While businesses fluctuate with politics, firms try to find ways to deal with uncertainty. We investigate how political incentives shape corporate social responsibility (CSR) reporting activities using the setting of China. Based on a sample of non-mandatory CSR disclosure firms, we find that firms experiencing political turnover are more inclined to issue CSR reports voluntarily, supporting the political connection demand hypothesis rather than the political cost hypothesis. Such effects are more prominent when the political turnover is unexpected and successors are non-locals. Meanwhile, non-SOEs, not politically connected enterprises, and firms located in low government efficiency areas are more likely to issue CSR reports. Further analysis shows that these firms disclosed CSR information experiencing political turnover fail to ensure the reporting quality but can obtain resources in the future. Overall, we highlight that CSR disclosure is a way for firms to establish political connections with politicians. Our study sheds light on the determinants of voluntary CSR disclosure from a political perspective.

Based on the background of China's pilot low-carbon city initiative in 2010, 2012, and 2017, this article captures the exogenous change of enterprise labor structure based on A-share listed companies from 2007 to 2019 in Shenzhen and Shanghai Stock exchanges. With the integration of macro data on the city level and micro data on the enterprise level, adopting the time-varying difference-in-differences (DID) model, we found that 1) China's pilot low-carbon city initiative can significantly promote the upgrading of enterprise labor structure; 2) China's pilot low-carbon city initiative can significantly increase R&D investment of listed companies, suggesting that R&D investment is a channel for the impact of China's pilot low-carbon city initiative on enterprise labor structure in the pilot cities; 3) the heterogeneity analysis shows that the labor structure of the state-owned listed companies has been optimized significantly, while the labor structure of the non–state-owned listed companies is not significant. Meanwhile, the labor structure of the listed companies under high-quality government control has been optimized significantly, while the labor structure of the listed companies under low-quality government control is not significant. Overall, our study shows that the pilot low-carbon city initiative has played a governance role in China and optimized enterprise labor structure.

Our paper examines the effect of CEOs' political promotion incentives on the value of corporate cash holdings using the setting of state-owned enterprises (SOEs) in China. We find that the value of cash holdings is significantly decreased when CEOs in SOEs receive political promotion. This effect is more pronounced when these CEOs are subject to less monetary and equity incentive, more promotion pressure, higher political rank, and less external supervision. Further analysis shows that these CEOs are more likely to engage in social activities and vanity projects rather than paying cash dividends and increasing innovation investments to create shareholder wealth. Overall, our study shows that political promotion incentives bring new agency conflicts between CEOs and shareholders, and these CEOs are driven by personal benefits to exploit cash resource, resulting in a valuation discount for cash holdings.

This paper explores the effect of China’s emission trading scheme (ETS) pilot policy implemented during 2013-2014 on carbon emission performance. Adopting the Difference-in-Difference (DID) model, we find that: 1) China’s ETS pilot policy can significantly improve the carbon emission performance of listed companies in the pilot provinces. 2) The heterogeneity analysis shows that the carbon emission performance of listed companies in the eastern coastal pilot areas has improved significantly, which is not significant in the central and western pilot areas. 3) We find that China’s ETS pilot policy can significantly improve innovation capabilities of listed companies, suggesting that innovation is a channel for the impact of the China’s ETS pilot policy on carbon emission performance in the pilot provinces. Overall, our study shows that ETS pilot policy has played a governance role in China and improved carbon emission performance. We further highlight some important policy implications with respect to helping companies save energy and reduce emissions, and promoting the further improvement of China’s ETS pilot policy.

We use the share pledge context in China to examine how affiliated analysts whose securities companies are pledgees of share pledge firms issue stock recommendations on these listed firms. We find that their recommendations are more optimistic than those of non-affiliated analysts, and they are more likely to issue Buy and Add recommendations, suggesting that they issue optimistic rating reports for share pledge firms due to their conflicts of interest. We also find a dynamic adjustment in the stock recommendation behavior of these analysts, and their probability after issuing optimistic stock recommendations is significantly reduced before and after the years that the affiliation relationship between them and share pledge firms both began and ended. These affiliated analysts continue to issue optimistic stock recommendations after visiting the share pledge firms if they work in the same location as the firms, or if they are star analysts among New Fortune's "top five analysts," and when the information transparency of the share pledge firms is higher. In addition, the optimistic stock recommendation behavior of affiliated analysts is more significant in our sample of firms with high share pledge ratios and downward stock price pressure. The earnings forecast quality of affiliated analysts is also found to be lower, and they are less inclined to downgrade stock recommendations for these share pledge firms. Buy recommendations issued by both non-affiliated and affiliated analysts can bring cumulative excess returns in the short event window, but those issued by affiliated analysts are significantly negative in the long-term event window, and significantly lower than those issued by non-affiliated analysts. Overall, our study shows that affiliated analysts issue optimistic rating reports on share pledge firms due to conflicts of interest, which leads to decision-making bias in investors and thus decreases the stock price crash risk of the firms. Our findings further reveal the economic consequences of share pledging and extend our understanding of the behavior of analysts in a conflict of interest situation from the share pledge perspective.

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