In highly competitive product markets, firms can internalize other firms’ resources through interfirm collaboration. Using a longitudinal dataset on strategic alliances among private and public firms in Europe, this study examines how industry competition induced by international trade inflows affects the interfirm competitive and cooperative dynamics. We document that industry-level competition shocks, caused by Chinese import penetration, are a key driver in shaping corporate alliances. Notably, firms with constrained cash flow but ample cash reserves are more likely to form alliances in industries experiencing competition shocks. After these alliances, we observe improvements in cash flow growth and investment, with this positive impact of interfirm collaboration being more pronounced among private firms. These findings suggest that strategic alliances are crucial tools for restructuring following international trade inflows, particularly among small, private enterprises.

This paper examines how economic policy uncertainty (EPU) affects mergers and acquisitions (M&As) between companies with different levels of financing constraints. Existing literature overlooks the interactive effect of EPU and financing constraints on M&As, and empirical evidence regarding EPU's influence on financially constrained firms remains limited. China's unique ownership structure provides a valuable context for this analysis, as state-owned enterprises (SOEs) face fewer financing constraints than private firms. Using a 2007-2021 sample of Chinese listed state-owned enterprises (SOEs) and private companies, we find that high EPU decreases the likelihood of private firms acquiring SOEs, while increases the likelihood of private firms being acquired by SOEs. These results suggest that under high EPU, financially constrained firms experience greater survival pressure, limiting their capacity to alleviate constraints by acquiring less-constrained targets. Conversely, less-constrained firms enhance their bargaining power and are more likely to acquire financially stressed counterparts. EPU facilitates control transfers from high-constraint to low-constraint firms, contributing to long-term market returns and improving financial market allocation efficiency. Our study contributes to the literature by shedding light on how EPU shapes divergent M&A behaviors based on firms’ financing constraints.

We examine how Chinese mutual funds react to superstitious beliefs about bad luck during one’s zodiac year, which occurs on a 12-year cycle around a person’s birth year. Funds decrease their holdings of zodiac stocks, non-state-owned enterprises in the zodiac years of their chairperson, and profit more from trading zodiac stocks than from trading other stocks. This pattern is more pronounced in firms with lower investor awareness and higher liquidity, and for fund managers with higher past ability, indicating that fund managers trade in anticipation of the negative market reaction towards zodiac stocks.

This paper investigates how the geographical distribution of shareholders in Chinese mutual fund management companies influences investment decisions. We show that mutual funds are more inclined to hold and overweight stocks from regions where their shareholders are located, thus capitalizing on a local information advantage. By examining changes in fund holdings in response to shifts in the shareholder base, we rule out the possibility that these effects are driven by fund managers’ local biases. Our findings reveal that stocks from the same region as the fund’s shareholders tend to outperform and significantly contribute to the fund’s overall performance.

In this paper, we investigate alternative one-factor and two-factor continuous-time models with both affine and non-affine variance dynamics for the Chinese options market. Through extensive empirical analysis of the option panel fit and diagnostics, we find that it is necessary to include both the non-affine feature and the multi-factor structure. For performance evaluation, we examine various measures from both aggregate and dynamic perspectives. Our results are statistically significant.

This paper examines the interactional phenomenon where an institutional complainee initiates a complaint and becomes a co-complainant with their original complainant against a third party that is proposed to have caused grievances to both participants. Institutional complainees initiate their third-party complaints when their complainants repeatedly refuse to affiliate with their attempts to shift responsibility or their proposed solutions. This shift from being the complainee to being a co-complainant is regularly accomplished through practices in which the institutional complainee: 1) produces implicit counter-complaints; 2) partitions complainants and themselves as sharing similar identities; and 3) highlights and upgrades their own grievances. Once complainants affiliate with their complaints, institutional complainees attempt to end the complaint sequences. The interactions end with a sense of solidarity sustained between the participants, even though no satisfying solutions are offered to the original complainants. The findings suggest that institutional actors can make relevant their noninstitutional identities and go against what is expected of them as institutional actors to achieve the institutional task of directing blame away from their institutions. Recorded phone conversations between local residents and various institutional actors during COVID-19 lockdowns in China serve as data for this study.

While observational studies have long suggested a positive correlation between social relationships and online transactions, surprisingly little research demonstrates a causal link. Effects identified in observational data generally conflate the Information effect, which bears the counterfactual causal interpretation, with the Homophily/environment effect. Against this background, this study conducted a pioneering a randomized field experiment design to isolate the Information effect of friendship disclosure from confounding homophily factors. We exploit a rare opportunity to conduct a field experiment on a large Chinese online second-hand platform, in which we manipulate buyer and seller’s awareness of their preexisting friendship ties. We provide the first empirical evidence that the effect of revealing friendship information between transaction parties turns out to be insignificant. We demonstrate that reliance on observational estimates of the “total effect” of friendship significantly overstates the benefits of providing friendship information in online marketplaces. Our findings contribute to a better understanding of social commerce and highlight the potential fallacy of relying on observational data in business studies.

This study examines how firm-specific characteristics and monetary tightening influence the composition and dynamics of trade credit received by Chinese listed firms. Using panel data, the analysis distinguishes among three sources of trade credit: related parties, non-related parties, and controlling shareholders. The findings reveal a clear asymmetry in firms’ financing responses to monetary tightening: while trade credit from non-related parties declines, credit from related parties—especially controlling shareholders—increases. This underscores the strategic role of intra-group financing in buffering firms against external financial shocks during periods of constrained liquidity. Moreover, firm-specific factors such as size, profitability, market power, and ownership have differing effects depending on the source of trade credit. These effects are most pronounced when the credit is extended from controlling shareholders, reflecting the influence of intra-group trust and reduced information asymmetries. The results also highlight a substitute relationship between bank credit and trade credit, which weakens when trade credit is sourced from related parties and disappears entirely in the case of controlling shareholders. By shedding light on the distinct mechanisms of intra-group trade credit in China’s underdeveloped financial system, this study contributes to a deeper understanding of corporate financing strategies of Chinese firms.

This study applies large language models (LLMs) to measure technological links and examines its predictive power in the Chinese stock market. Using the BAAI General Embedding (BGE) model, we extract semantic information from patent textual data to construct the technological momentum measure. As a comparison, the measure based on traditional International Patent Classification (IPC) is also considered. Empirical analysis shows that both measures significantly predict stock returns and they capture complementary dimensions of technological links. Further investigation through stratified analysis reveals the critical role of investor inattention in explaining their differential performance: in stocks with low investor inattention, IPC-based measure loses its predictive power while BGE-based measure remains significant, indicating that straightforward information is fully priced in while complex semantic relationships require greater cognitive processing; in stocks with high investor inattention, both measures exhibit predictability, with BGE-based measure showing stronger effects. These findings support behavioral finance theories suggesting that complex information diffuses more slowly in markets, especially under significant cognitive constraints, and demonstrate LLMs’ advantage in uncovering subtle technological connections that traditional methods overlook.

This paper investigates the causal impact of pre-trade transparency on the market liquidity of an over-the-counter-style market by leveraging a natural experiment in China’s interbank corporate bond market. We find that turnover, market liquidity, and aggregate bond returns significantly declined when the regulators unexpectedly suspended real-time quote dissemination in March 2023. Consistent with our expectation, these effects were mainly focused on interbank bonds, not exchange bonds, and bonds with lower credit ratings and longer maturities. This study contributes novel evidence to the transparency literature and provides insights for policymakers in emerging markets weighing the trade-offs between data governance and market efficiency.