Using a sample of listed manufacturing firms in China, this study investigates the impact of artificial intelligence (AI) on restrictive corporate bond covenants. Our findings suggest that AI adoption significantly reduces the use of restrictive covenants included in bond contracts. After alleviating the endogenous issues by conducting several statistical approaches, the results remain robust and unchanged. Mechanism analyses indicate that AI curtails the use of restrictive covenants primarily by mitigating agency conflicts and lowering operational uncertainty. This negative effect is more pronounced among firms receiving higher investor attention, those facing intense industry competition, and those located in regions with superior innovation levels. Moreover, we find that AI predominantly affects investment-restricting and repayment-guarantee covenants, while its impact on asset-transfer-restricting covenants is statistically insignificant. Finally, an analysis of economic consequences reveals a synergistic effect between AI adoption and restrictive covenants in mitigating corporate default risk. Collectively, these findings provide valuable implications for integrating emerging technologies to optimize financing channels and promote high-quality economic development.
We examine how the enactment of China's data privacy regulations—the Data Security Law and the Personal Information Protection Law—shapes corporate risk-management behavior, with a focus on demand for directors' and officers' liability (D&O) insurance. Using the introduction of these laws as a quasi-natural experiment, we apply a difference-in-differences framework to Chinese A-share listed firms from 2018 to 2023. The results show that data privacy regulations significantly increase firms' demand for D&O insurance, consistent with heightened exposure to data and privacy security risk. Cross-sectional analyses reveal stronger effects among state-owned firms, firms with more risk-seeking managers, firms with higher institutional ownership, and firms with more negative media sentiment. The findings remain robust to matching procedures, placebo tests, nonlinear model specifications, alternative channel tests, additional identification checks and the exclusion of COVID-19-related effects. Overall, the study illustrates how regulatory changes in the digital economy reshape firms' managerial risk-management decisions.
Exploiting China's accountability system for irregular operation & investment (ASIOI) as a policy intervention implemented in 2016, this paper employs a staggered difference-in-differences (DID) method to examine the impact of the accountability system on the default risk of state-owned enterprises (SOEs). We find that the implementation of the ASIOI improves corporate information transparency and the quality of internal control, reduces managerial risk preference, and ultimately curbs the default risk of Chinese SOEs. Further analysis reveals that the effect of the ASIOI on corporate default risk is more pronounced in central SOEs, public welfare SOEs, and SOEs that receive higher government subsidies. In addition, the ASIOI significantly suppresses related-party transactions (RPTs) in SOEs, indicating its protective role extends from preventing ultimate defaults to reducing tunneling. Yet, macro-level analyses find no significant improvement in regional financial stability or economic efficiency, highlighting the complexity of transmitting micro-level governance gains to the macro level. These findings can not only theoretically enrich the research on the mitigation mechanism of corporate default risk and the economic consequences of accountability system, but also practically provide the basis and inspiration for regulators to use accountability system to prevent financial risks.
This paper examines the impact of ownership concentration on corporate financialization utilizing a large sample of Chinese A-share listed firms from 2003 to 2021. We find that firms with higher ownership concentration conduct significantly fewer financial investments. Mechanism analyses show this effect is more pronounced in firms with stronger vertical principal-agent problem (i.e., lower managerial ownership and higher managerial perks) and in firms with stronger horizontal principal-agent problem (i.e., lower ownership balance and lower institutional shareholding), supporting that increased ownership concentration enhances large shareholders' monitoring on managers and reduces their incentives to engage in tunneling through financial investments. We further find that ownership concentration curb financialization primarily in non-state-owned enterprises and mainly restrain long-term financial investments, which tend to be riskier and may crowd out real investment. Consistently, ownership concentration mitigates the adverse effects of corporate financialization by dampening its positive link to firm risk and negative links to investment and innovation. Overall, we contribute to the literature on corporate financialization and the role of ownership structure, and has great implication to the emerging practices of corporate financialization in China and other developing countries with similar ownership structure.
This study examines the effects of financial judicial specialization on corporate financing by treating the specialized financial adjudication reform in as an exogenous shock. We find that financial judicial specialization significantly expands firms' access to credit while also increasing their cost of debt, resulting in simultaneous increases in credit quantity and price. We identify three primary mechanisms driving this effect: improved judicial enforcement efficiency and certainty enhance credit availability, while the entry of more high-risk firms into the credit market raises the average risk premium among borrowers. Furthermore, the credit-expansion effect is more pronounced among financing-constrained firms, whereas the increase in debt financing costs is more pronounced among firms with higher default risk. Our analysis contributes to a novel perspective on specialized financial adjudication reform as an effective law institution for improving credit market pricing efficiency and safeguarding the lawful rights of both creditors and debtors.
