China A-share Research Articles

Compromise or Struggle: Extreme Temperatures and Environmental Corporate Social Responsibility in China

This article uses China's A-share listed companies from 2008 to 2020 as a sample to examine the impact of extreme temperatures on environmental corporate social responsibility (ECSR). The results show that extreme temperatures can significantly enhance companies' performance of ECSR. Extreme temperatures primarily compel companies to engage in ECSR activities by increasing the costs of debt financing, reducing income levels, and intensifying government environmental regulations, thereby mitigating the negative impact of extreme temperature events on corporate production and operation activities. Further research found that in SOEs, companies with high government subsidies, and companies with executives with overseas experience, extreme temperatures have a more significant role in promoting ECSR. This article provides a novel perspective and micro-evidence for studying the external driving factors of ECSR, and provides useful enlightenment for managing climate risks and realizing the green and low-carbon transformation of our country's economy.

Impact of equity pledges on analysts earnings forecasts

This study conducts an in-depth analysis of the relationship between the equity pledge phenomenon and analysts’ earnings forecast behavior using China's A-share listed companies from 2017 to 2022 as the research sample. Findings indicate that the existence of equity pledges increases the error range, optimism, and disagreement among analysts when making earnings forecasts. However, for non-state-owned enterprises, companies with a relatively high proportion of institutional shareholders, and those with better transparency, the impact of equity pledges on analysts’ forecasting behavior shows a weakening trend.

Joint Learning of Volume Scheduling and Order Placement Policies for Optimal Order Execution

Order execution is an extremely important problem in the financial domain, and recently, more and more researchers have tried to employ reinforcement learning (RL) techniques to solve this challenging problem. There are a lot of difficulties for conventional RL methods to tackle the order execution problem, such as the large action space including price and quantity, and the long-horizon property. As naturally order execution is composed of a low-frequency volume scheduling stage and a high-frequency order placement stage, most existing RL-based order execution methods treat these stages as two distinct tasks and offer a partial solution by addressing either one individually. However, the current literature fails to model the non-negligible mutual influence between these two tasks, leading to impractical order execution solutions. To address these limitations, we propose a novel automatic order execution approach based on the hierarchical RL framework (OEHRL), which jointly learns the policies for volume scheduling and order placement. OEHRL first extracts the state embeddings at both the macro and micro levels with a sequential variational auto-encoder model. Based on the effective embeddings, OEHRL generates a hindsight expert dataset, which is used to train a hierarchical order execution policy. In the hierarchical structure, the high-level policy is in charge of the target volume and the low-level learns to determine the prices for a series of the allocated sub-orders from the high level. These two levels collaborate seamlessly and contribute to the optimal order execution policy. Extensive experiment results on 200 stocks across the US and China A-share markets validate the effectiveness of the proposed approach.

Does enterprise digital transformation contribute to green innovation? Micro-level evidence from China

The synergy of digitalization and greening has emerged as a prominent means to achieve the goal of “carbon peaking and carbon neutrality”. Given its significant contribution to carbon emissions, the impact of digital transformation on green innovation in manufacturing enterprises remains a longstanding research hotspot. Therefore, based on the data from China A-share listed manufacturing companies spanning from 2007 to 2022, this paper empirically analyzes the influence and mechanism of digital transformation on green innovation. Our findings reveal that digital transformation can significantly promote green innovation in manufacturing enterprises, with a particularly pronounced effect on substantive green innovation. These conclusions withstand rigorous robustness tests. Mechanism analysis shows that digital transformation can facilitate green innovation by improving internal control quality and fostering industry-university-research cooperation. Moreover, our moderation analysis reveals that both equity incentives and compensation incentives strengthen the positive relationship between digital transformation and green innovation in manufacturing enterprises. Heterogeneity analysis proves that digital transformation exerts a more pronounced impact on green innovation of state-owned manufacturing enterprises, non-heavily polluted manufacturing enterprises, and enterprises located in regions with strong intellectual property protection. Furthermore, the transformation of digital underlying technologies is more conducive to fostering green innovation compared to practical application transformation. Subsequent investigation into the economic and social effects of green innovation indicates that it effectively reduces pollution emissions from manufacturing enterprises without compromising their development. Additionally, the emission reduction and income-generating effect resulting from digital transformation primarily manifest through substantive green innovation. This research expands upon the theory regarding the impact of digital transformation on green innovation in micro-manufacturing enterprises, providing empirical support for facilitating low-carbon transformations among manufacturing enterprises under the goal of “carbon peaking and carbon neutrality”.

