In this study, we analyze the network structure of institutional investor cliques and their effect on corporate innovation in a large sample of Chinese firms. Clique ownership is positively associated with innovation input and output, particularly among firms characterized by non-state ownership, more severe agency problems and CEO duality, suggesting that governance environment matters. This baseline effect is strengthened by product and capital market pressures, captured respectively by product market competitiveness and stock liquidity. To ameliorate endogeneity concerns, we show that our inferences are robust to more granular fixed effects, an instrumental variable approach, propensity score matching and Heckman correction. Using the Mainland China–Hong Kong Stock Connect program as a quasi-natural experiment and a difference-in-differences design, we find that clique ownership has a more salient effect after firms enter the Connect program. Mechanism tests reveal that cliques improve innovation incentives by increasing information transparency and reducing forced CEO turnovers and enhance innovation capability by increasing innovation investment efficiency and employees’ innovation productivity. Institutional site visit evidence is consistent with more active institutional monitoring of firms with higher clique ownership.
According to upper echelons theory, top management team (TMT) characteristics significantly influence corporate strategic decision-making. This study examines the impact of TMT openness on corporate innovation using a sample of Chinese A-share listed firms from 2007 to 2022. We employ a large language model (GLM-4) to measure TMT personality traits based on Q&A transcripts from annual performance briefings, offering a novel approach to capturing managerial personalities. Our findings demonstrate that TMT openness significantly enhances both explorative and exploitative innovation. Moreover, our extended analysis reveals that TMT openness exhibits differential effects across innovation types, with a more pronounced enhancing effect on digital technology innovation than non-digital technology innovation. Mechanism analyses reveal that TMTs with higher openness exhibit stronger innovation awareness, greater tolerance for uncertainties and reduced managerial myopia. Cross-sectional analyses show that the positive effect is larger among firms facing higher performance pressure, greater institutional ownership and more intense competition. Further analyses demonstrate that TMT openness is positively associated with R&D expenditure and personnel allocation. Moreover, TMT openness increases not only innovation quantity but innovation quality and efficiency. This study contributes to the literature by highlighting the role of TMT personality in corporate innovation and introducing an innovative measurement approach using large language models, providing methodological insights for future empirical research.
Digital transformation may give managers an information advantage that facilitates opportunistic behavior. We hypothesize that this enables managers to achieve excess returns from insider trading, increasing their engagement in such activities. We find that digital transformation significantly increases insider trading and pledging volumes, particularly for insider sales. When firms implement digital transformation, managers’ insider trading is positively associated with stock returns and financial performance. Managers can thus achieve significantly higher long-term excess returns from insider selling, increasing trading volumes. The effect is pronounced for firms with stronger management opportunism and less transparent information environments. Our findings suggest that digital transformation amplifies managerial information advantages, enabling more profitable and well-timed managerial opportunism; this underscores the need for stronger regulatory oversight.
Computing power is becoming a new productive force driving high–quality business growth worldwide. How to lower barriers to computing power usage and facilitate enterprise digital transformation through the systematic deployment of computing power projects remains unclear. Using China’s “East data, West computing” project as a quasi-natural experiment, we investigate its impact on the digital transformation of enterprises and find that it significantly promotes this transformation in the region, due to three factors: the optimization of the computing power environment, the strengthening of digital R&D and innovation and government digital subsidies and support. Heterogeneity analysis reveals that the facilitating effect is more pronounced in state‑owned enterprises, asset‑light firms and regions with better computing power infrastructure. Furthermore, the effect is stronger in regions with higher energy consumption and better data transmission conditions, suggesting a potential relocation of computing power demand away from energy‑intensive areas. From the perspective of developing high‑quality enterprises, firms in computing power hub nodes with more advanced digital transformation achieve higher total factor productivity. From the perspective of cross‑regional resource flows, the project significantly boosts out‑of‑region investment by enterprises located in the Eastern hub node, reflecting their strategic initiative to actively respond to the project. Our paper contributes to the literature on the drivers of digital transformation in enterprises and uses China’s experience and evidence in constructing and implementing policies related to global computing power infrastructure.
This study develops an interpretable machine learning framework to predict goodwill impairment using linguistic features of mergers and acquisitions comment letters. We extract thematic content via Bidirectional Encoder Representations from Transformers-based synonym self-generation with term frequency–inverse document frequency and capture readability, length and response time through text mining. Tree-based models with SHapley Additive exPlanations analysis reveal that valuation-focused, less readable letters signal higher impairment risk, whereas forward-looking, detailed letters with clear deadlines indicate lower risk. Predictive power strengthens in weakly governed firms. This study demonstrates that unstructured regulatory text serves as an early warning signal for financial risk and advances explainable natural language processing applications in accounting research.
