As companies and investors globalize, we are increasingly faced with estimation questions about the risk associated with this globalization. When investors invest in China Mobile, Infosys or Vale, they may be rewarded with higher returns, but they are also exposed to additional risk. When Siemens and Apple push for growth in Asia and Latin America, they clearly are exposed to the political and economic turmoil that often characterize these markets. In practical terms, how, if at all, should we adjust for this additional risk? We will begin the paper with an overview of overall country risk, its sources and measures. We will continue with a discussion of sovereign default risk and examine sovereign ratings and credit default swaps (CDS) as measures of that risk. We will extend that discussion to look at country risk from the perspective of equity investors, by looking at equity risk premiums for different countries and consequences for valuation. In the fourth section, we argue that a company’s exposure to country risk should not be determined by where it is incorporated and traded. By that measure, neither Coca Cola nor Nestle are exposed to country risk. Exposure to country risk should come from a company’s operations, making country risk a critical component of the valuation of almost every large multinational corporation. In the final section, we will also look at how to move across currencies in valuation and capital budgeting, and how to avoid mismatching errors.

Digital mergers and acquisitions (M&As) are increasingly becoming a critical strategic approach for enterprises to advance digital transformation. This study conceptualizes digital M&As as positive shock events for corporate digital transformation. Using a dataset of digital M&As by Chinese listed companies from 2005 to 2024, this study applies the propensity score matching combined with difference-in-differences (PSM-DID) method to empirically examine the impact of digital M&As on the market value of acquiring firms. The results show that digital M&As significantly enhance acquirers’ market value. Mechanism tests reveal that this effect is driven by digital resource empowerment, operating through increased digital factor inputs and strengthened digital innovation capabilities. Heterogeneity analysis further indicates that the market value enhancement effect of digital M&As is predominantly significant in non-digital firms, non-state-owned enterprises, and firms located in eastern China. This study expands the research scope of the micro-level effects of the digital economy and offers useful references for the Chinese government in refining its digital economy strategies, as well as practical guidance for firms in formulating their own digital investment decisions.

This study investigates how venture capital (VC) reputation affects initial public offering (IPO) exits in the Chinese VC market using a two-sided matching mechanism. Research that distinguishes the sorting and influence effects of VCs in the Chinese market is lacking. To address this gap, Chinese VC transaction data, comprising 3,606 VC firms and 8,173 investment transactions, was used to construct a structural econometric model. The Markov Chain Monte Carlo Bayesian estimation techniques were employed to identify the sorting and influence effects of VC reputation. We demonstrate that the likelihood of IPO exits is considerably increased by VC reputation, whereas historical investment experience has a dampening effect on exit outcomes. The IPO success rates are significantly higher for firms in the biotechnology, electronics, medical, and late-stage industries. The difficulty of IPO exits increases with investment age. Compared to influence effects, sorting effects were the dominant mechanism. VCs with a high reputation systematically selected firms with potential advantages, such as high-quality management teams, to promote IPO success. This study’s novelty lies in its application of an endogenous two-sided matching solution to the Chinese VC market. Using a structural model, we discovered the importance of the reputation sorting effect in the Chinese VC market and refined the VC’s investment preferences in high-tech industries. This study’s practical significance lies in the findings that enterprises must pay attention to the sorting capabilities of VC institutions, the government can guide capital flows to efficient exit industries, and VC institutions should optimize the resource allocation structure.

We examine the effects of issuing green bond on green premium and green signal transmission by matching green bonds with ordinary bonds. We find that the credit spread of green bonds is significantly lower than that of ordinary bonds, especially for those green bonds with lower information disclosure complexity. Besides, issuing green bonds cannot receive a positive response from the stock market, but can significantly reduce issuer’s loan costs and provide more financial subsidies for high polluting issuers. Furthermore, by obtaining discounted loans and financial subsidies, issuing green bonds can increase issuer’s R&D intensity and reduce their carbon emissions. These findings indicate that issuing green bonds can reduce financing costs and convey green signals to market stakeholders with less investment experience.

We combine a new collection of microdata from China with a natural policy experiment to investigate the extent to which reductions in rural-urban migration barriers affect flows of trade and investments between cities and the countryside. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs increase rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. To quantify the implications at the regional level, we interpret these estimates through the lens of a spatial equilibrium model in which migrants can reduce buyer- seller matching frictions. We find that a 10% increase in a rural county’s migration market access on average leads to a 1.5% increase in the county’s trade market access and a 2% increase in investment market access. In the context of China’s recent Hukou reforms, we find that these knock-on effects on market integration were on average larger among the urban destinations compared to the rural origins, reinforcing incentives for rural-urban migration.

