This paper develops a delegation-based framework to explain how institutional design shapes pricing incentives under risk. Using China’s 2016 IPO reform—which abolished prefunding requirements and transferred payment obligations from investors to underwriters—as a natural experiment, we show that introducing subscription-payment risk (SPR) renders underwriter’s partial residual claimants with respect to unpaid allocations. Building on Baron’s (1982) delegation model, we argue that the reform amplifies information asymmetry and induces underwriters to adopt more conservative pricing strategies to manage perceived payment risk. Empirically, IPOs exposed to SPR exhibit greater underpricing and lower offer prices, particularly when investor bids reflect stronger valuation pessimism. The effect tends to be less pronounced for reputable underwriters and when foreign institutional investors participate. Overall, the evidence demonstrates how risk redistribution and institutional frictions jointly shape underwriter behavior and pricing efficiency in primary equity markets.

This study examines the role of artificial intelligence (AI) adoption in the market for corporate control using a sample of Chinese listed firms from 2011 to 2021. We construct a novel firm-level AI Index through textual analysis of annual reports and find that AI adoption significantly enhances both the likelihood of becoming an acquisition target and the valuation premiums commanded in M&A transactions. Specifically, a one-standard-deviation increase in the AI Index is associated with a significant increase in the probability of being acquired and higher deal premiums measured by price-to-earnings multiples. We identify two channels through which AI adoption creates value recognized by the M&A market: an efficiency channel, whereby AI reduces agency costs and improves profitability, and an innovation channel, evidenced by increased high-quality patent output. The persistence of these effects over time further suggests that AI adoption generates substantive improvements in firm fundamentals rather than serving as a transitory informational signal. Importantly, we document significant heterogeneity across ownership structures: the positive effects of AI adoption are substantially weaker for State-Owned Enterprises (SOEs) than for non-SOEs. Our findings contribute to the literature on digital transformation and corporate finance by demonstrating that AI adoption serves as a value-relevant firm attribute that shapes outcomes in the market for corporate control.

We examine the unintended consequences of bankruptcy court establishment on corporate behavior. Using data on Chinese listed firms from 2009 to 2019 and a staggered difference-in-differences model, we find that the establishment of bankruptcy courts increases accrual earnings management by about 17% among high bankruptcy risk firms relative to low-risk firms. While bankruptcy courts improve bankruptcy efficiency and justice, reduce local government intervention, and accelerate the exit of zombie firms, they also induce greater earnings management. This effect is driven mainly by survival pressure and managerial reputation concerns, rather than by efforts to correct external evaluations. Consistent with this interpretation, we do not observe improvements in long-term operations, governance, performance, or real earnings management. Overall, this paper enriches the literature on earnings management from the perspective of judicial governance and on the economic consequences of creditor-friendly bankruptcy institutions.

This paper identifies the marginal investors in China’s stock market and examines their impact on stock pricing. To clearly distinguish between the equity constraint channel and the debt constraint channel, we construct the capital ratio factor and the debt constraint factor for banks and securities companies, the two most critical financial intermediaries in China’s stock market. Our results demonstrate that banks indeed serve as marginal investors and influence stock market efficiency primarily through the equity capital constraint channel. Furthermore, we find that the bank capital ratio factor significantly explains stock mispricing in China, with the single-factor model based on bank equity capital producing substantially smaller pricing errors compared to traditional multi-factor models.

We find that firm-specific social media tone influences leveraged trading. A more positive tone predicts greater next-day net margin purchasing, driven predominantly by sentiment. High margin purchasing following positive social media tone consistently yields inferior performance over both short and long horizons. Short sellers are collectively more sophisticated. They capitalize on fluctuations in social media tone, both positive and negative, through strategies that adjust to different tone windows and holding periods. While experienced, rational short sellers can swiftly profit from temporary negative sentiment, high short selling following persistently high social media tone is highly profitable over longer horizons.

Capital market internationalization is widely regarded as an important pathway to improving resource allocation efficiency and enhancing governance quality, while simultaneously imposing higher requirements on corporate sustainability and social responsibility. However, its impact on firms’ internal income distribution remains subject to academic debate. This study treats the inclusion of China’s A-shares in the MSCI Emerging Markets Index as a landmark exogenous shock of capital market internationalization. Based on a sample of Chinese A-share listed firms from 2014 to 2022, we manually compile firm-level MSCI inclusion data and construct a multi-period difference-in-differences model for empirical testing. The results indicate that firms’ inclusion in the MSCI Index significantly increases their labor income share. The mechanism analysis reveals that this promoting effect operates mainly through three channels: alleviating financing constraints, fostering innovative development, and strengthening investor governance. Further heterogeneity analysis shows that the effect is more pronounced among technology-intensive firms, firms under greater competitive pressure, and firms with higher degrees of internationalization. By incorporating income distribution outcomes into the framework of capital market internationalization, this paper enriches the evidence on the economic and social effects of internationalization and provides policy implications for emerging economies to advance high-level capital market opening and optimize income distribution.