The effect of environmental information disclosure on environmental rating divergence

This study examine the relationship between environmental information disclosure and environmental rating divergence by empirically analyzing China's A-share listed companies from 2011 to 2020. The findings reveal a positive correlation between environmental information disclosure and rating divergence. When regulatory authorities tighten the norms for environmental information disclosure, the impact of corporate environmental disclosure on rating divergence is significantly reduced. Heterogeneity analyses indicate that the variations in environmental information disclosure are less pronounced among large-scale firms and state-owned enterprises. Additionally, audits conducted by the Big Four and the professional board contribute to mitigating the divergence in environmental information disclosure.

Relationship Between ESG and Corporate Innovation Investment - Based by A-share Listed Companies

Abstract: ESG criteria are pivotal factors in assessing corporate performance, influencing not only a company's social reputation and investor trust but also its innovation investment decisions. Recognizing the crucial role of innovation in enterprise growth and its linkage to ESG factors, This essay examines the association between company innovation investments and ESG levels objectively. Utilizing China's A-shares as the research sample, an empirical analysis is conducted through a linear regression model. The findings conclusively reveal a notable correlation between ESG performance and the level of enterprise innovation investments. Specifically, companies with stronger ESG performance tend to invest more heavily in R&D and innovation. Conversely, enterprises with higher levels of R&D and innovation often exhibit superior ESG standards. This study underscores the mutual reinforcement between ESG practices and corporate innovation, emphasizing the importance of integrating ESG considerations into business strategies for sustainable growth and innovation.

Research and Analysis of Connected Transactions and Firms' Listing Denials

Abstract: In recent years, IPO declarations of proposed listed companies in China's A-share market have been rejected more and more frequently due to the issue of connected transactions, which has aroused concerns. The purpose of this paper is to explore in depth the reasons for the rejection of the A-share listing of proposed listed companies and to propose countermeasures to solve the problem of abnormal connected transactions. This article first defines the scope of connected transactions and their problems, analyzes some cases of proposed listed companies being rejected due to connected transactions in recent years, and deeply explores the problems of hidden connected relationships, connected transaction fraud, and connected transaction de-connectedness, etc., and demonstrates the specific manifestations and impacts of these problems through example analysis. Given the findings, the article puts forward a series of recommendations and insights, including maintaining the operational independence of enterprises, improving the sustainable profitability of enterprises, and tightly controlling the truthfulness of corporate information disclosure. These suggestions aim to help enterprises avoid the problems of connected transactions, enhance the success rate of IPO, and promote the healthy development of the capital market.

Market integration and the risk of corporate leverage manipulation: Evidence from China

We examine the impact of market integration on the risk of corporate leverage manipulation, using data on China's A-share listed firms. Our results indicate that market integration reduces this risk. This effect is more pronounced for firms in the Midwest, small firms, and those receiving less analyst attention. We also find that market integration promotes fair competition, reduces financing constraints, and improves information transparency, thereby reducing the risk of corporate leverage manipulation. This study provides a useful reference for promoting the construction of a unified domestic market and maintaining stability in the financial system.

Government green procurement and corporate ESG performance

This study utilizes data from China's A-share listed companies from 2009 to 2022 and manually collects government green procurement lists published on the Chinese government procurement website. By matching this data with listed companies, we employ a multi-period Difference-in-Differences (DID) model to examine the impact of a firm's inclusion in government green procurement lists on its Environmental, Social, and Governance (ESG) performance. We find that government green procurement significantly improves firms' ESG performance. In the mechanism analysis, we find that executive green perceptions and media and analyst attention amplify the positive impact of government green procurement on firms' ESG performance. Through the heterogeneity analysis, we find that government green procurement promotes ESG performance more significantly when the listed company is a state-owned enterprise, and this promotion is more obvious in central state-owned enterprises. In addition, we find that government green procurement enhances ESG performance more significantly when the company is located in a region with higher levels of market integration. Further research find that government green procurement effectively inhibit “greenwashing” behavior and reduce the probability of negative events. Our findings provide important micro-empirical evidence for understanding the effects of market-based policy instruments on corporate ESG performance and contribute positively to the practice of improving corporate governance capabilities.