There is substantial evidence indicating that enterprises are negatively impacted by climate risk, with the most direct effects typically occurring in financial domains. This study examines A-share listed companies from 2007 to 2023, employing text analysis to develop the firm-level climate risk indicator and investigate the influence on corporate financial risk. The results show a significant positive correlation between climate risk and financial risk at the firm level. Mechanism analysis shows that the negative impact of climate risk on corporate financial condition is mainly achieved through three paths: increasing financial constraints, reducing inventory reserves, and increasing the degree of maturity mismatch. To address potential endogeneity, this study applies instrumental variable tests, propensity score matching, and a quasi-natural experiment based on the Paris Agreement. Additional tests indicate that reducing the degree of information asymmetry and improving corporate ESG performance can alleviate the negative impact of climate risk on corporate financial conditions. This relationship is more pronounced in high-carbon emission industries. In conclusion, this research deepens the understanding of the link between climate risk and corporate financial risk, providing a new micro perspective for risk management, proactive governance transformation, and the mitigation of financial challenges faced by enterprises.

Exploiting a unique market-oriented media reform initiated in 1996 in China, we investigate the role of media environment in affecting firm behaviour. We find robust evidence that market-oriented media environment is conductive to firm innovation, with the reform promoting patent quantity and quality substantially. The effect is more pronounced for firms with higher information asymmetry. Matching firm data with 1.3 million news reports, we find the market-oriented media reform significantly improves the criticalness and unbiasedness of news coverage and shapes an innovation-friendly environment. Our findings highlight economic outcomes of relaxing media control and underline substantial gains from deepening the reform.

Purpose – This paper takes the Shanghai-Shenzhen-Hong Kong Stock Connect as a quasi-natural experimentand investigates the impact of capital market liberalization on the corporate debt maturity structure. It also aimsto provide some policy implications for corporate debt financing and further liberalization of the capital marketin China. Design/methodology/approach – Employing the exogenous event of Shanghai-Shenzhen-Hong Kong StockConnect and using the data of Chinese A-share firms from 2010 to 2020, this study constructs a difference-in-differences model to examine the relationship between capital market liberalization and corporate debt maturitystructure. To validate the results, this study performed several robustness tests, including the parallel test, theplacebo test, the Heckman two-stage regression and the propensity score matching. Findings – This paper finds that capital market liberalization has significantly increased the proportion of long-term debt of target firms. Further analyses suggest that the impact of capital market liberalization on thedebt maturity structure is more pronounced for firms with lower management ownership and non-Big 4 audit.Channel tests show that capital market liberalization improves firms’ information environment and curbsself-interested management behavior. Originality/value – This research provides empirical evidence for the consequences of capital marketliberalization and enriches the literature on the determinants of corporate debt maturity structure. Further thisstudy makes a reference for regulators and financial institutions to improve corporate financing through thegovernance role of capital market liberalization.

Utilizing a dataset from 2013 to 2022 on China’s listed companies, we explored whether a hedge fund network could help explain the occurrence of Chinese stock crash. First, this study constructs a hedge fund network based on common holdings. Then, from the perspective of network centrality, we examine the effect of hedge fund network on stock crash risk and its mechanism. Our findings show that companies with greater network centrality experience lower stock crash risk. Such results remain valid after alternating measures, using the propensity score matching method, and excluding other network effects. We further document that the centrality of hedge fund network reduces crash risk through three channels: information asymmetry, stock price information content and information delay. In addition, the negative effect of hedge fund network centrality on crash risk is more prominent for non-SOEs firms. In summary, our research shed light on the important role of hedge fund information network in curbing stock crash.

The reform of the IPO registration system is a crucial step toward the maturity, improvement, and marketization of the securities market. In recent years, the trend of corporate financialization has become increasingly evident. Based on data from firms listed on the ChiNext Market and the Main Board, this paper constructs a Propensity Score Matching-Difference-in-Differences (PSM-DID) model and an RDD-DID model to examine the impact of IPO registration system reform on corporate financialization and analyze its underlying mechanisms from multiple perspectives. The estimation results of both models indicate that the IPO registration system reform has significantly increased firms’ financialization levels. Furthermore, a series of robustness checks confirm the reliability of the findings. The mechanism analysis reveals that the reform has promoted corporate financialization by lowering listing thresholds, alleviating financing constraints, and intensifying market competition. Meanwhile, its information disclosure mechanism has to some extent curbed financialization. Further heterogeneity analysis shows that the reform’s promoting effect is more pronounced in non-state-owned enterprises, firms with lower growth potential, and those with weaker corporate social responsibility (CSR) performance. This study enriches the literature on the policy impact of IPO registration system reform, provides a new perspective on how such reforms influence corporate financialization, and offers important implications for curbing excessive financialization in real-sector enterprises, deepening IPO registration system reform, and further improving capital markets.