This paper examines the impact of Exchange-Traded Fund (ETF) ownership on corporate earnings management. We find that ETF ownership is associated with a significant reduction in earnings management, and this result remains robust across a wide range of endogeneity tests and robustness checks. Further analyses reveal that ETFs exert a pronounced mitigating effect on sales manipulation, production manipulation, and expense manipulation. Mechanism tests indicate that ETFs curb earnings management by improving stock liquidity and strengthening external monitoring. We also find that the influence of ETFs is stronger in private firms, in firms with lower information transparency, and in firms with CEO duality, suggesting that ETFs serve as a more prominent external governance force when internal governance mechanisms are relatively weak. Overall, this study enriches the literature on the economic consequences of ETFs and provides new empirical evidence that financial innovation in emerging markets can help alleviate the information risk faced by investors.

This paper documents that the physical appearance of CEOs, specifically excess body weight, is priced in the capital market. In the absence of explicit health disclosures,market participants interpret obesity as a proxy for latent health risks and potential managerial disrupts, thereby demanding a compensation premium. Our analysis reveals that (1) IPOs of firms with obese CEOs have lower first-day performance, (2) these firms achieve a lower valuation, (3) the stocks of these firms have lower liquidity and (4) they provide higher stock returns thereafter. A quasi-natural experiment based on the invention of anti-obesity medications provides supporting causal evidence.

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.

This study analyzes the network structures of institutional shareholders and examines the influence of institutional investor cliques on corporate innovation. Our empirical results reveal that institutional investor cliques significantly enhance both innovation input and output. To mitigate endogeneity concerns and establish causality, we adopt multiple empirical strategies. Further evidence suggests that the beneficial impact of institutional investor cliques on firm innovation can be attributed to increased innovation investment efficiency, enhanced employee productivity, reduced information asymmetry, and decreased managerial myopia. Additionally, we find that the positive effect of institutional investor cliques on firm innovation is more pronounced in non-state-owned enterprises and is particularly evident in firms with severe agency conflicts, CEO duality issues, highly competitive product markets, and for firms that have low stock liquidity.

Recent research highlights the significant impact of managerial industry tournament incentives on internal firm decisions. However, their potential impact on external stakeholders-in the context of evolving product market relationships-has received scant attention. To address this gap, we examine the effect of customer aspiration, incentivized by CEO industry tournaments (CITIs), on supplier innovation. Utilizing customer-supplier pair-level data from 1992 to 2018, we establish that customer CITIs enhance supplier innovation, both in quantity and quality. Additionally, we identify that CITIs positively impact the relationship-specific innovation and market valuation for suppliers. The effect of CITIs is more pronounced when customers are larger, geographically closer, socially connected, and have long-standing relationships with their suppliers. The results remain robust to alternative specifications and considering potential endogeneity issues. Our study highlights the bright side of executives’ industry tournament incentives, which not only drive innovation within the sector but can also positively influence related sectors within the supply chain.

A second-tier patent system with relatively low protectability standards has been adopted by many countries, but empirical evidence on how it is used by firms israre. Using Chinese patent data, we exploit “parallel filings” – where a second-tierpatent is filed simultaneously with an invention patent – to shed light on its usein practice. The data indicate that while parallel filings appear to be inventionswith a narrower scope, they are cited more frequently in the early years and morelikely to be licensed or transferred compared to inventions protected by standardpatents. We provide evidence that parallel filing is likely a strategic choice forshort-life-cycle technologies that achieve high value early in their lifetime but decayfast. The rapid issuance of the second-tier patent facilitates knowledge diffusionand technology transfer, thereby helping the patentees capitalize on the value of fast-moving technologies. This study provides some much-needed empirical evidenceon how the quick procedure of the second-tier patent system serves short life-cycletechnologies.

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 study investigates how abnormally hot temperatures affect firms’ environmental behavior in China. We find that firms exposed to abnormally hot temperatures participate in more environmental engagement. We also find that this improvement effect is driven mainly by environmental concerns, including public concerns, CEOs, and governments. Our results remain intact after an array of robustness tests. Further analysis shows that the effect of abnormally hot temperatures on corporate environmental engagement is more pronounced in SOEs, heavily polluting firms, and firms located closer to local environmental protection agencies. Moreover, the positive impact of environmental engagement on firm value is stronger when firms are exposed to abnormally hot temperatures. Overall, this study sheds light on the potential stimulation of firms’ environmental actions by global warming, which is yet to be fully understood.

We examine the relation between the CEO’s childhood socioeconomic class and corporate labor policies. We find that CEOs raised in low socioeconomic class families are less likely to invest in employee friendly firm policies measured by several types of labor and employment litigation, including litigation by unions, and occupational safety measures. These results are confirmed by crowdsourced employee firm reviews across several workplace dimensions. Our findings are supported by the studies of within-family transmission of occupational knowledge and formation of occupational norms as well as development of empathy and altruistic behaviors in children.

We study when CEOs with legal expertise are valuable for firms. In general, lawyer CEOs are negatively associated with frequency and severity in employment civil rights, contract, labor, personal injury, and securities litigation. This effect is partly induced by the CEO’s man- agement of litigation risk and reduction in other risky policies. Lawyer CEOs are further associated with an increase in gatekeepers providing additional legal oversight and a decrease in innovative activities with high litigation risk. Lawyer CEOs are more valuable during periods of enhanced compliance requirements and regulatory pressure and in indus- tries with high litigation risk or better growth opportunities.