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 paper provides the first theory and evidence on the role of presale policies in the residential housing market. We start with constructing a novel dataset of unfinished projects, presale policies, and land auction outcomes across 270 major cities in China. We then identify 2,330 unfinished residential projects from 2010 to 2017 on a citizen complaint website run by the central government. We find that both presale criterion and postsale supervision of construction costs relate to a lower probability of unfinished projects. But only presale criterion relates negatively to the pace of new housing development, measured by developers' multitasking and land auction outcomes. A back-of-the-envelope calculation suggests that the average bundle of presale policies is inferior to the Pareto frontier in our sampled cities. Tightening the regulation on postsale supervision by 2 standard deviations may lead to a 58% reduction in the occurrence of unfinished projects, while keeping the pace of new housing development unchanged. Eliminating unfinished projects would entail a drastic increase in both presale criterion and postsale supervision, with slower housing development.

Using the firm-level data of the Chinese industrial sector from 1998 to 2010, this study investigates the impact of the previous environmental protection experience of prefecture-level Communist Party secretaries on the COD regulation within the secretaries’ respective jurisdictions. The study finds that the secretaries’ previous environmental protection experience has reduced the COD discharge intensity. The duration of the previous environmental protection experience is selected as an instrumental variable and the endogeneity is further addressed; the research conclusion remains unchanged. However, this negative impact only lasts for two years and presents an unclear long-term impact. The negative effect on COD discharge intensity caused by the previous environmental protection experience is affected by the mandatory regulation pressure from the central government and the overall polluting density of the sub-sectors. Secretaries with previous environmental protection experience do not reduce the COD discharge intensity by using the punishment mechanism of increasing sewage charges. The secretaries, instead, encourage enterprises to use clean production technology, save water resources, and reduce the produced COD level. Also, the secretaries place an emphasis on the treatment of wastewater pollutants, thus reducing the COD discharge intensity. The conclusions of this study can provide decisionmaking reference for the selection and training of local officials, with the goal of environmental regulation.

Purpose – To examine whether and how the different levels of regional economic incentives would have an effect on underwriters’ market share in general. Design/methodology/approach – Drawing on Chinese IPO firms during the period 2006-2016, this study examines the impact of different levels of regional economic incentives on underwriters’ market share. Findings – The authors find thatregional economic incentives have a positive impact on underwriters’ market share and that local economic incentives have a significantly strongerimpact than central economic incentives. Furthermore, the authors find that IPO firms with underwriters driven by regional economic incentives experience worse post-IPO performance than firms with underwriters driven by central economic incentives, which do not experience a significant decline in post-IPO performance. Originality/value – Taken together, the authors’ findings are consistent with the notion that performance assessment motivates officials at various levels of government to bring companies in their jurisdiction to the IPO market prematurely. In addition, the results indicate that central economic incentives play a significantrole in driving China’s macroeconomic development and market-oriented system reforms. As such, they are one of the major driving forces behind China’s market-oriented system reforms.

From 2013 onwards, the Chinese central government has subjected the largest state-owned enterprises (SOEs) to ‘disciplinary inspections’ to weed out and punish graft and other corruption. While this policy has been somewhat successful in punishing corruption—over 160 top SOE officials have been indicted—we show that the principal economic impact of these inspections has been to significantly cut investment by targeted firms, leading to a major decline in profitability, innovation and Tobin’s Q. Expenditures on R&D, entertainment, and travel also decline dramatically. The most obvious explanation is that the fear induced in SOE managers, who have limited risk-promoting equity holdings or incentive compensation and few external employment options, deterred them from taking risky but value-enhancing investments post-audit.

