We examine the effect of China Securities Investor Services Center (ISC) shareholding, a joint public-private enforcement mechanism, on mergers and acquisitions (M&As). Employing a difference-in-differences (DID) analysis, we demonstrate that acquirers whose shares are owned by the ISC (ISC acquirers) encounter more price-related M&A withdrawals, more bid revisions, and shorter deal durations. Such effects are mainly driven by weak investor protection environments, lack of external supervision, and information asymmetry. Mechanism analysis indicates that ISC shareholding has monitoring and demonstration effects by drawing public attention and encouraging minority shareholder activism. Furthermore, ISC acquirers experience positive market reactions on withdrawal announcements and better long-term performance, such as higher stock returns, lower goodwill impairment, and better financial performance. Overall, our study suggests that as a joint public-private enforcement mechanism, ISC shareholding can protect minority shareholders' interests, especially when the investor protection is weak. Our findings enrich the understanding of the enforcement mechanisms in emerging markets.

We examine whether and how corporate derivative use affects analysts' earnings forecast accuracy based on Chinese A-share listed firms during 2010 and 2020. We find that derivative users experience less accurate forecasts, compared to non-users. Such effects are more pronounced for SOEs and firms without risk exposure. Mechanism tests suggest that the negative effects of derivatives on analysts' forecasts are primarily due to ineffective hedging, high complexity and insufficient disclosure. Further analysis indicates that the implementation of Hedging Accounting Standards, the provision of management forecasts, and analysts’ capabilities help to mitigate the adverse impact of derivative use on analysts' forecasts.

Using manually collected firm-level data on foreign subsidiaries, we examine the impact of internationalization on analysts’ earnings forecast bias in Chinese corporations. We find that analysts’ earnings forecast bias is stronger among multinational firms when compared with domestic firms, and the higher the level of internationalization, the greater the bias in analysts’ earnings forecasts. Various methods, such as the Heckman two-stage least squares, propensity score matching, and difference in difference tests, are employed to ensure the robustness of our results. The mechanism analysis indicates that oversea business complexity, information asymmetry and analysts’ experience are critical factors that moderate the relationship between international diversification and forecast bias. These findings have important implications for multinational corporations, analysts, and investors.

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.

This study interprets enterprise pollution reduction from the perspective of the financial market. Using data on Chinese industrial enterprises, this paper tests the impacts of bank competition on enterprise pollution emissions. The findings show that bank competition has a significant total effect and technique effect on pollutant reduction. Bank competition reduces pollutant emissions by easing financing constraints, increasing the implementation of internal pollution control, and improving the efficiency of bank credit resource allocation. Further research shows that both bank type and bank branch level could moderate the pollution reduction effects and such effects vary a lot under different environmental regulation intensities. We expand the relevant literature on the economic consequences of banking competition and have certain theoretical and practical reference significance for the future reform of the banking industry.

Purpose Top executive hubris is associated with positive/negative outcome. Little is known about the antecedent of hubris in top management team (TMT) and how they can be weakened to capitalize on TMT size and market complexity. This paper aims to address these issues. Design/methodology/approach This study draws on the social information processing theory. Subsequently, it proposes and tests an inverted U-shaped relationship between task-related faultlines and top executive hubris. Top management team size and complexity can weaken the relationship between them. Panel data were collected longitudinally from 2011 to 2016 on China's listed firm on growth enterprises board. Findings Hierarchical regression analyses indicate that medium task-related faultlines experience stronger than weak and strong faultlines. TMT size and market complexity can weaken the inverted U-shaped relationship between them. Originality/value This study provides pioneering evidence for an inverted U-shaped relationship between task-related faultlines and top executive hubris. These findings inform practice by suggesting a tipping point of team faultlines.

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 chapter investigates the institutional background, practice and academic research of investment in China. As a transition country, the institutional background of China is quite different from developed countries. The primary role of top management in State-owned enterprises in making investments has not been completely established, and the government still plays an important role in intervening corporate investments through government planning and many other indirect macroeconomic controls. Investment practice in Chinese enterprises currently is characterized with the rapid growth of enterprise investment and the low-return on investment. Chinese scholars have conducted both theoretical and empirical researches on enterprise investment efficiency, determinants and economic consequences of corporate investment. These studies find that corporate investment efficiency in China is generally low, demonstrating either under- or over-investment. Such inefficient investment impairs corporate value. Moreover, government intervention, political connections, agency problem, information asymmetry as well as market competition could directly or indirectly influence corporate investment decision. We expect future research on corporate investment in China will be characterized with continuous development of new research perspectives, the introduction of new methodology and the extension of research objects to unlisted companies.