This article examines the link between foreign institutional holdings and firms’ efficiency in labor investment in the setting of Chinese markets. We find that foreign institutional investors enhance firms’ labor investment outcomes primarily through mitigating asymmetric information and by strengthening internal governance. Specifically, the influence of foreign institutional investors on a firm’s labor investment efficiency is stronger when the firm faces greater labor adjustment frictions. This effect is more evident when foreign institutional investors are originated from countries or areas with stronger cultural connections to China, stronger governance quality, common law traditions, or stronger bargaining power in the firms’ governance. Our paper contributes to the literature in that it documents the monitoring role of foreign institutional investors from the perspective of firms’ labor investment decisions, and adds to the literature on the drivers of firms’ labor investment choices.

The essay delves into the impact of environmental uncertainty on asymmetric mispricing utilizing the data from listed firms in China spanning from 2007 to 2023. Our analysis reveals that environmental uncertainty amplifies stock mispricing within capital markets, whether upward or downward. Diverging from prior research, we distinguish between upward and downward mispricing and reveal the black box of environmental uncertainty affecting stock mispricing from dual channels. Specifically, environmental uncertainty intensifies upward mispricing through heightened earnings management and exacerbates downward mispricing by boosting investor irrationality. Furthermore, we explore the heterogeneous impact of different media coverage. In the downward mispricing sample, negative media exacerbated the relationship between the two, while positive coverage played a mitigating role. In the upward mispricing sample, only negative reports have a significant impact, and mitigate the impact of uncertainty on mispricing. Our research on media heterogeneity once again proves that it is a double-edged sword. Our research indicates that improving the capacity to recognize different mispricing mechanisms in various market directions can greatly boost decision-making efficiency. Meanwhile, it is vital to strengthen professional ethics in media organizations and encourage more objective reporting. These efforts can jointly contribute to improve he efficiency of emerging capital markets.

This study examines the role of financial derivatives in managing operational and financial risks within China's chemical manufacturing sector. While prior research has primarily focused on financial determinants of hedging decisions, we highlight the significant influence of operational metrics—particularly inventory levels and turnover rates—in shaping firms’ engagement in derivatives markets. Drawing from a sample of 289 publicly listed chemical firms from 2016 to 2022, we employ probit regression and K-means clustering to explore how operational and financial factors jointly determine derivatives adoption. Our empirical results reveal that operational metrics have a non-negligible impact on hedging decisions. Specifically, inventory and turnover rates emerge as primary determinants of firms' initiatives, while pre-tax operating profit remains significant from a financial perspective. The moderation analysis of cash flow reveals that financially constrained firms prioritize derivatives for operational risk mitigation, while resource-abundant firms employ them selectively for strategic optimization. Furthermore, our robustness tests, which control for geographical distinctions and the COVID-19 effect, confirm that firm-specific operational characteristics consistently dominate firms' hedging decisions despite regional heterogeneity. Finally, clustering analysis underscores the interplay between operational efficiency and capital robustness, showing that firms exhibiting superior operational efficiency and capital robustness demonstrate higher engagement in derivatives hedging. These findings contribute to the corporate risk management literature by expounding on the primacy of operational considerations in derivatives usage, particularly in asset-intensive industries. The study also provides practical implications for manufacturing firms navigating volatile market conditions, emphasizing that integrating operational and financial strategies is crucial for effective risk management.

This study examines the mean-reversion behavior of trading volume in China’s A-share market, with a focus on the speed at which abnormal surges dissipate. We compare two competing hypotheses: the stealth-trading hypothesis, where persistent volume reflects order-splitting by informed traders, and the informational-efficiency hypothesis, which interprets faster reversion as a sign of efficient information absorption. Using the Ornstein–Uhlenbeck (OU) model, we estimate the reversion speed for over 3,000 stocks and link it to firm- and industry-level characteristics. We find that trading volume is strongly mean-reverting, with over 98% of stocks classified as stationary. The OU model forecasts reversion speed with less than 7% error. Faster reversion is associated with larger size, higher analyst coverage, lower volatility, and greater liquidity. Notably, reversion speed increased after the 2006 IFRS reform but declined following Stock Connect, suggesting that stock market policies can influence informational efficiency. Our OU-based methodology offers a simple, observable proxy for monitoring how quickly markets process information. These results position trading volume as a core variable in market microstructure research and policy evaluation.