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.

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.

Innovation is crucial for long-term corporate value and competitive advantage; however, it can misalign the interests of managers and investors. Balancing managers’ short- and long-term goals is a pivotal challenge in promoting innovation incentives. Therefore, this study examines innovative incentives for managers of publicly traded firms to address the issue of agency problems. The study focuses on economic value-added (EVA) reform implemented by China’s State-Owned Assets Supervision and Administration Commission (SASAC), which encourages EVA-driven R&D investments as the primary management metric. The policy effectively motivates key corporate managers by reducing capital costs and stimulating increased innovation. Following this policy’s implementation, notable innovation disparities exist between state-owned enterprises and firms not subject to the reform. Furthermore, innovation incentives significantly affect overconfident company managers, yielding positive effects on innovation.

The Central Environmental Protection Inspector (CEPI) is a critical regulatory measure in China aimed at improving ecological quality. From a compliance cost perspective, we examine the impact of the CEPI on corporate environmental governance. The findings reveal an asymmetry in the CEPI's influence: it significantly promotes environmental governance efforts on the non-production side of enterprises, while having no substantial effect on the production side. Additionally, government environmental subsidies do not provide a resource incentive in the process of the CEPI influencing corporate environmental governance. However, local environmental governance pressure mitigates this asymmetry, leading the CEPI to significantly enhance environmental governance on both the production and non-production sides. Further analysis shows that under the synergistic effect of local environmental governance pressure, the CEPI encourages state-owned enterprises to focus on environmental governance on the production side, while non-state-owned enterprises tend to focus on the non-production side. Moreover, political connections reduce the positive impact of the CEPI on production costs under local environmental governance pressure. Finally, the CEPI also significantly encourages enterprises to expand their production scale. These findings offer valuable insights for refining the CEPI system to better promote corporate environmental governance.

This paper examines the impact of social distrust on household saving in China using a microsample from the China Family Panel Studies (CFPS). We find that social distrust leads to an increase in savings within households, in which households not living alone, with higher levels of education and urban households are more affected. We also find that social distrust affects household savings through raising risk expectations, reducing credit availability and amplifying risk spillovers from real estate markets.

To better understand the government’s role in corporate social responsibility (CSR), we use the relocation of local governments in China as an exogenous shock to examine how geographic distance from the government affects corporate charitable donations. The Difference-in-Differences (DiD) analysis indicates that firms reduce charitable donations when local governments move closer. This effect is more pronounced for non-state-owned enterprises and for firms located in cities with lower fiscal pressure. The results remain consistent to a series of robustness tests, including alternative sample specifications, different measures of donations, and various estimation methods. We do not observe a corresponding increase in donations when governments move farther away. Additional analysis indicates that when the government relocates closer, firms may reallocate resources away from traditional charitable donations toward CSR activities that involve more active engagement.

This paper examines the impact of Chinese local government hidden debt on corporate ESG greenwashing. Extending fraud theory, we reveal that hidden debt shifts the boundary between government and market that drives the factors behind ESG greenwashing. Using the ESG greenwashing indicator of listed firms in the A-share market and the hidden debt-to-GDP ratio of 31 provinces from 2012 to 2023, we find that local government hidden debt is positively correlated with corporate ESG greenwashing. The impact is more significant for firms that are state-owned, without active primary-level Party organizations, or not on China’s key pollution supervisory list. Mechanism analysis indicates that expansion of local government hidden debt brings firms with higher LGFVs’ share-holding for the SOEs, heavier environmental tax burden, and less social responsibility preference, all of which are related with ESG greenwashing. Reducing local government special debt and improving tax compliance can help alleviate this impact. These findings highlight the necessity of fiscal risk management in achieving genuinely sustainable corporate development.

The commodity and financial characteristics of carbon emission allowances play a pivotal role within the Carbon Emission Trading Scheme (CETS). Evaluating the effectiveness of the scheme from the perspective of carbon price is critical, as it directly reflects the underlying value of carbon allowances. This study employs a time-varying Difference-in-Differences (DID) model, utilizing data from publicly listed enterprises in China over the period from 2010 to 2023, to examine the effects of carbon price level and stability on Total Factor Productivity (TFP). The results suggest that both an increase in carbon price level and stability contribute to improvements in TFP, particularly for heavy-polluting and non-stateowned enterprises. Mechanism analysis reveals that higher carbon prices and stability can stimulate corporate engagement in green innovation, activate the Porter effect, and subsequently enhance TFP. Furthermore, optimizing the system environment proves to be an effective means of strengthening the scheme's impact. The study also finds that allocating initial quotas via payment-based mechanisms offers a more effective design. This research highlights the importance of strengthening the financial attributes of carbon emission allowances and offers practical recommendations for increasing the activity of trading entities and improving market liquidity.

This paper investigates the impact of environmental awareness on local fiscal revenue in China. We exploit the unexpected release of the environmental documentary Under the Dome in early 2015 as an exogenous shock on residents preferences. The generalized difference-in-difference estimation shows that on average, a one standard deviation increase in the exposure to the documentary would reduce the government land sale revenue by 21.45 billion CNY. Consistent with the “vote with feet” mechanism in Tiebout model, after the release of this film, residents increase awareness of air pollution and express higher mobility intention. Local government also raises environmental investment as a response. This indicates the value of market in constraining the behavior of local governments in authoritarian states.