Major Western political economists of the past 300 years had an exaggerated emphasis on the role of capital in the economy, with the exception of Karl Marx, who recognized the role of labor, and solely of labor, in creating social wealth. The advancement of modern technologies has hitherto disproportionally benefited capital, even though we see labor welfare also improve over the centuries. This time, however, AI is infinitely benefiting capital. How can humanity survive? We imagine the rise of new accountants, serving a “super-entity,” to redistribute economic benefits to humanity. In search of historical perspectives, we go back in time. Divergent from the Western experience that accounting emerged for commerce, China’s experience with accounting is that it often availed itself to central governance. Further, market-participating state capital can be super-competitive and well-informed. Facing an anti-human private-capital-empowered AI, rationing and redistribution under an intelligent “super-entity,” enabled by the new accountants, take on a new meaning and urgency in taming unbridled private capital and helping preserve the physical existence of humanity.
This study investigates whether and how global major customers affect corporate carbon disclosure. Leveraging the unique quasi-natural experiment of Apple’s supply chain from 2008 to 2023 in China, we employ a difference-in-differences design and examine the impact of major customers on suppliers’ carbon-disclosure quality. Baseline results indicate that the carbon-disclosure quality increases by approximately 6.76% following a firm’s entry into the supply chain. Mechanism analysis indicates Apple plays a disciplining role through direct governance and indirect exposure effects. Cross-sectional analyses reveal that the impact is more pronounced among suppliers with stronger financial capacity and lower agency costs. Real effects, measured by carbon emission intensity and green innovation, demonstrate that the influence of global major customers extends beyond symbolic disclosure to substantive environmental action. These findings underscore the influential role of major customers in promoting environmental transparency along global supply chains.
We investigate how local government fiscal pressure is transmitted to corporate commercial credit provision. Heightened fiscal pressure significantly reduces firms’ net commercial credit supply. Mediation analysis reveals three transmission channels: expanded debt issuance crowds out corporate loan availability; intensified tax administration increases corporate tax burdens; and reduced government subsidies constrain corporate cash flows. Collectively, these mechanisms compel firms to curtail commercial credit extension. Heterogeneity analysis demonstrates that regions heavily dependent on debt, land revenue or tax revenue experience amplified adverse impacts; firms with higher customer concentration and supplier concentration and weaker institutional backing exhibit greater vulnerability. We demonstrate the microeconomic consequences of fiscal stress, emphasizing the importance of diversified revenue structures and robust government–business relationships for sustainable economic development.
This paper employs natural language processing to construct a firm-level green-transition score and examines how downstream companies’ greening shapes upstream suppliers’ environmental upgrading. Our findings demonstrate that downstream firms’ green transition exerts significant positive spillovers on upstream suppliers’ environmental practices. This conclusion remains robust across multiple identification strategies, including instrumental variable estimation, difference-in-differences analysis and Heckman two-step selection correction. Heterogeneity analysis reveals that these spillover effects are amplified under three conditions: (1) strong supplier absorptive capacity, (2) narrow green-technology gaps between buyers and suppliers and (3) large market size in the buyer’s regional market. Mechanism tests indicate that downstream firms’ green transformation facilitates upstream suppliers’ environmental upgrading through two channels: knowledge–technology transfer and norm diffusion of environmental standards. This study advances the literature on corporate greening and supply chain coordination and provides policy levers to foster integration and amplify green spillovers.
This paper investigates the impact of peer performance on firms’ pollution emissions using establishment-level pollution emissions data of Chinese listed firms. The empirical results show that managers increase pollution emissions intensity to save costs in response to performance pressure from peer firms. We identify two underlying mechanisms, capital market pressure and compensation pressure, through which peer performance exacerbates pollution emissions. Heterogeneity analysis shows that CSR activity by focal or peer firms and regional environmental regulations help mitigate the environmental externalities of peer performance, while firms with state ownership and GDP importance are more likely to increase emissions in response to peer performance. This study sheds light on how peer performance exerts a negative environmental externality and provides implications for balancing the relationship between economic benefits and environmental sustainability.
