We document “foreign bias” in AI financial predictions, reversing the classic home bias. U.S.-based ChatGPT is systematically more optimistic than China-based DeepSeek about Chinese firms—in price predictions and directional forecasts—yet significantly less accurate. Evidence supports an information-availability mechanism: bias is strongest when U.S. media coverage of Chinese firms is limited and attenuates for cross-listed firms. Crucially, injecting Chinese news eliminates the prediction gap. Both models produce similar forecasts for U.S. firms, consistent with broader worldwide coverage. LLMs trained in different information environments can create divergent signals, with implications for investors and policymakers as AI increasingly intermediates global markets.

Prevailing research, assuming developed financial markets, concludes that Chinese firms heavily rely on “short-term credit for long-term investment.”We challenge this view, arguing that China's vibrant informal financial system provides crucial alternative funding. Consequently, the severity of this maturity mismatch is likely overestimated. To investigate this, we examine strategic alliances as a representative informal institution. Our analysis confirms that such alliances significantly mitigate maturity mismatch, revealing that they enhance information sharing and reduce transaction costs. This provides initial evidence of informal institutions' critical role in addressing this issue. Given the prevalence of similar arrangements in China—like private lending and inter-corporate financing—our findings highlight the need to look beyond formal systems. This perspective not only recalibrates the understanding of corporate financing in China but also opens ample avenues for future research on informal finance's role in emerging economies.

In the Chinese context, the term “overseas” refers to countries and regions outside the sovereignty and jurisdiction of China. Overseas listing is an important strategy for firms to integrate into global capital markets and enhance their corporate investment efficiency. Using data from 600 Chinese companies listed exclusively overseas and 860 domestically listed firms for the period 2009–2023, this study analyzes the impact of overseas listing on corporate investment efficiency using empirical research methods, underlying mediating mechanisms, and the moderating role of economic policy uncertainty. The findings show that overseas listing improves Chinese firms’ investment efficiency. Compared to listing on the United States securities market (Nshares), listing on the Hong Kong securities market, (H-shares) has a pronounced effect on enhancing investment efficiency. Enhanced information disclosure quality improves the investment efficiency of Chinese enterprises listed overseas. Economic policyuncertainty can strengthen the positive impact of overseas listing on corporate investment efficiency. This study shows that overseas listing improves investment efficiency of firms in developing countries and offers new insights into advancing micro-level opening-up in these countries.

We construct the most comprehensive bankruptcy database of Chinese firms to date and document significant real effects arising from the establishment of specialized bankruptcy courts. Specifically, the recovery rate for unsecured creditors increases by 38.6 percentage points after the reform. This improvement is not driven by shorter case durations or lower direct bankruptcy costs, as intuition might suggest. Instead, it results primarily from greater efficiency in the discovery and disposal of assets during bankruptcy proceedings. The reform also increases the likelihood of reorganization and promotes capital infusion in such cases. Higher recovery rates generate broader spillovers: reductions in non-performing loans, expansion of unsecured lending by local banks, relaxation of firms’ financial constraints, shifts in capital structure and investment, and greater public willingness to file for bankruptcy when distressed.

Using a sample of 501 Chinese non-financial firms listed on the Hong Kong Stock Exchange from 2008 to 2020, we find that both foreign exchange (FX) derivatives and foreign currency (FC) debt significantly reduce firms’ probability of default. We further observe that larger, non-state-owned enterprises (SOEs), Hong Kong-headquartered firms, firms operating after China’s 2015 exchange rate reform and firms under high trade policy uncertainty (TPU) are more likely to use both FX derivatives and FC debt concurrently, thereby diversifying their strategies for managing default risk. Our analysis indicates that these tools reduce firms’ default risk primarily by improving firms’ profitability, raising their likelihood of obtaining credit ratings, and increasing their use of interest rate derivatives. Importantly, we reveal that FX derivatives and FC debt act as substitutes in mitigating firms’ default risk. Notably, this substitution effect is more pronounced for larger, non-SOEs, Hong Kong-headquartered firms, firms operating after exchange rate reform and firms facing high TPU. Finally, we find that using FX derivatives significantly dampens firms’ investment, which may explain why Chinese firms tend to prefer FC debt to manage their default risk.

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.

Trust can be obtained by firm location (endowed trust) or behaviors (earned trust). We are interested in whether firms located in trusted regions are more likely to protect stakeholders’ benefits as a strategy to earn trust. Based on a sample of Chinese firms, we find a significant and positive correlation between regional endowed trust and local firms’ environmental and social commitment. We suggest that endowed trust has two effects: 1) shaping local firms’ legal cognition and thus decreasing misconducts; and 2) providing resources and thus mitigating financial constraints, both of which encourage firms to protect the environment and society. Moreover, the positive effect of high endowed trust is weakened when corporate governance or local legal environment is strong.

The impact of Artificial Intelligence (AI) on firm performance is an emerging issue in both practice and research. However, discussions surrounding the effect of AI on productivity are enshrouded in a paradoxical quandary. This study examines the relationship between AI implementation and total factor productivity (TFP), considering the moderation effects of digital infrastructure quality, business diversification, and demand uncertainty. Using data from 2155 Chinese firms over 2016-2021, our empirical analysis reveals a nuanced pattern: while moderate AI implementation achieves the best TFP, excessive and insufficient implementation yields diminishing returns. The curvature of this inverted U-shaped relationship flattens with higher levels of digital infrastructure quality but steepens when firms undertake diversified businesses and face heightened demand uncertainty. The findings suggest that the impact of AI on TFP is not universally beneficial, and the relationship between AI and TFP varies across different contexts. These findings also provide implications on how firms can strategically implement AI to maximize its value.

Forming diversified global supply chains (GSC) is an important approach to improving economic resilience. When firms expand their oversea suppliers for such purposes, information friction is a major challenge, and internetization may help firms cope with it by more efficient communication of information. We introduce a dynamic discrete choice model for firms’ searching for new supplier sources estimated with structural methods, and construct counterfactual studies to analyze the internetization effects on Chinese firms’ GSC diversification. Our quantitative studies reveal that internetization relieves information friction, which reduces firms’ searching costs by 13.4%, and thus significantly diversifies firms’ GSC. It also raises firms’ productivity by 0.5% through efficient communication of information. Reductions in searching costs are revealed as the main channel of such effects of internetization, while the productivity channel is less significant. Moreover, the internetization effects on diversifying GSC are persistent over time, and are biased towards high-productivity and importing firms.

Facing external shocks, maintaining and stabilizing imports is a major practical issue for many developing countries. We first document that sourcing market switching (SMS) is widespread for Chinese firms (For 2000-2016, SMS firms account for 76.29% of all import firms and 96.30% of total import value). Then we use Chinese firm-level data to show that SMS can significantly mitigate the negative impacts of international uncertainty on imports, which further stabilizes firm employment and innovation, leading to increases in national and even world welfare. Possible motivations for SMS include stabilizing import supply, lowering import tariffs, raising the real exchange rate, and increasing product switching. We also find that the effects of SMS vary by the type of uncertainty, firm ownership, productivity, credit constraints, trade mode, and product features.