This paper examines how local judicial governance shapes corporate cash holdings by exploiting the staggered implementation of China's judicial delocalization reform as a quasi-natural experiment. The reform shifted personnel, fiscal, and material control over local courts from same-level local governments to provincial authorities, thereby weakening local judicial protectionism. Using a sample of Chinese A-share listed firms from 2007 to 2023, we find that the judicial delocalization reform significantly reduces corporate cash holdings. Channel analyses show that the reform weakens firms' precautionary demand for cash by reducing litigation risk and improving external capital availability, while also mitigating agency-related cash retention by lowering managerial agency costs and rent-seeking expenditures. Cross-sectional evidence indicates that the impact is more pronounced among non-state-owned enterprises that rely more heavily on judicial protection, firms located in regions with more abundant judicial resources, and firms situated farther from local courts. Furthermore, we find that the reform accelerates firms' adjustment toward target cash levels. Overall, this study enriches the literature on the judicial determinants of corporate cash holdings and offers policy insights into the corporate financial consequences of reducing local judicial protectionism.
We identify firm connections through mutual fund common ownership. Our results reveal a momentum spillover effect among mutual fund connected firms. This effect generates monthly Fama–French six-factor alphas ranging from 0.70% to 1.15%. The firm connections formed by mutual fund common ownership are distinct from those based on industry, geography, or analyst linkages. The mutual fund connected-firm momentum spillover is driven neither by fund manager stock selection ability nor by price pressure. Consistent with limited investor attention, the spillover effect is stronger for firms held by mutual funds that receive less investor attention or by institutional investors with greater stress resistance. Our study contributes to the momentum spillover literature by identifying a new transmission channel through mutual fund common ownership.
This study examines the structural interplay between financial risk transmission and technological factor flows within China's tech-finance system. We employ a dual-network framework that integrates a financial risk network with a technology linkage network across 31 industries from 2011 to 2025. Through this approach, we document a pronounced divergence between financial risk transmission and real-economy innovation allocation. Our results show that technology-intensive industries act simultaneously as both risk transmitters and receivers. Consequently, they have the potential to amplify systemic volatility during periods of market stress. The analysis further reveals that core risk transmission pathways exhibit limited overlap with actual technology flows, indicating that risk diffusion is predominantly market-driven rather than grounded in industrial linkages. These findings highlight a structural misalignment between financial risk dynamics and technological resource configuration. By integrating a dual-network perspective, this study provides systematic evidence on the decoupling between financial and real-economy technology networks, offering critical insights for systemic risk monitoring, targeted capital allocation to innovation hubs, and enhancing the resilience of emerging tech-finance markets.
Corporate AI innovation imposes financing demands that conventional domestic equity markets are ill-equipped to meet. Yet this structural mismatch remains underexplored. This study investigates whether capital market liberalization can relax this structural disadvantage by exploiting China's Stock Connect program as a quasi-natural experiment using difference-in-differences and double machine learning methods. We find that financial openness significantly promotes corporate AI innovation through three complementary channels: alleviating equity financing constraints, expanding analyst coverage, and improving information transparency, each of which mitigates the severe information asymmetry inherent in AI projects. We further find that organizational knowledge search strengthens this positive effect. These findings reposition capital market quality from a background condition to an active institutional determinant of whether firms can sustain the distinctive financing demands of AI innovation investments.
Outward foreign direct investment (OFDI) is crucial for family firms' global expansion and long-term growth. Establishing a family office is a meaningful way to ensure effective family governance. This pre-registered report mainly explores whether the critical function of family offices (FOs) in family governance can extend to the OFDI decision-making. We propose that FOs can promote family firms' OFDI by enhancing long-term strategic commitment and improving board monitoring effectiveness. Additionally, we are interested in whether the founder's immigration experience and the institutional environment of the host country will affect the impact of FOs on OFDI. Furthermore, we compare the differences in the relationship between FOs and OFDI of family firms in developed and developing countries. We anticipate that the findings can provide practical guidance for developing effective FOs and formulating internationalization strategies, enabling family firms to achieve sustainable global expansion.
