This study investigates the predictability of cross-sectional stock returns in Chinese A-share market. We employ an instrumented principal component analysis (IPCA) approach on a wide range of firm-level characteristics to construct a dynamic 4-IPCA index as a novel predictor. We find that this index has strong predictive power, with a long-short strategy yielding a monthly risk-adjusted alpha of 190 basis points. Mechanistically, this predictability is more pronounced for firms receiving less investor attention, supporting a mispricing-based explanation, while lottery preferences and arbitrage limitations hold no explanatory power. Furthermore, the 4-IPCA effect is significantly associated with aggregate market conditions, including investor sentiment, market development, trading frictions, and accounting quality.

This study investigates the influence of corporate social responsibility performance by industry peers on innovation outputs of focal firms, along with the underlying mechanism that drives the peer effect. Using a sample of Chinese listed firms from 2010 to 2020, the analysis shows that higher corporate social responsibility performance among peer firms is associated with a reduction in the innovation outputs of focal firms. This outcome indicates that peer firms with superior corporate social responsibility performance hold competitive advantages that limit essential innovation resources for focal firms. Furthermore, the results demonstrate that customer demand partially mediates the negative peer effect. However, the adverse impact diminishes when focal firms maintain stable relationships with suppliers and customers.

This study examines the impact of peer corporate social responsibility (CSR) performance on a firm's profitability by employing fixed-effects panel regressions on a sample of listed Chinese firms during 2010-2021. We find that the high-quality CSR performance of peer firms has a time-lagged negative effect on the profitability of the focal firm, because it provides a competitive advantage to peer firms. This effect is stronger in more competitive industries and when industry strategy differentiation is high, supporting our framework grounded in the resource-based view (RBV). The results highlight the crucial role of network status in mitigating the adverse effects of lower CSR performance. Peer CSR performance negatively influences the persistence of the focal firm's profitability. Our study advances the literature by developing a competitive framework and addressing the time-dependent nature of peer CSR effects. By integrating network theory, we deepen insights into the moderating mechanisms that impact CSR peer effects.

Investment decision-making is the cornerstone of capital operations. Real investments play a critical role in enabling companies to gain a long-term competitive advantage and maintain stable, sustainable growth in highly competitive markets. In the current economic environment, the financialization of commodities has become increasingly prominent, representing a significant external uncertainty factor for businesses. There is currently a lack of sufficient theoretical support and empirical research on whether the financialization of commodities promotes or inhibits corporate real investment, warranting further exploration and validation.This study examines the effect of commodity financialization on firm investment and the underlying mechanisms driving this relationship using a sample of Chinese listed firms. It focuses on the core area of real investment, delving into the intrinsic drivers of decision-making behaviors and thoroughly uncovering the pathways of their interaction. Expanding on this, the study further explores the heterogeneous effects of environmental dynamism and munificence, as well as the impact of commodity financialization on investment efficiency.Findings indicate that commodity financialization results in a significant decline in firm investment. The use of derivatives and engagement in financial activities exhibit partial mediating effects on the relationship between commodity financialization and firm investment. Customer concentration and industry competition can significantly moderate the effect of commodity financialization on firm investment. Furthermore, the effect of commodity financialization on firm investment is more pronounced in more dynamic and munificent environments. Finally, we find that commodity financialization is negatively associated with firm investment efficiency.

With the frequent occurrence of exogenous shock events such as natural disasters and extreme weather, building urban resilience has become an important goal for governments worldwide. Based on data from 254 cities in China from 2013 to 2021, this paper measures urban resilience through the entropy method. Furthermore, taking the supply chain digitalization pilot policy as a quasi-natural experiment, this paper explores the impact of supply chain digitalization (SCD) on urban resilience. The results indicate that SCD promotes urban resilience, enhancing cities' ability to resist and recover from risks. Specifically, the promotional effect of SCD on urban resilience is stronger in cities with better digital development, higher administrative levels, and those located in the eastern and middle regions. Additionally, mechanism analysis reveals that SCD strengthens urban resilience by enhancing industrial chain resilience, improving green total factor productivity, and stimulating innovation. This study provides empirical evidence for the contribution of SCD to urban resilience and offers policy implications for improving urban resilience in developing countries.

This study examines how market ambiguity and investor sentiment influence market anomalies in the Chinese A-share market. Prior literature indicates that market ambiguity and investor sentiment play critical roles in shaping investment behaviors and market anomalies. However, the specific mechanisms through which these factors interact remain unclear. We analyze a dataset comprising daily and monthly stock returns and fundamental information for 4,587 A-share listed firms from 2003 to 2022. We select market anomalies based on emotional biases in investor decision-making under ambiguity and construct anomaly portfolios. We introduce market ambiguity as a moderating variable to study its interaction with investor sentiment. We find that market ambiguity significantly interacts with investor sentiment. During periods of pessimistic sentiment, ambiguity enhances the explanatory power of sentiment for market anomalies, while during optimistic periods, it diminishes this power. Furthermore, market ambiguity's moderating effect is stronger in environments with high information asymmetry compared to those with low information asymmetry. These findings suggest that market ambiguity amplifies the impact of investor sentiment on market anomalies, especially in conditions of high information asymmetry. This highlights the importance of considering both sentiment and ambiguity in understanding market behaviors and anomalies.