Reviewing the literature on mandatory corporate disclosure from a political economy perspective, we synthesize the classic justifications for disclosure regulations while emphasizing why voluntary disclosure often fails to achieve socially efficient transparency. We also highlight how legal institutions, enforcement capacity, and political forces shape the design, credibility, and effectiveness of disclosure mandates. Drawing on evidence from international and China-focused studies, we review empirical findings on how mandatory disclosure affects investor protection, information environments, and firm behavior, showing that similar reporting rules yield different outcomes across institutional settings. We further extend the discussion to ESG and climate-related disclosure to examine emerging evidence on transparency gains, real effects, compliance costs, and regulatory trade-offs, including debates on materiality and regulatory objectives. Overall, the literature suggests that mandatory disclosure remains a central governance instrument in modern capital markets, but its effectiveness depends on its enforcement, institutional context and political economy constraints.
Despite their global presence, state-owned enterprises’ (SOEs) corporate governance has received less attention than that of non-SOEs. Using China’s central inspection team (CIT) visits as a quasi-natural experiment, we examine how central government monitoring influences local SOEs’ investment efficiency. These visits may both limit local officials’ interference and curb managers’ pursuit of personal gains and impose excessive external responsibilities on firms. We find that investment efficiency increases after CIT visits, both in underinvesting and overinvesting firms. These effects are stronger in firms facing greater government interference, weaker internal governance or greater policy and economic uncertainty. Moreover, CIT visits affect unlisted SOEs more than listed SOEs, improve ex-post long-term operating performance and remain effective over time (i.e., revisit inspections). Our findings highlight the central government’s role in enhancing local SOEs’ investment practices, as an effective top-down corporate governance mechanism.
A scenario described vividly and in detail is more easily imagined, leading individuals to overestimate the likelihood of its occurrence. We leverage a novel large-language-model (LLM) framework to analyze management speech style during unstructured earnings conferences and construct quantitative measures of scenario oral disclosure. Such disclosure triggers scenario thinking, inflating investors’ beliefs about future firm prospects, particularly when firm-specific information is scarce. Scenario disclosure is more pronounced when conveying positive information, with poor relative performance and under negative media sentiment, suggesting that management employs scenario framing to manage expectations. Finally, management scenario disclosure significantly increases stock price crash risk. This represents LLMs’ first application to identify and quantify scenario disclosure in earnings conferences, providing guidance for regulation and institutional design.
Supplier diversification is a crucial corporate strategy for ensuring uninterrupted production and secure supply chains. This study investigates how industrial robots reshape corporate suppliers’ allocation strategies. Using data from China’s A-share listed firms during 2012–2022, we find that extensive robot adoption significantly reduces supplier concentration. This shift is primarily driven by enhanced market power and expanded product diversity. The diversification effect is more pronounced in regions with less developed market institutions characterized by pronounced government intervention, underdeveloped private sectors and weak legal systems, as well as within more technology-intensive and competitive industries and among firms with a larger share of low-skilled workers. We identify a trade-off of automation-driven supplier diversification: enhanced firm performance and supply chain resilience but reduced inventory efficiency and increased transaction costs. Our findings offer valuable insights for managers and policymakers seeking to optimize automation investments and improve robotics integration into supply chain management.
This study examines the impact of changes in market equilibrium, from collusion to competition, on firms’ R&D investments by leveraging the staggered enactment of antitrust legislation in 32 countries, which effectively addresses endogeneity concerns in the innovation literature. We argue and find that restoring competition by dissolving collusion requires increased R&D investment by firms to effectively compete for market share. The effect is stronger among firms operating in more concentrated industries before the reform and among those with greater financial flexibility and higher risks. Increased R&D investment is associated with improvements in both return on equity and Tobin’s Q, indicating real and market performance gains. These effects are amplified in countries with a stronger rule of law and a weaker pre-reform innovation capacity. Overall, the findings highlight the role of antitrust enforcement in fostering innovation and firm performance through the restoration of competitive market structures.
Against the backdrop of volatile global trade and the expanding U.S. Entity List targeting Chinese enterprises, this study examines how firms adjust their narrative disclosures in response to external trade policy risks, specifically, the strategic choice between opacity and explicitness. Using data from A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2024, we find that firms added to the U.S. Entity List exhibit significantly higher textual ambiguity in their narrative disclosures than non-sanctioned firms. This effect is primarily driven by firms’ strategic choice to adopt an obscure disclosure stance. Mechanism analyses reveal that inclusion on the U.S. Entity List triggers negative discussions on Guba and increases negative coverage by the financial media, thereby heightening the firms’ perceived supply chain risks. In turn, this perception drives firms to incorporate more positive forward-looking statements in their Management Discussion and Analysis. Heterogeneity tests indicate that the increase in textual ambiguity is more pronounced among firms facing higher managerial performance pressure, with inferior market positions, greater international exposure or weaker institutional investor oversight. Further analysis of the economic consequences shows that elevated textual ambiguity significantly increases both analyst forecast dispersion and stock price crash risk, thereby impairing the informativeness of the capital market and financial market stability. This study contributes to the literature on the economic consequences of the U.S. Entity List from an information disclosure perspective, elucidates how external risks can lead to corporate textual manipulation and provides valuable empirical insights for improving disclosure regulation within a complex international trade environment.
