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.

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.

Despite nearly twenty years of privatization, mixed-ownership reform has been the mainstay of SOE reform in China in recent years. This raises the question of whether the financial performance of mixed-ownership firms (Mixed firms) is better than private-owned enterprises (POEs). Although Mixed firms suffer more from government intervention, unclear property rights, and interest conflicts between state shareholders and private shareholders, they can also benefit from the external resources controlled by the state. Therefore, the performance of Mixed firms is still unclear. Collecting data from the Chinese A-share listed market, we divide the firms into POEs, Mixed firms controlled by the state (MixedSOEs), and Mixed firms controlled by the private sectors (MixedPOEs). Measuring profitability using ROA and ROE, we find that on average, POEs perform better than Mixed firms, and MixedPOEs have a higher profitability than MixedSOEs. Within Mixed firms, more state shares are related to lower profitability, and more private shares are related to higher profitability. Using the NBS survey data, we further find that on average, SOEs exhibit the lowest profitability, with MixedSOEs and MixedPOEs in the middle, and POEs have the highest profitability. We try to address the endogeneity challenge in several ways and get similar results. Overall, our analysis provides new evidence on the financial performance of mixed-ownership firms.

Despite nearly twenty years of privatization, mixed-ownership reform has been the mainstay of SOE reform in China in recent years. This raises the question of whether the financial performance of mixed-ownership firms (Mixed firms) is better than private-owned enterprises (POEs). Although Mixed firms suffer more from government intervention, unclear property rights, and interest conflicts between state shareholders and private shareholders, they can also benefit from the external resources controlled by the state. Therefore, the performance of Mixed firms is still unclear. Collecting data from the Chinese A-share listed market, we divide the firms into POEs, Mixed firms controlled by the state (MixedSOEs), and Mixed firms controlled by the private sectors (MixedPOEs). Measuring profitability using ROA and ROE, we find that on average, POEs perform better than Mixed firms, and MixedPOEs have a higher profitability than MixedSOEs. Within Mixed firms, more state shares are related to lower profitability, and more private shares are related to higher profitability. Using the NBS survey data, we further find that on average, SOEs exhibit the lowest profitability, with MixedSOEs and MixedPOEs in the middle, and POEs have the highest profitability. We try to address the endogeneity challenge in several ways and get similar results. Overall, our analysis provides new evidence on the financial performance of mixed-ownership firms.

This study documents how the political hierarchy plays a significant role in determining corporate environmental governance. By conducting difference-in-differences analysis to investigate listed firms in China, this study demonstrates that local and central SOEs headquartered in jurisdictions far removed from central government supervision have worse environmental governance than POEs. Verticalization reforms implemented in 2016 enable provincial environmental protection bureaus to direct lower-level bureaus. Local governments cannot control environmental protection bureau leaders for economic development. This study finds that the corporate environmental governance of local SOEs has significantly improved following the reform, as local environmental protection bureaus no longer have conflicts of interest with local governments. However, the reform has not resulted in improvements to corporate environmental governance in central SOEs, whose executives occupy higher status than provincial Environmental Protection Bureau leaders, nor in POEs, which were already managed before the reform. Further evidence indicates that local SOEs experience an increase in abatement investments and relationship building expenses following the reform. Lastly, our study reveals that verticalization reform costs are negligible. Local SOEs have not experienced a decline in financial performance or corporate valuation. This study suggests that policymakers should consider the political ranking of government agencies and enterprises to improve environmental governance.

This study provides the first empirical evidence on the relationship between the chairman of the board of directors (COB) and corporate financial performance. Using a sample of Chinese A listed firms between 2008-2017, we find reliable evidence that the COB turnover improves corporate financial performance. Moreover, the existence of a majority shareholder (Majority) positively influences corporate financial performance, while firm nature (private majority shareholder or public majority shareholder)(Private) may not.

