businesses (including unregistered self-employments) in China, we examine (i) whether digitization helps small and medium enterprises (SMEs) better cope with the COVID-19 pandemic, and (ii) whether the pandemic has spurred digital technology adoption. We document significant economic benefits of digitization in increasing SMEs' resilience against such a large shock, as seen through mitigated demand decline, sustainable cash flow, ability to quickly reopen, and positive outlook for growth. Post the January 2020 lockdown, firm entries exhibited a V-shaped pattern, with entries of e-commerce firms experiencing a less pronounced immediate drop and a quicker rebound. Moreover, the pandemic has accelerated the digital transformation of existing firms and the industry in multiple dimensions (e.g., altering operation scope to include e-commerce, allowing remote work, and adopting electronic information systems). The effect persists more than one year after reopening, and is more pronounced for certain sectors, firms in industrial clusters, and areas with more digital inclusion but less financial efficiency, constituting initial evidence for the long-term impact of the pandemic and the supposedly transitory mitigation policies.