Forming diversified global supply chains (GSC) is an important approach to improving economic resilience. When firms expand their oversea suppliers for such purposes, information friction is a major challenge, and internetization may help firms cope with it by more efficient communication of information. We introduce a dynamic discrete choice model for firms’ searching for new supplier sources estimated with structural methods, and construct counterfactual studies to analyze the internetization effects on Chinese firms’ GSC diversification. Our quantitative studies reveal that internetization relieves information friction, which reduces firms’ searching costs by 13.4%, and thus significantly diversifies firms’ GSC. It also raises firms’ productivity by 0.5% through efficient communication of information. Reductions in searching costs are revealed as the main channel of such effects of internetization, while the productivity channel is less significant. Moreover, the internetization effects on diversifying GSC are persistent over time, and are biased towards high-productivity and importing firms.

Informal institutions can play a crucial role in fostering corporate and policy innovation, especially when formal institutions are weak. However, their intangible nature makes them difficult to quantify. In this paper, we proxy the strength of kinship-based informal institutions using surname homogeneity among business owners, specifically, the extent to which they share a limited number of surnames within the same county. Our analysis reveals that a one-standard-deviation increase in the strength of informal institutions leads to a 21.1% increase in patent filings and an 18.9% increase in policy innovation. We find that kinship-related informal institutions foster corporate innovation by compensating for weak formal institutions, enhancing protection for intellectual property rights, facilitating access to finance, improving public service delivery, and promoting supply chain cooperation. We also suggest that kinship-related informal institutions encourage local governments to engage in policy experimentation, which relies on the collaboration of business owners. This experimentation process is easier to coordinate and monitor in counties dominated by a few kinship networks. Both informal institutions and policy innovation contribute to economic development and foster entrepreneurial market entries. However, the positive impact of informal institutions declines over time as formal institutions strengthen in China.

Based on the sample of Chinese A-listed firms from 2003 to 2020, this paper investigates the effect of common institutional ownership on labor income share. The result shows that common institutional ownership can significantly increase firms’ labor income share. Mechanism tests indicate that common ownership can: 1) alleviate financial constraints by reducing the debt financing costs and increasing the trade credit financing, thus increasing the labor income share; 2) improve corporate innovation and therefore enhances the demand for highly-skilled labor, which eventually boost labor income share. Competitive hypothesis test represents that common institutional ownership can reduce the monopoly power of enterprises and decrease monopoly rent, so as to increase the proportion of labor in the distribution. Further analyses present that the network formed by the common ownership can effectively exert the financing support role of SOEs and the knowledge spillover effect of innovative-advantage firms, which contributes to the labor income share increasing of other related firms in the network connection. This study not only enriches the economic consequences of common institutional ownership, but also provides policy guidance for the government to further optimize the income-distribution pattern by deepening the reform of the financial market.

This paper examines the impact of asset bubbles on innovation and long-run economic growth within a semi-endogenous growth framework, incorporating idiosyncratic productivity shocks and endogenous credit constraints in the R&D sector. It demonstrates that pure bubbles tied to intrinsically useless assets and equity bubbles linked to intermediate goods firms can coexist, relaxing credit constraints and boosting entrepreneurs’ total factor productivity (TFP), which stimulates R&D and enhances growth along the transitional path. However, these bubbles generally do not influence the long-run economic growth rate. The model’s mechanisms and predictions are supported by aggregate and firm-level evidence, showing a positive correlation between equity bubbles and R&D investment, with stronger effects during periods of tightened financial constraints.

We leverage machine learning to introduce belief dispersion measures to distinguish different opinion (DO) and information asymmetry (IA). Our measures align with the human-based measure and relate to economic outcomes in a manner consistent with theoretical prediction: DO positively relates to trading volume and negatively linked to bid-ask spread, whereas IA shows the opposite effects. Moreover, IA negatively predicts the cross-section of stock returns, while DO positively predicts returns for underpriced stocks and negatively for overpriced ones. Our findings reconcile conflicting disagree-return relations in the literature and are consistent with Atmaz and Basak (2018)’s model. We also show that the return predictability of DO and IA stems from their unique economic rationales, underscoring that components of disagreement can influence market equilibrium via distinct mechanisms.

This study examines the economic consequences of China’s Three-Red-Lines policy—introduced in 2021 to cap real estate developers’ leverage by imposing strict thresholds on debt ratios and liquidity. Developers breaching these thresholds experienced sharp declines in financing, land acquisitions, and financial performance, with privately-owned developers disproportionately affected relative to state-owned firms. Using granular project-level data, we document significant drops in sales and a demand shift from private to state-owned developers. The policy also reduced local governments’ land sale revenues, prompting greater reliance on hidden local government financing vehicles for land purchases. The policy induced broad structural changes in China’s housing and land markets.

We investigate the economic impact of artificial intelligence (AI) adoption in the mutual fund industry by introducing a novel measure of AI adoption based on the presence of AI skilled personnel at fund management firms. We provide robust evidence that AI adoption enhances fund performance, primarily by improving risk management, increasing attentive capacity, and enabling faster information processing. Furthermore, we find that mutual funds with higher levels of AI adoption experience greater investor net flows and exhibit lower flow-performance sensitivity. While AI adoption benefits individual funds, we find no evidence of aggregate performance improvements at the industry level.

This study explores the price drivers of Chinese Emissions Allowances (CEAs) in the early stage of China’s national carbon market. Using daily time series data from July 2021 to July 2023, we find limited influence from conventional drivers, including energy prices and economic factors. Instead, national power generation emerges as a significant driver. These are primarily due to the distinct institutional features of China’s national carbon market, notably its rate-based system and sectoral coverage. Moreover, the study uncovers cumulative abnormal volatility in CEA prices ranging from 12% to 20% around the end of the first compliance cycle, reflecting sentiments about the policy design and participants’ limited understanding about carbon trading. Our results extend previous literature regarding carbon pricing determinants by highlighting China’s unique carbon market design, comparing it with the traditional cap-and-trade programs, and offering valuable insights for tailored market-based policies in developing countries.

The economic institutionalist literature often suggests that sub-optimal institutional arrangements impart unique distortions in China, and excessive corporate debt is a symptom of this condition. However, lax monetary policies after the global financial crisis, and specifically, quantitative easing have led to concerns about debt bubbles under a wide range of institutional regimes. This study draws on data from Chinese listed firms, supplemented by numerous macroeconomic control variables, to isolate the effect of international capital flows from other drivers of firm leverage. We conclude that the rise in, and distribution of, Chinese corporate debt can partly be as-cribed to the effects of monetary policy outside of China and that Chinese institutional features amplify these effects. Whilst Chinese firms are affected by developments in the global financial ecosystem, domestic institutional realities and distortions may unevenly add their own particular effects, providing further support for and extending the variegated capitalism literature.

Exploiting a unique market-oriented media reform initiated in 1996 in China, we investigate the role of media environment in affecting firm behaviour. We find robust evidence that market-oriented media environment is conductive to firm innovation, with the reform promoting patent quantity and quality substantially. The effect is more pronounced for firms with higher information asymmetry. Matching firm data with 1.3 million news reports, we find the market-oriented media reform significantly improves the criticalness and unbiasedness of news coverage and shapes an innovation-friendly environment. Our findings highlight economic outcomes of relaxing media control and underline substantial gains from deepening the reform.