Research Question/Issue: This study investigates whether and how political connections affect customer complaints in the Chinese market, using a comprehensive dataset from the country’s largest online complaint platform. Research Findings/Insights: Analyzing 22,644 firm-year observations from 2018 to 2023, we find that politically connected firms experience significantly fewer customer complaints. A one-unit increase in political connection strength is associated with a 9% reduction in complaints relative to the sample mean. This effect operates through two primary mechanisms: a reputation-motivation channel and a financial resource channel. The mitigating effect is more pronounced for firms in highly marketized regions, those with higher advertising expenditures, companies facing greater earnings pressure, and those with lower tangible asset ratios. Theoretical/Academic Implications: Our study contributes to the literature on political connections and corporate governance by demonstrating how political capital translates into tangible consumer experience advantages. It also advances research on the determinants of customer complaints by highlighting the role of internal governance mechanisms, particularly managerial political ties. Our findings support the Corporate Reputation and Financial Resource Hypotheses while challenging alternative explanations based on regulatory shielding or managerial complacency. Practitioner/Policy Implications: For corporate leaders, our results underscore the importance of reputation management and quality investment, particularly when political connections are absent. Policymakers should consider strengthening public monitoring institutions to reinforce reputational incentives across markets. Investors may use customer complaints as an indicator of product quality and operational stability in their investment decisions.

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.

China's tech companies are making waves with their recent achievements, including a "trifold" phone from Huawei and the revolutionary AI reasoning model from DeepSeek. Much discussion has centered on the founders of these companies and their ability to gain an edge on American rivals. But what is less appreciated or understood among foreign analysts of China’s tech giants is the role that innovation and transformation in corporate governance and organizational structure has played in these companies’ successes. Moreover, there are unique aspects of these companies from a corporate governance perspective that are not commonly seen in tech companies in other parts of the world or even within China itself. For instance, Huawei is 99% employee owned, while Alibaba is primarily governed by an "Alibaba Partnership." These unique corporate structures have arisen due to several factors, including the rapid changes to China’s regulatory landscape over the past three decades, distinct characteristics of Chinese business culture, geopolitical tensions and preoccupations with national security, and the “socialism with Chinese characteristics” model. In this article I overview some of the more distinctive corporate governance mechanisms of four Chinese tech companies: Huawei, Alibaba, Bytedance, and DeepSeek, and explain why these structures were adopted.

We examine the impact of state-owned shareholders on fraud within private firms. Utilizing a sample of A-share private listed firms in China observed from 2008 to 2021. We discover a significant negative association between state-owned shareholders and the likelihood of fraud in private firms. State-owned shareholders primarily act as inhibitors of fraud, and their effect on the probability of fraud being detected is not statistically significant. This finding remains robust even after conducting a series of sensitivity tests to mitigate potential selectivity bias and reverse causality endogeneity issues. In the analysis of heterogeneity, we found that state-owned shareholders play a more active role under conditions of imperfect external institutional development, and they also exert a more significant inhibitory effect on enterprises with lower governance levels and higher business risks. Our mechanism test demonstrates that the inhibitory effect of state-owned shareholders on corporate fraud is achieved by improving corporate governance and alleviating financial distress. This study also examines the impact of state-owned shareholders' local characteristics, external supervision mechanisms, and internal governance mechanisms in unique Chinese enterprises on fraudulent behaviour by private enterprises. Overall, our study provides empirical evidence that state-owned shareholder ownership is associated with reducing fraudulent behaviour within private firms.

Purpose – The aim of this paper is to provide additional insights on the association between real earnings management (REM) and crash risk, particularly from the perspective of an emerging market economy. It also examines the moderation role that internal and external corporate governance may play in this area. Design/methodology/approach – Relying on archival data from the RESSETand CSMAR databases over a timeframe from 2010 to 2018 of China listed company, the authors test the hypotheses by regressing common measures of crash risk on the treatment variable (REM) and crash risk control variables identified in the prior crash risk literature. The authors also introduce monitoring proxies (internal controls as an internal governance and institutional ownership as an external governance) and assess how effective internal and external governance moderate the relation between REM and stock price crash risk. Findings – The results suggest firms with higher REM have a significantly greater stock price crash risk, and that this association is mitigated by external monitoring. That is, greater institutional ownership, particularly pressure insensitive owners, mitigates the impact of REM on stock price crash risk. However, internal control does not mitigate the association between REM and stock price crash risk. Originality/value – Following the passage of the Sarbanes–Oxley (SOX) Act, prior research has documented an increase in the use of REM and a positive association between REM and cash risk. The authors demonstrate that they persist in one of the largest emerging markets where institutional regulations, market conditions and corporate behaviors are different from those in developed markets. Also, the assessment of the moderation effect of internal and external governance mechanisms could have meaningful implications for investors and regulators in Chinese and other emerging markets.