Common institutional ownership and corporate cost stickiness —Evidence from China

This study examines the impact of common institutional ownership (CIO) of firms on their degree of cost stickiness. Taking the data of China's A-share listed companies during the period 2007–2022 as sample, we find that firms with common institutional ownership (CIO) have a lower degree of cost stickiness. Mechanism test find that CIO mitigate the degree of cost stickiness by improving the governancing and monitoring efficiency and by promoting the transfer of information among portfolio firms. Heterogeneity tests provide evidence that the positive relation is stronger among non-state-owned firms and firms in monopolistic industries.

Corporate financial digitalization, internal governance, and social trust

Taking advantage of a comprehensive sample of China's A-share listed companies from 2012 to 2022, this research examines the relationship between Corporate financial digitalization and a society's trust in firms. We provide robust evidence that the level of financial digitalization is positively related to social trust. Moreover, we document that the positive relationship is more pronounced for firms with effective internal governance because it can mitigate conflicts of interests between insiders and outsiders. Our findings are robust to a battery of sensitivity tests. Overall, this research contributes to the fast-growing literature on financial digitalization and social trust as well as provides valuable practical implications for investors, managers, and policymakers.

Policy burden and technological innovation of state-owned enterprises

State-owned enterprises (SOEs) possess unique characteristics and play pivotal roles within the economy, necessitating them to bear significant policy burdens. Based on China's A-share listed firms from 2008 to 2021, we empirically analyzed how the policy burden influences SOEs’ capacity for technological innovation. Unlike conventional views, we found that the policy burden significantly improves SOEs’ innovation capability, and this conclusion holds true even after multiple robustness tests. Mechanism research shows that government subsidies and positive media coverage are the transmission pathways for policy burdens to promote innovation in SOEs. Further research revealed that the policy burden is more important in promoting innovative advancement in central and competitive SOEs. Our conclusion confirms the positive aspects of the policy burden and contributes to research on the innovative effects of the policy burden on SOEs.

Unlocking the Reversal Anomaly in the A-share Market: Insights from Marginal Funds of Institutional Investors

Fama's Efficient Market Hypothesis (1970) posits that all valuable information is swiftly reflected in stock prices in mature markets. However, anomalies like momentum and reversal effects persist in China's A-share market. This study investigated the short-term reversal effect using turnover rates and institutional investor marginal funds. Significant reversals were found in high-turnover stocks due to speculative trading and deviations from intrinsic value. Institutional investors played a crucial role in correcting mispricing. The Institutional Holding Change Ratio (IHCR) demonstrated that institutional investors' marginal funds strongly explain the reversal anomaly and act as a style factor with positive returns. This research highlights the impact of institutional and individual investor behaviors on market efficiency and investment strategies.

Government investment in science and technology, digital transformation, and innovation in manufacturing enterprises

This study examines the relationship between government investment in science and technology (S&T), manufacturing enterprises’ innovation, and the moderating effect of digital transformation based on data from China's A-share listed manufacturing enterprises from 2011 to 2022. Findings indicate that government investment in S&T has an inverted U-shaped effect, where digital transformation mitigates the incentive distortion. The conclusions provide a valuable reference for strengthening resource allocation while augmenting enterprise innovation theories. The findings serve as a practical guide for manufacturing enterprises’ innovation in the digital era.

