This paper investigates the causal effects of air pollution on housing prices in China using a dataset of 65 cities from 2014 to 2021. We employ the central environmental protection inspection (CEPI) as a quasi-natural experiment for air pollution index to show a negative causal relationship between air pollution and housing prices. We also find that this causal relationship is more pronounced for less-developed, manufacturing-intensive and tourismrelied cities. Our results reveal the response to central environmental protection inspection on improvement in regional air pollution protection but its by-effects on housing markets, as the impact is limited if the inspection is conducted repeatedly, suggesting its unsustainability as a regulatory tool.

This study explores how foreign competition impacts the capital structure of domestic firms. While import competition is associated with a decrease in domestic firms’ leverage, we propose a novel perspective concerning the positive effect of inward foreign direct investment (FDI) on leverage. FDI competition can boost demand for debt via productivity spillover to domestic firms, and also increase supply of debt by inducing lenders to herd toward foreign investors. Using Chinese firm-level data, we find that the positive effects of industry inward FDI on domestic firms’ leverage are more pronounced in high-tech industries and industries where foreign investors exhibit a high degree of herding behavior. Our instrument variable approach, employing industry exchange rates and import tariffs, supports these findings. Additionally, we reveal that the positive effect of FDI on local firms’ leverage is amplified when the firms have stronger absorptive capacities, receive foreign capital, and experience more human capital transfers from foreign rivals.

In China's labor market, there is a phenomenon that enterprises choose whether to provide "social insurance and housing fund" to laborers autonomously. This paper use micro-data from two leading Internet recruitment platforms and empirically finds that in a labor market with double-side information asymmetry, "social insurance and housing fund" is not only a cost but also a signal. Providing workers with "social insurance and housing fund" can both send a signal of stable operation to the labor market and identify high-quality workers for enterprises. With an instrument variable of local average social security payment rate, this paper excludes the endogenous effect of labor supply on wages while the signaling effect above is still significant. In addition, "housing fund" has a stronger signaling effect than "social insurance", and the strength of the two signaling effects is affected by the scale of the enterprises and the level of local payment rates. This paper also introduces a theoretical framework of two micro-mechanisms — signaling and screening — into the analysis. In terms of policies, this paper proposes to strengthen the information disclosure and the propagation of social security payment, and further reduce the financial burden of enterprises.

With market-oriented reforms in the economy, the Chinese government has promoted the development of risky financial markets, but evidence on the influence of social trust on risky financial market participation is scarce. Using three-wave longitudinal data from the China Family Panel Survey; and lagged variable, instrument variable, and fixed-effects models to address the endogeneity issues; we investigated social trust’s influence on risky financial market participation. We also estimated the effects of social trust by age, education, sex, and urban/rural resident groups. We found that social trust positively affected the probability of holding risky financial assets and their shares, however its effects were insignificant when addressing unobservable individual heterogeneity. The positive effect of social trust was greater for the youth, the highly educated, women, rural residents and high-income groups than their counterparts.

We provide nationwide causal estimates of digital financial inclusion’s (DFI) effect on air pollution in the short term for China from 2014 to 2018. Using distance to Xihu District as an instrument, 1% gain of DFI increases air pollution by 0.36%. The baseline result is strongly robust to various checks. The coverage breadth and usage depth of DFI increase pollution, with the elasticity of 0.39 and 0.37 respectively, whereas the digitization level of DFI lowers pollution, with the elasticity of -1.42. The heterogeneous short-run effect of DFI can be attributed to a multitude of channels, including pollution standard, geographical factors, population density, development gaps and international trade.

Using a unique FinTech data containing monthly individual-level consumption, investments, and payments, we examine how FinTech can lower investment barriers and improve risk-taking. Seizing on the rapid expansion of offline usages of Alipay in China, we measure individuals’ FinTech adoption by the speed and intensity with which they adopt the new technology. Our hypothesis is that individuals with high FinTech adoption, through repeated usages of the Alipay app, would build familiarity and trust, reducing the psychological barriers against investing in risky assets. Measuring risk-taking by individuals’ mutual-fund investments on the FinTech platform, we find that higher FinTech adoption results in higher participation and more risk-taking. Using the distance to Hangzhou as an instrument variable to capture the exogenous variation in FinTech adoption yields results of similar economic and statistical significance. Focusing on the welfare-improving aspect of FinTech inclusion, we find that individuals with high risk tolerance, hence more risk-taking capacity, and those living in under-banked cities stand to benefit more from the advent of FinTech.

We investigate the power structure of the Chinese political system and explore its implications on corporate finance. With a large sample of firms from 1999-2007, we document large-scale ‘re-nationalization’—local governments re-establish controlling ownership stakes in previously privatized firms. We find that firms located in provinces with newly appointed, top-ranked Party leaders who do not belong to any of the three dominant political factions are more likely to be renationalized. With a number of instrument variables, including the political status of the top-ranked provincial party leaders, we find that re-nationalization leads to lower sales and labor productivity for the firms. We also find some evidence that re-nationalization temporarily lowers the unemployment rate in the region without any significant, long-term economic benefits.