Why do firms appoint expired independent directors? How do expired independent directors affect corporate governance and thus impact investment decisions? By taking advantage of the sharp increase in expired independent directors’ re-employment in China caused by exogenous regulatory shocks, Rule No. 18 and Regulation 11, this paper adopts a PSM-DID design to test the impact of expired independent directors on CSR performance. We find that firms experience a significant decrease in CSR performance after re-hiring expired independent directors and the effect is stronger for CSR components mostly related to internal governance. The results of robustness tests show that the main results are robust to alternative measures of CSR performance, an extended sample period, alternative control groups, year-by-year PSM method, and a staggered DID model regarding Rule No. 18 as a staggered quasi-natural experiment. We address the endogeneity concern that chance drives our DID results by using exogenous regulatory shock, an instrumental variable (the index of regional guanxi culture), and placebo tests. We also find that the negative relation between the re-employment of expired independent directors and CSR performance is more significant for independent directors who have more relations with CEOs and raise less objection to managers’ decisions, and for firms that rely more on expired independent directors’ monitoring roles (e.g., a lower proportion of independent directors, CEO duality, high growth opportunities, and above-median FCF). The mediating-effect test shows that the re-employment of expired independent directors increases CEOs’ myopia and thus reduces CSR performance. In addition, we exclude the alternative explanation that the negative relation is caused by the protective effect brought by expired independent directors’ political backgrounds. Our study shows that managers may build reciprocal relationships with expired independent directors in the Chinese guanxi culture and gain personal interest.

This paper investigates the impact of curation algorithms through the lens of stock market dynamics. By innovatively incorporating the dynamic interactions between social media platforms, investors, and stock markets, we construct the Social-Media-augmented Artificial Stock marKet (SMASK) model under the agent-based computational framework. Our findings reveal that curation algorithms, by promoting polarized and emotionally charged content, exacerbate behavioral biases among retail investors, leading to worsened stock market quality and investor wealth levels. Moreover, through our experiment on the debated topic of algorithmic regulation, we find limiting the intensity of these algorithms may reduce unnecessary trading behaviors, mitigates investor biases, and enhances overall market quality. This study provides new insights into the dual role of curation algorithms in both business ethics and public interest, offering a quantitative approach to understanding their broader social and economic impact.

Reputation is widely regarded as a stabilizing factor in financial institutions, reducing capital constraints and enhancing firm resilience. However, in the insurance industry, where capital requirements are shaped by solvency regulations and policyholder behavior, the effects of reputation on capital management remain unclear. This paper examines the unintended consequences of reputation in insurance asset-liability management, focusing on its impact on capital allocation. Using a novel reputation risk measure based on large language models (LLMs) and actuarial models, we show that reputation shifts influence surrender rates, altering capital requirements. While higher reputation reduces surrender risk, it increases capital demand for investment-oriented insurance products, whereas protection products remain largely unaffected. These findings challenge the conventional wisdom that reputation always eases capital constraints, highlighting the need for insurers to integrate reputation management with capital planning to avoid unintended capital strain.

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 examines the impact of strategic alliances on corporate green innovation. We find that strategic alliances significantly promote corporate green innovation. Mechanism tests indicate that strategic alliances promote green innovation through channels of attracting market attention, alleviating agency problems, and stimulating collaborative innovation. Heterogeneity analysis demonstrates that the effects of strategic alliances are more pronounced for firms in areas with stringent environmental regulations and a favorable business environment, and firms facing intense product market competition. The findings provide new insights into the green transformation and upgrading of enterprises.

This paper examines the spillover effect of environmental regulations on firms’ green technological innovation, from the perspective of supply chain relationships. Analyzing data from Chinese listed companies, we find that the average environmental regulatory pressure faced by the client firms of a supplier firm enhances the green patent applications filed by the supplier firm, indicating that environmental regulatory pressure from clients spills over to suppliers. When the industries of suppliers are more competitive or the proportion of their sales from the largest client is higher, suppliers feel more pressured to engage in green innovation, resulting in more green patent applications. Thus, via their negotiation power, client firms can prompt supplier firms to innovate to meet their demand for green technologies. Finally, we show that this effect is particularly pronounced when supplier firms are located in highly marketized regions, receive low R&D government subsidies, or have high ESG ratings.

This article examines the impact of the Green Financial Regulatory Policy on corporate strategic ESG behavior against the backdrop of the 2017 policy integration of “green finance” into the Macro-Prudential Assessment by the central bank. The research identifies that GFRP may shift corporate focus towards the disclosure of ESG performance while neglecting the actual practices of ESG engagement, potentially inducing firms to engage in ESG greenwashing. It is further posited that corporate green perception and executives’ environmental backgrounds serve as primary mechanisms in this dynamic. Additionally, the policy efficacy of GFRP on strategic ESG behavior exhibits heterogeneity

The e-CNY, with its information transparency and financial inclusion, activates an innovative solution to cure the financing obstacles among the small and medium enterprises in China. The research establishes a game model between enterprises and commercial banks embedded in information asymmetry, and incorporates the e-CNY payment choice within the framework to analyse the cure effect of e-CNY on enterprise financing obstacles. With equilibrium results calculated, it simulates the outcomes of changing parameters on the behaviours of enterprises and banks. The findings involve that, based on the incremental utility of e-CNY and subsidies attached, e-CNY is preferred in transaction, reducing the bad debt risk caused by misalignment when both achieving excess returns. The People’s Bank of China must strengthen a more transparent publicity of e-CNY and structure an inclusive system of financial regulation to well use digital currency and realise high-quality socio-economic development.

Local financial development is crucial for advancing regional financial supply side structural reform, enabling local governments to leverage financial instruments to effectively mobilize land resources and foster competitive growth. The introduction of numerous financial products linked to land-related rights and interests has resulted in a pronounced transmission and interconnection of fiscal and financial risks across regions. This study examines the impact of local financial development on land financialization in China using panel data from prefecture-level cities and detailed information on land mortgages. The findings indicate that the establishment of city commercial banks (CCBs) contributes to the progress of land financialization by incentivizing local government financing vehicles to participate in land mortgage financing, increasing the transfer of debt risks to the financial sector. Notably, the impact of CCBs on land financialization is more pronounced in regions with urban agglomeration, high GDP manipulation, inadequate local financial regulation, and robust implicit government guarantees. Further analysis reveals that CCB establishment has negative spillover effects on land financialization in neighboring areas, while expansion strategies such as establishing intercity branches, engaging in cross-regional mergers, and relaxing regulations have mitigated the rise of land financialization at the regional level. This study provides policy recommendations that focus on reducing local governments’ reliance on land financing and enhancing the prevention and management of financial risks.

Using the unique regulatory setting from the Hong Kong stock market with both shortable and no-short stocks, we document that no-short stocks on average earn significantly higher average returns than shortable stocks. Furthermore, stocks that comove more with the portfolio of no-short stocks than with the portfolio of shortable stocks on average earn higher subsequent abnormal returns. Additions to and deletions from the shorting list only partially contribute to the no-short return premium. To interpret our findings, we provide a theoretical model showing that rational investors’ discounting for the mispricing risk of no-short stocks can lead to the no-short return premium.