We investigate how managers' evasiveness affects peer firms' stock returns. Managers' evasiveness is measured by the degree of managers' irrelevant answers and non-answers during earnings communication conferences. Our results show that peer firms' investors react negatively to managers' evasiveness. Moreover, we find that the spillover effects are stronger for peer firms with lower information transparency, and the leading firms with a higher market power or a higher leverage ratio.

This study explores the relationship between stocks' change in salience (CS) and the cross-section of stock returns. We find that the change in salience can negatively predict future stock returns. Investors, attracted by salient attributes of choices, overestimate prominent rising trends in stock historical return performance and extrapolate, leading stocks with prominent rising trends to be overpriced and earning lower subsequent returns. In terms of potential mechanisms, we find that costly arbitrage and lottery preference are two underlying mechanisms behind the mispricing of CS. The CS effect is more pronounced among stocks with greater costly arbitrage and greater lottery preference. Moreover, both institutional and individual investors are shown to generate distortions of expectations induced by salient thinking. Our findings are robust after considering common risk factors, shell contamination, short-term reversals, the prospect theory, and investor attention.

The interactive behaviors, such as competition and learning between local and neighboring cities, can lead to spatial spillover effects in policy implementation. Estimating the direct, indirect, and total effects of the carbon emission trading scheme (CETS) on green innovation is crucial to clarify its role and mechanisms. This paper applies the spatial difference-in-differences model to estimate these effects using data from 278 cities in China from 2009 to 2019. The results demonstrate that the CETS implementation catalyzes green innovation in pilot cities, which supports the Porter hypothesis. However, it has a negative impact on green innovation in neighboring cities of pilot cities, with this negative impact diminishing as distance increases. Notably, the total effect of the CETS is significantly negative, indicating that the CETS’s average impact on green innovation in all cities is negative. Mechanism analysis reveals that the direct and indirect effects of the CETS on green innovation are strengthened in cities with higher levels of financial development, lower financial pressure, and easier economic growth targets. Notably, in cities with high-level industrial structures, the CETS not only enhances its contribution to green innovation but also mitigates its negative impact on neighboring cities. Furthermore, this paper explores the heterogeneous effects of the CETS from the perspective of its implementation measures.

Motivated by the substantial influence of oil price uncertainty (OPU) on corporate investment and the importance of corporate investment efficiency, this study focuses on the impact of OPU on corporate inefficient investment. Using a sample of Chinese listed firms from 2007 to 2019, we find that OPU negatively affects inefficient investment. This negative effect is consistent in the over-investment and under-investment sub-sample. Our findings are consistent with the real options theory and the strategic growth option theory. We also find that a shortening debt maturity structure is one of the underlying mechanisms through which OPU reduces inefficient investment. In addition, heterogeneity analysis indicates that the negative effects of OPU on inefficient investment are more pronounced in state-owned firms, firms with higher financing constraints, and firms with lower ownership concentration. Furthermore, we find that OPU emanating from positive oil price changes has a stronger negative impact on inefficient investment. This study comprehensively investigates the relationship between OPU and corporate inefficient investment from perspectives of over-investment and under-investment, and it enriches macro perspective evidence for the determinants of corporate inefficient investment.

This study investigates the relationship between quality acceleration and cross-sectional returns, and explores the source of quality acceleration effect. We provide empirical evidence that quality acceleration positively and significantly predicts subsequent stock returns, and this predictive ability of quality acceleration lasts for three months, and does not reverse in the long term. These results are robust to alternative subsamples and alternative measures of quality acceleration, and common anomalies. The prediction information contained in quality acceleration is not subsumed by quality level and quality growth, and even exceeds the prediction information contained in quality level and growth. Consistent with a behavioral mispricing explanation, we find that the quality acceleration effect becomes stronger in the period of high investor sentiment, while the quality acceleration effect becomes weaker or even disappears in the period of low investor sentiment. However, the quality acceleration effect cannot be explained by limits to arbitrage and investor attention. Finally, quality acceleration has incremental predictive power for future one-quarter-ahead earnings growth, as well as future two- and three-quarters-ahead quality growth, which could be overlooked by investors.

This paper examines whether and how the network centrality of institutional investors affects firms' sustainability development. Using data from the Chinese market, we find that central institutional investors in the social network significantly increase firms' overall ESG performance. For the environmental, social, and governance pillars of ESG, we find that environmental performance is more likely to be driven by central institutional investors. We further show that central institutional investors act as active monitors and resource providers, enhancing firms' ESG performance by improving corporate internal control quality, promoting the corporate information environment, alleviating financing constraints, and increasing green innovation capability. Furthermore, the relationship between centrality and ESG performance is considerably more pronounced for firms with political connections or under a high degree of industry competition but more diminished in periods of high economic policy uncertainty.