Traditional cultural institutions may substantially enhance resilience amid escalating economic uncertainty and geopolitical tensions that amplify vulnerabilities in corporate supply chains. We measure firm-level exposure to Confucian influence based on the number of nearby Confucian temples and find robust evidence that firms with greater exposure exhibit higher supply chain resilience. To address endogeneity concerns, we include granular fixed effects, control for additional variables and implement a propensity score matching procedure and an instrumental variable approach. Our results remain qualitatively unchanged. Exploiting two quasi-natural experiments, we further show that Confucian culture has a muted impact on firms located in regions with historical Manchu garrisons or areas exposed to the Taiping Rebellion. Through mechanism analysis, we reveal that Confucian influence is more pronounced among firms with weaker formal or external governance, slower adaptive evolution or a more opaque information environment. Lastly, heterogeneity tests show that the effect of Confucian culture is stronger on firms with a weaker environmental, social and governance orientation; lower exposure to exotic ideologies; more constrained trade credit financing; or a higher operating risk level. Overall, our study identifies corporate culture as a crucial determinant of resilience and underscores the value of harnessing traditional culture to mitigate operational risks and support long-run sustainability.
This study explores a new channel through which environmental, social and governance (ESG) reporting mandates implemented in one country can influence firms’ ESG performance in another country, focusing on returnee CEOs in China who studied or worked abroad. We find that compared with Chinese firms led by returnee CEOs from countries without ESG mandates or Chinese CEOs with no foreign experience, firms managed by returnee CEOs from countries with ESG mandates implemented after their return show improved ESG performance. Therefore, returnee CEOs’ sustained attention to foreign regulatory environments has a lasting impact on their decision-making, particularly in relation to ESG practices. Additionally, we find that the influence of foreign ESG reporting mandates on Chinese firms’ ESG performance is stronger when mandates originate from countries with strong investor protection, when firms are audited by reputable auditors, when they generate more sales in foreign markets and when they have foreign subsidiaries. Our findings reveal how CEOs’ foreign relationships and networks can transcend geographical boundaries, shape individual behaviors and decisions and enhance ESG practices.
Prior studies define corporate greenwashing as inconsistent and exaggerated environmental disclosures compared with actual practices. This study explores how the stock market identifies and penalizes greenwashing risks, focusing on mismatches between companies’ words and actions and suspicions of greenwashing. Using data from non-financial Chinese A-share firms that publish CSR reports (2008–2021), we test the stock risk premium effects of greenwashing. The results show that investors demand higher premiums due to greenwashing suspicions, while textual evidence of greenwashing amplifies negative reactions, but does not directly increase premiums. The mechanism analysis reveals that exposure to reputational risk, financial misallocation, and information frictions drive premium increases. Heterogeneity analysis indicates that external pollution shocks, internal financial regulations, and corporate strategies affect the amount of premiums. Moreover, firms mimic their peers’ disclosure formats to reduce their environmental information risks, which triggers a transmission of greenwashing and exacerbates systemic risks. Contrary to the view that heavily polluting firms are major greenwashers, low-polluting firms bear higher greenwashing risk premiums because investors already consider the environmental risks of heavily polluting firms. This study measures the likelihood of greenwashing by integrating its motives, expressions, and behaviors, thus offering policy insights for green finance and corporate environmental disclosure frameworks.
Drawing on agency theory, this study explores how the geographical distribution of institutional shareholders affects corporate ESG rating disagreements. A higher geographical concentration of institutional shareholders is found to correlate with reduced ESG rating disagreements, as concentration supports coordinated governance and enhances ESG disclosure quality. Heterogeneity analyses show that this effect of geographical concentration is more pronounced in environments with higher competition among institutional shareholders and less media attention toward ESG issues. Analysis of economic consequences indicates that reducing ESG rating disagreements enhances stock liquidity. This study offers important insights regarding how coordinated governance among institutional shareholders can improve corporate ESG performance and optimize governance structures. The findings have practical implications for promoting shareholder collaboration to enhance capital market efficiency and support sustainable development. (c) 2025 The Authors. Published by Elsevier B.V. on behalf of Sun Yat-sen University. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