Using the firm-level data of the Chinese industrial sector from 1998 to 2010, this study investigates the impact of the previous environmental protection experience of prefecture-level Communist Party secretaries on the COD regulation within the secretaries’ respective jurisdictions. The study finds that the secretaries’ previous environmental protection experience has reduced the COD discharge intensity. The duration of the previous environmental protection experience is selected as an instrumental variable and the endogeneity is further addressed; the research conclusion remains unchanged. However, this negative impact only lasts for two years and presents an unclear long-term impact. The negative effect on COD discharge intensity caused by the previous environmental protection experience is affected by the mandatory regulation pressure from the central government and the overall polluting density of the sub-sectors. Secretaries with previous environmental protection experience do not reduce the COD discharge intensity by using the punishment mechanism of increasing sewage charges. The secretaries, instead, encourage enterprises to use clean production technology, save water resources, and reduce the produced COD level. Also, the secretaries place an emphasis on the treatment of wastewater pollutants, thus reducing the COD discharge intensity. The conclusions of this study can provide decisionmaking reference for the selection and training of local officials, with the goal of environmental regulation.

Through a unique database on daily activities of municipal party secretaries, we find that they spend a significant part of their work time on political and propaganda activities, including organizing various meetings to promote the central government's spirit ideology. We find that officials engage in these behaviors more often before a government reshuffle, plausibly tend to leave a loyal and obedient impression on the superior government and increase their promotion probability. This is on contrary to economic behaviors, which are more common in the early stages of officials' terms, possibly because investment projects require time. This is more evident among younger, well-educated politicians due to age-based promotion restrictions. Our study may shed light on how the Communist Party of China balancing economic development and political loyalty when selecting officials.

We examine the roles of bank ownership and CEO political faction membership in facilitating or hindering the implementation of central bank policy in China. Specifically, we examine the response of China’s commercial banks to People’s Bank of China (PBC) guidelines intended to decrease mortgage lending and to slow down the rise in residential property prices. We find that both bank ownership and faction membership matter. Central government-owned banks whose CEOs are members of the specialist finance faction within the Chinese Communist Party (CCP) respond most strongly to PBC guidance, whereas provincial or city government-owned banks whose CEOs are members of a generalist faction respond least strongly. The implementation of PBC policy has real effects: in those cities where central government-owned banks with specialist CEOs constitute a larger percentage of total bank branches, house prices grew more slowly, as did the number of residential real estate transactions and the number of new listings. Where in contrast provincial and city government-owned banks with generalist CEOs dominate, the number of transactions grew faster; the rate of house price appreciation and the number of listings were however unaffected. We conclude that China’s different levels of government and the CCP’s different factions enjoy some discretion in responding to PBC guidance and that they exploit the discretion they are afforded to vary the strength of their response.

Exploring a novel dataset and a unique policy experiment, this paper examines the role of government intervention in the emergence of venture capital (VC) in China during 1999-2013. Using difference-in-difference methodology, I find that the central government program leads to an increase in local investment from both government and private VCs, which doubles the number of successful companies. The positive impact is most pronounced in relatively less developed regions and during the early development of the VC sector. I present two micro-level transmission channels of the crowding-in effects, through networks formed by previous investments and through co-ownership in VC affiliates.

This paper investigates CEO pay and pay-performance relationship in China’s listed firms. We distinguish four firm types based on their controlling owners: state owned enterprises affiliated with state asset management bureaus (SAMBs), state owned enterprises affiliated with the central government (SOECGs), state owned enterprises affiliated with a local government (SOELGs), and private firms controlled by private investors. We also distinguish between firms with foreign investors and those without. Because the different types of controlling owners have different objectives, motivations, and political interests, they affect managers’ compensation in the firms in which they invest. Our results indicate that CEO pay is lowest in SAMB controlled firms and highest in SOECG controlled firms. Not only is CEO pay positively associated with firm performance, the positive pay-performance relationship is stronger in both types of SOE firms but weaker in privately controlled firms. In addition, firms with foreign investors compensate their CEOs more highly than those without foreign investors, an effect that is significant in both SOEs and privately controlled firms. Overall, the evidence suggests that CEO compensation in China is jointly determined by firm performance, market-oriented reform and the unique ownership structure, meaning that standard theories of efficient compensation contracts may not apply in such emerging markets.