Inspired by the prevalence of firm innovation and substantial influence of international oil price uncertainty (OPU) on firm operation and decision-making, we investigate the influence of OPU on firm innovation. Using a sample of Chinese listed firms over the 2007–2019 period, our study reveals that OPU decreases firm innovation. This finding is consistent with the real options theory and the prospect theory. Mediation analysis shows that OPU could decrease firm innovation by increasing firms' financing constraints degree. Moreover, high-tech firms and those in highly competitive industries have fewer options to delay their innovation investments, we find that the adverse effects of OPU on their innovation are weaker. Finally, further analysis shows that government subsidies can help mitigate adverse effects of OPU on firm innovation. This paper reveals that OPU goes beyond the commonly known and understood regular indicator that shapes a firm's innovation activity and enriches firm-level evidence for the effects of OPU by highlighting the effects on long-term investment in intangible assets.

Based on the imprinting theory, this study investigates the effect of CEO early-life famine experience on corporate tax avoidance (CTA). The empirical results show that firms led by CEOs who experienced the Great Chinese Famine (1959–1961) in early life tend to engage in CTA at a lower level. Both CEO duality and higher educational attainment weaken the negative effect of CEO early-life famine experience on CTA. Corporate social responsibility and risk-taking have partial mediating effects between CEO early-life famine experience and CTA. Moreover, heterogeneous analysis indicates that the negative relationship is more pronounced and the moderating effects are both significant in a more munificent and dynamic environment.

This study investigates the role of analysts on the relationship between trend information and cross-sectional returns. Our results show that the trend information about past price and trading volume significantly predicts future stock returns in the Chinese stock market. The trend effect is more pronounced among stocks without analyst coverage or low analyst coverage, which indicates that analysts play an important role in disseminating information and helping information to be incorporated into stock price more quickly, thus reducing mispricing and weakening the trend effect. Considering the information's updates from analysts, the findings suggest that the trend effect is stronger for stocks with no revision, while the trend effect becomes weaker or even disappears for stocks with upgrade or downgrade revision. Moreover, our results show that analyst recommendations fail to take full advantage of trend information or even contradict trend signals although analyst recommendations do contain forecast information related to future stock returns. Furthermore, we find that analyst recommendations provide additional useful information that can enhance the predictability of trend information, but the value of information reflected in their recommendations cannot offset the value of trend information.

We employ the "Two Sessions," comprising the National People’s Congress and the Chinese People’s Political Consultative Conference, as a proxy for measuring policy uncertainty. In our analysis, we utilize a regression model, the three-path mediated effect framework, and the Campbell and Shiller decomposition method to delve into the influence of policy uncertainty on asset pricing within China’s financial market. Our findings reveal an increase in stock returns during the months leading up to the "Two Sessions," evident at both the market and firm levels. Notably, the extent to which stock returns respond to policy uncertainty is contingent on various firm-specific characteristics, including ownership structure, company size, and profitability. Furthermore, our investigation confirms that investor sentiment serves as a complete mediator in the relationship between policy uncertainty and its impact on asset prices. Additionally, we identify future cash flow as the primary conduit through which policy uncertainty directly exerts its influence on asset prices.

In this study, we show that changes in profitability predict a firm's stock returns and future profitability. We construct three horizon-based profitability changes, including short-, medium-, and long-term changes. We find that the predictive information for short-term changes in profitability is not subsumed by the profitability level in the Chinese stock market. We also find that short-term profitability changes generate an asymmetrical premium across different market states. Furthermore, we find that the beta anomaly is embedded in the premium generated by a short-term change in profitability. In addition, we explore the underlying mechanisms of the profitability premium and propose a heterogeneous investor belief channel to explain the profitability premium. We find that risk-based q-theory also helps explain the profitability premium. Therefore, the profitability premium comes from a mixed source and cannot be entirely explained by a single theory.

We examine the convergence of corporate financialization and the impact of macroeconomic changes on corporate financialization in Chinese nonfinancial listed companies. Strong evidence suggests that multiple convergence clubs exist and that macroeconomic changes play an essential role in their composition. Economic growth and financial development positively affect corporate financial asset allocation, while monetary policy negatively affects corporate financial asset allocation. Given macroeconomic changes, companies with high financial investment profitability and low financing constraints tend to allocate more to financial assets. In contrast, companies with poor financial investment performance and limited financing capacity do not have significant financial investment preferences.

We investigate the effect of commodity financialization on firm’s idiosyncratic risk. Our results reveal a positive effect of commodity financialization on firm’s idiosyncratic risk. Derivative usage and diversification strategy can negatively moderate the positive effect. Moreover, the positive effect of commodity financialization and the moderating effects of derivative usage and diversification strategy are more pronounced in firms with lower-quality information environment, lower hedging efficiency, and higher cash flow volatility. Additionally, we find that the relationship between the two hedging instruments is complementary, and the increased idiosyncratic risk caused by commodity financialization can be priced into the cost of equity.