This study employs an imbalanced panel dataset of 524 Chinese commercial banks from 2009 to 2020 to investigate the influence of Basel III on banks' loan loss provisions. Our findings reveal no significant change in the relationship between loan loss provisions and capital adequacy, although it indicates a heightened impetus for Tier 1 capital management. Furthermore, the study finds that earnings management motivations, particularly related to pre-provision profits, influence banks' loan loss provisions. Basel III's enactment reduces the ability of high-earning banks to manipulate earnings using loan loss provisions. This research provides empirical evidence from China for the global assessment of Basel III's impact on commercial banks.

This paper examines how profits from mutual funds’ participation in initial public offerings (IPOs) shape fund performance, investor flows, and market stability in China. Using comprehensive fund–IPO matched data from 2016 to 2023, we decompose fund returns into an IPO-lottery component and residual performance. At the aggregate level, IPO allocations add 2.05% to annualized excess returns; net of IPOs, excess return is −0.35% per year. At the individual level, the contribution of IPO profits varies substantially across funds and is most pronounced among mid-sized funds, inflating perceived managerial skill. Funds with higher IPO-driven gains attract greater inflows despite the absence of performance persistence, leading to capital misallocation. At the market level, IPO-profit-induced trading (PIT) predicts short horizon price run-ups that dissipate and reverse over subsequent months, while raising both total and idiosyncratic volatility. Overall, IPO profits temporarily enhance reported performance but erode market stability by propagating non-fundamental shocks through secondary markets.

This paper employs a proprietary data set on commodity producers’ profit margins (PPMG) and establishes a robust positive relationship between commodity producers’ profitability growth and future returns of commodity futures. The spread portfolio that longs top-PPMG futures contracts and shorts bottom-PPMG futures contracts delivers a statistically significant average weekly return of 36 basis points. We further demonstrate that profitability is a strong SDF factor in commodity futures market. We theoretically justify our empirical findings by developing an investment-based pricing model, in which producers optimally adjust their production process by maximizing profits subject to aggregate profitability shocks. The model reproduces key empirical results through calibration and simulation.

This study explores the proclivity of institutional investors in China towards highESG stocks amidst the growth of ESG investment funds. Using A-share data from 2015-2022 and a Tobit model analysis, it is found that these investors indeed favor such stocks, particularly under extensive analyst coverage and in non-state-owned firms. However, rating discrepancies can impact this preference. The attraction lies in reduced operational risks and improved net profits. Notably, independent investors show a stronger ESG preference, especially within high-pollution industries. Thus, fostering ESG investment among institutional investors can improve resource allocation in China's capital market, favoring eco-friendly companies.

Empowered by comprehensive data on smartphone fund investors’ trading and browsing histories from a Chinese financial company, we explore the role of investors’ financial attention in influencing the relationship between unrealized profits and investors’ selling decisions. Against a backdrop in which retail investors are not attentive to their portfolio information, we find supportive evidence suggesting that investors exhibit realization preference when we condition on days when investors pay financial attention. Further, we show that failing to account for investors’ financial inattention may induce observers to reject the realization-preference hypothesis. This paper also offers insights into the determinants of financial attention and the influence of financial attention on investor disposition effect.

This work explored the changes in production decision-making trends of Chinese steel enterprises under the influence of the carbon border adjustment mechanism. First, using evolutionary game theory, the interactive mechanism of complex production strategies among steel enterprises considering the carbon border adjustment mechanism was studied, including the impact of government subsidy coefficients, additional profits and carbon tax prices on enterprise decisionmaking.Second, the influence of key parameters on the dynamic evolutionary process was analysed. On this basis, the empirical simulation method was used to verify the game model and the main conclusions. Finally, the sensitivity analysis of the selected parameters was determined using Matlab software. The results showed that additional profits from green investment, government subsidy coefficients, input-output values and carbon tax prices had a higher impact on the evolution of enterprise production strategies. The results of this study provide a decision-making basis for the selection of future production methods for steel enterprises.

We propose a theory of corporate social responsibility (CSR) by linking it to a firm’s product market. In our model, the firm’s product exhibits network effects whereby its value increases with the number of consumers who purchase it. Moreover, with advancements in technology and big data, the firm can adopt personalized pricing for each consumer. We show that such a firm could use CSR as a commitment device for low product prices, which helps overcome the coordination problem among consumers and increases firm profits, thus supporting the notion of “doing well by doing good.”

We examine the effects of the world’s first comply-or-explain dividend regulation in China’s Shanghai Stock Exchange, which requires firms to either pay at least 30% of profits as dividends or explain the use of funds. We find that many firms increased their payout ratio to comply, by increasing dividends or decreasing earnings. Firms with high profitability, state ownership, and fewer agency conflicts were more likely to comply. However, complying firms subsequently issued more debt and had a decline in accounting performance and firm valuation. The evidence suggests that the comply-or-explain regulation increased firms’ dividends at substantial costs.

Using Chinese data, we investigate the impact of the China Semi-Mandatory Payout Policy that sets an explicit requirement that firms need to distribute at least 20% of their average annual net profits as cash/stock dividends accumulatively in three consecutive years before refinancing via seasoned equity offerings. Firms with the payout level below (above) the cutoff imposed by the Semi-Mandatory Payout Policy are regarded as Treated (Control) group. We find that Treated firms are more likely to cut investment, especially long-term innovation investment, and perform poorly compared to Control group due to lack of money. Treated firms also tend to use earnings management assisting in financing through the debt market as an alternative way to raise money. The negative impact of cutting investment caused by the Semi-Mandatory Payout Policy is more pronounced for firms suffering from severe financial constraints, firms having good corporate governance, and firms located in less financial development areas. We attribute findings to the difficulty of accessing capital that is implicitly increased the China Semi-Mandatory Payout Policy, which alters firms’ behavior leading to insufficient investments and destroys firms’ value.

How do private equity (PE) investors affect a firm’s decision-making during the IPO process? The special IPO approval system for China’s stock market provides a unique setting to investigate this issue. In China, all IPO candidates need to submit an application to the China Securities Regulatory Commission and only approved firms can then be listed. Using data from ChiNext, we documented that pre-IPO PE investors, who invested in a firm less than a year prior to the IPO filing day, are associated with higher earnings management at the IPO, while longterm PE investors are associated with lower earnings management at the IPO. We propose that this is because long-term PE investors may prefer conservative financial statements to increase the probability of gaining approval in order to guarantee successful exit; on the other hand, pre- IPO PE investors are more likely to have political connections that can help the firms gain approval and they share the profits through a high IPO price. Consistent with this explanation, we find that local pre-IPO PE investors, who are more likely to have strong political connections, are associated with a higher probability of IPO approval. The evidence suggests that PE investors do have an impact on a firm’s decision-making during the IPO process. It also points to an important cost of the IPO approval system in China as well as the rent-seeking behavior associated with it.