This paper exploits China’s first default of state-owned enterprises to study the implicit government guarantee’s effect on SOEs’ trade credit financing. It finds that SOEs increase trade credit by 2.3% of total liabilities, on average, relative to non-SOEs after the first SOE default in China’s bond markets in 2015. The additional reliance on suppliers’ credit is more prominent among SOEs with higher information opacity. It is consistent with the literature where trade credit advantage lies in the suppliers’ superior information, as they can observe their clients through daily transactions. The current paper also finds that trade credits positively affect SOEs when IGG weakens. Overall, the results suggest that the reduction in IGG significantly affects Chinese firms’ financing decisions, highlighting the trade credit advantage against the backdrop of imperfect market institutions.

With growing awareness of sustainability, the field of Environmental, Social and Governance (ESG), has been attracting mainstream investors and researchers. Many previous studies have found inconclusive or mixed results on the relationship between ESG ratings and firms’ financial performance, which are mainly attributed to their varied markets, time horizons, and sources of ESG rating. Based on evidence from an emerging market, namely China, this paper examines whether ESG is an adequate indicator for firms’ future financial performance. Given the divergence in ESG rating methodologies, we use ESG data from two ESG rating agencies, one based in China (SynTao) and the other based in Switzerland (RepRisk), for robustness. Specifically, we investigate 377 China A-share companies covered by both agencies and find that ESG rating, albeit divergent due to disparate methodologies, is instrumental in predicting the trend of corporate financial performance (CFP). This work verifies that the forward-looking nature of ESG makes it crucial for firms’ long-term valuation and financial performance in emerging markets. Throughout the research, we observe four issues in the current ESG rating process: the opacity and inaccessibility of source data, the obscurity of ESG rating methodologies adopted by rating agencies, the lack of automated pipeline, and the unannounced historical data rewriting. We believe that the public blockchain ecosystem is promising to address these issues, and we propose future research on the ESG framework for blockchain to call for sustainability focus on this emerging technology.

Opacity (the converse of transparency) has only recently received attention as it has been considered to be linked to a series of financial crises. This study utilizes Price Waterhouse Cooper’s 2001 opacity indices and capital flow data from the World Bank and Bank for International Settlement. Capital flows are disaggregated into categories of foreign direct investment flows by multinational enterprises, portfolio capital flows and international bank lending. Regression analysis supports the idea that higher opacity leads to a reduction in capital flows, in general. The results have policy-relevant implications as countries wishing to enhance capital inflows need to reduce the level of opacity in decision-making. More interestingly, however, the investigation with opacity sub- indices shows higher capital flows, in general, were associated with higher opacity in corruption and regulatory indices corroborating some existing evidence in the FDI literature that opacity will influence the choice of entry mode rather than the actual level of flows. In addition, the paper supports the notion that Bank Assurance mechanisms are highly desirable with regard to international bank lending, as the nature of these flows means that they are more influenced by general levels of opacity and are less responsive than FDI and portfolio flows.