Monetary policy uncertainty and financial risk: The mediating role of corporate investment

Monetary policy uncertainty has increased due to the rapidly changing economic environment and international situation in recent years. This study examined the relationship between monetary policy uncertainty and corporate financial risk based on a large sample of China's A-share listed companies from 2012 to 2022. Findings indicate that monetary policy uncertainty was negatively correlated with financial risk. The results remained robust after sensitivity analyses. We found that corporate investment decisions exhibited a potential economic channel underlying the negative relationship between monetary policy uncertainty and corporate financial risk. This study augments the literature on monetary policy uncertainty and financial risk, providing practical implications for investors, managers, and policymakers.

An Empirical Study on Asset Pricing Models Based on The Chinese A-Share Market

Based on the analysis of the A-share markets in Shanghai and Shenzhen Stock Exchange from 2000 to 2023, this paper systematically evaluates the applicability and explanatory power of the Capital Asset Pricing Model (CAPM), the Fama-French Three-Factor Model (FF3) and the Fama-French Five-Factor Model (FF5) in the Chinese market. The study finds that although CAPM has some explanatory power in the early stage, the three-factor and five-factor models can better explain the cross-sectional changes in stock returns as the market develops. In the descriptive statistics, each factor's volatility and correlation reveal the Chinese market's unique characteristics, such as the relative strength of small-cap and growth stocks. In the regression analysis, the results of the Fama-MacBeth regression showed that the significance and explanatory power of the market factor, size factor and value factor were different in different models. Further robustness analysis reveals the COVID-19's impact on the model's performance through the sub-period analysis. This paper provides a new perspective on understanding the asset pricing of China's A-share market and a theoretical basis for investors' investment decisions. It also points out the limitations of existing models in explaining emerging market equity returns. It suggests that future research can deeply explore the performance of more factors in different market environments.

Impact of Equity Liquidity on Corporate Value—— Based on The Empirical Analysis of China's A-Share Listed Companies

Since the establishment of the Shanghai and Shenzhen Stock Exchange, China's stock market has experienced a development process from scratch, from small to large, and from weak to strong. During this period, the liquidity of China's stock market has increased significantly. The stock market can affect the real economy by changing the motivation and influencing the behavior of enterprises, which is crucial to economic development. Many scholars at home and abroad have studied the impact of stock liquidity on enterprise value from different perspectives. This paper finds that the stock liquidity has a significant positive impact on the value of enterprises. The higher the level of stock liquidity, the higher the enterprise value, and the company's equity structure can play a role as an intermediary variable in the process of stock liquidity affecting the enterprise value.

Internationalization speed and corporate long-term performance: Exploring the inverted U-shaped relationship

Using data from China's A-share listed companies spanning 2002 – 2022, our research uncovers an intriguing inverted U-shaped dynamic between the velocity of firms' internationalization and their long-term performance. It reveals that while an initial acceleration in internationalization bolsters performance, an overly rapid pace can subsequently lead to a deterioration. Critically, the proportion of independent directors acts as a moderating factor, as a higher concentration of these directors facilitates a balance between the speed and risks associated with internationalization, ultimately optimizing long-term corporate performance. These findings offer vital insights for companies navigating their internationalization strategies and emphasize the importance of robust corporate governance.

Financial subsidies, digital finance, and corporate industrial investment level

This study examined the impact of digital finance and financial subsidies on enterprises’ industrial investment based on data from China A-share listed companies in Shanghai and Shenzhen from 2011 to 2020. Results show that the development of financial subsidies and digital finance positively impact industrial investment, further easing the financial constraints of enterprises. Based on results, suggestions such as rational resource usage and a clear investment direction are made.

Litigation risk and corporate cash holdings: The moderating effect of CEO tenure

Cash holdings represent a crucial decision that can affect the efficiency of a firm's cash usage and, ultimately, shareholder value. Taking advantage of a comprehensive sample of China's A-share listed companies from 2012 to 2022, this research examines the relationship between litigation risk and corporate cash holdings. In line with the precautionary motive, we discover robust evidence that litigation risk is positively correlated with corporate cash holdings. Moreover, we document that the positive relationship is more pronounced for firms with long-tenured CEOs, as they are more risk averse. Our findings are robust to a series of sensitivity analyzes. Overall, this study contributes to the literature on litigation risk and corporate cash holdings, and generates valuable practical implications for investors, managers, and policymakers.