Purpose – Using a sample of 9,898 firm-year observations from 1,821 unique Chinese listed firms over the period from 2004 to 2019, this study aims to investigate whetherthe marketrewards meeting or beating analyst earnings expectations (MBE). Design/methodology/approach –The authors use an event study methodology to capture marketreactions to MBE. Findings – The authors document a stock return premium for beating analyst forecasts by a wide margin. However,there is no stock return premium forfirms that meet orjust beat analystforecasts, suggesting that the market is skeptical of earnings management by these firms. This market underreaction is more pronounced for firms with weak external monitoring. Further analysis shows that meeting or just beating analyst forecasts is indicative of superior future financial performance. The authors do not find firms using earnings management to meet or just beat analyst forecasts. Research limitations/implications – The authors provide evidence of market underreaction to meeting or just beating analyst forecasts, with the market’s over-skepticism of earnings management being a plausible mechanism for this phenomenon. Practical implications – The findings of this study are informative to researchers, market participants and regulators concerned about the impact of analysts and earnings management and interested in detecting and constraining managers’ earnings management. Originality/value – The authors provide new insights into how the market reacts to MBE by showing that the market appears to focus on using meeting or just beating analyst forecasts as an indicator of earnings management, while it does not detect managed MBE. Meeting or just beating analyst forecasts is commonly used as a proxy for earnings management in the literature. However, the findings suggest that it is a noisy proxy for earnings management.

This study examines whether firms’ financial fraudulent behavior varies when local firms are led by nonlocal CEOs. Building on the social identity theory, we argue that nonlocal CEOs, due to their different location-based social identities, are perceived as outgroup leaders and face intergroup bias from stakeholders within local firms. Therefore, nonlocal CEOs are more likely to conform to laws and regulations and reduce corporate financial fraud to enhance their legitimacy in leading local firms. Using panel data on Chinese listed firms from 2007 to 2020, we find a significantly negative correlation between nonlocal CEOs and the likelihood of corporate financial fraud. Furthermore, our moderating analysis indicate that the negative effect of nonlocal CEOs on corporate financial fraud is stronger (a) for CEOs who have neverwon awards, (b) in firms with poor financial performance and (c) in regions with tight cultures. Additional mechanism tests indicate that nonlocal CEOs’ outgroup identity is more prominent in regions with low regional dialect diversity and local private-owned enterprises. Overall, these findings suggest that choosing a nonlocal CEO warrants attention from the firm’s top management teams and stakeholders.

The pilot carbon emission trading schemes (ETSs) of China were created to combat climate change in a cost-effective and economically efficient manner, and their potential impact on regulated firms has drawn increasing attention. This study is conducted to provide empirical evidence on the effect of China’s pilot ETSs on firm-level financial performance during the period from 2008 to 2017. The empirical results show that the ETS pilots have a positive impact on firms’ profitability and value, and a negative impact on operational costs. We also find that the ETS pilots improve total factor productivity (TFP) but that changes in technology have an indirect suppressing effect on the relation between the ETS and short-term financial performance, providing support for the weak version of the Porter Hypothesis. Further, we show that the carbon emission price has a negative impact on firms’accounting-based performance but increases firms’ market value. Finally, we find evidence that, in contrast to state-owned enterprises (SOEs), non-SOEs do not experience significant improvements in their financial performance, led by the ETS pilots. Our findings have policy implications for firms’sustainable development and the transition to a low-carbon economy.

We investigate whether suppliers value their clients’ ESG profiles in China, the largest emerging market featured with low ESG awareness and severe agency problems. We find a robust and negative impact of Chinese firms’ ESG scores on their access to trade credit. The 2SLS regression results based on the instrumental variable indicate that the impact is casual. Additionally, the impact is more pronounced for firms with higher agency costs, greater information asymmetry, and worse financial performance. These results suggest that suppliers in China view clients’ ESG engagement as costly investments caused by agency problems. Finally, we highlight the economic importance of the impact by showing that trade credit access helps Chinese firms decrease debt costs, increase trade credit supply to downstream firms, and promote R&D inputs.