Applying the principle of the bonding theory, this study examined the relationship between corporate governance practice and performance of Chinese firms that are listed in the major international stock exchanges, including NASDAQ, New York, Hong Kong, Singapore and London AIM markets, and further investigated whether the Chinese firms that adopted the corporate governance mechanisms of the stock exchanges where they are listed would outperform those of firms listed locally in the Chinese stock exchanges that operates in a weak enforcement mechanism environment. Hypotheses are tested using panel data analysis. The results suggest that the Chinese cross-listings exhibit bonding premium only in U.S. markets, while those non-cross-listed Chinese firms demonstrate better firm performance than those listed in London, Singapore, and Hong Kong. Further, the results reveal that for all the cross-listed Chinese firms, profitability rate and the leverage ratio play a positive role in improving the firms’ performance. The adoptions of Big Four auditing firms and international accounting standard as a must-to-do corporate governance mechanism regulated by the host stock exchange has less effects on firm’s performance. The study suggests that merely borrowing a corporate governance mechanism does not guarantee the improvement of corporate governance of a firm, and therefore to its firm performance; rather, a firm’s own background and country effects also matter.

Applying the principle of the bonding theory, this study examined the relationship between corporate governance practice and performance of Chinese firms that are listed in the major international stock exchanges, including NASDAQ, New York, Hong Kong, Singapore and London AIM markets, and further investigated whether the Chinese firms that adopted the corporate governance mechanisms of the stock exchanges where they are listed would outperform those of firms listed locally in the Chinese stock exchange that operates in a weak enforcement mechanism environment. Hypotheses are tested using cross sectional data. The empirical tests show a mixed result. The cross-listings in New York and NASDAQ (dual-listing is excluded) exhibit bonding premium, while those noncross- listed Chinese firms demonstrated better firm performance that those listed in London, Singapore, and Hong Kong. Further, the study shed some lights on the relative importance of various corporate governance mechanisms in enhancing the firm performance in the context of the dominance of state-owned-enterprises in the market. The results reveal that different market has different corporate governance mechanisms under its different macro-environments. For the overall Chinese listings, the second largest shareholder of a firm could play a role as an effective corporate governance mechanism in increasing the firm’s performance. A negative relationship between the size of the board and the corporate governance was found. For those cross-listed Chinese firms, by adopting the stringent financial disclosure and the famous auditing firms could increase the firm performance, but not good enough comparing to these non-cross-listed Chinese firms. Meanwhile, controlling shareholder has negative effect on firm performance for the cross-listed Chinese firms. The study suggests that merely borrowing corporate governance mechanism does not guarantee the improvement of corporate governance (further to its firm performance), rather, firm’s own background and country effects also matter.

This study aims to examine empirically whether ownership structure and corporate governance mechanisms affect income-smoothing behavior in China. The sample comprises 1353 companies listed in the Shanghai Stock Exchange and the Shenzhen Stock Market during the period 1999 to 2006. By comparing the variability of income to the variability of sales an income smoother can be identified if income is less variable. Our empirical results show that the proportion of Chinese firms practicing income-smoothing is greater than those of Singaporean, Japanese and U.S. firms. Income smoothing in China is more severe when the state is the controlling shareholder of the listed firm. Firms with more independent directors are more likely to engage in income smoothing. This article presents the current development of China’s corporate governance system and indicates that agency conflicts between controlling shareholders and minor investors account for a significant portion of earnings management in China.

We examine empirically whether internal corporate governance mechanisms play a role in reducing the probability of being sued by lending banks due to bank loan default and the market reaction to the announcement of bank loan litigation. Using bank loan litigation events in Chinese financial markets, our results show that companies with better internal corporate governance mechanisms are associated with a lower probability of being sued. We also find a significant negative market reaction to the announcement of a bank loan filing while insignificant market reaction to the announcement of bank loan litigation verdict. Moreover, we test whether internal corporate governance mechanisms can play a role in mitigating the effect of market reactions. Our findings indicate that there is no evidence of internal corporate governance in mitigating this effect. Our paper suggests that internal corporate governance mechanisms are important in preventing the trigger of external governance mechanisms (litigation) but do not play any role once external governance (litigation) takes over.

The paper, based on the samples of 2003, makes empirical analyses of China listed companies from the perspective of Chinese Corporate Governance Index ( ) and its six dimensions: the index of controlling shareholders’ behaviors, board governance index, top management governance index, information disclosure index, stakeholders’ governance index, supervisors committee governance index, and find that is positively associated with return on assets (ROA), net assets per share (NAPS), earnings per share (EPS), operating cash flow per share (OCFPS), total assets turnover (TAV), rate of total assets growth (ITA) and Z-score. These indicate that good corporate governance mechanisms improve profitability, stock expansion ability, operating efficiency, growth and development potential, as well as financial flexibility and safety of listed companies. Corporate governance mechanisms of controlling shareholders, board of directors, top management, information disclosure, stakeholders and supervisors committee are largely responsible for decision-making and decision-execution mechanisms, and furthermore, they have direct and profound effects on the performance and value of listed companies.