China A-share Research Articles

Double-edged sword of industrial internet of things: Empirical evidence from green transformation of enterprises

The industrial revolution based on the Internet of Things brings new opportunities and challenges for enterprises' green and sustainable development. Therefore, this study explores the relationship between the Industrial Internet of Things (IIOT) and the Green Transformation of Enterprises (GT) based on the data of China's A-share listed companies from 2009 to 2023 using two-way fixed, mediated effect, and moderated effect models. The results show that for every unit increase in IIOT, the GT increases by 28.89 percent on average, indicating that IIOT can break down information barriers and effectively promote GT. However, after disaggregating the GT, it was found that the IIOT guided companies to implement the Symbolic Green Transformation (SGT) instead of adopting the Realistic Green Transformation (RGT). This strategic choice preference is more pronounced among firms that are larger, in energy-intensive industries, in regions with weaker environmental regulations and higher levels of development. The intermediary mechanism test proved that the IIOT can drive firms to implement comprehensive GT through paths that enhance investment attractiveness, productivity, technological innovation, and pay gaps. In particular, the masking effect reminds us that smart technology is a “double-edged sword”. The negative effects of smart technologies hinder the implementation of RGT. Further analysis reveals an inverted U-shaped relationship between IIOT and RGT preferences. In addition, in companies that focus on Environmental, Social and Governance (ESG) performance and avoid financial speculation, the dark side of intelligent technology is suppressed. The findings of this study enrich the research scope of smart technology, GT, and provide important insights for enterprises in emerging economies to rationally utilize IIOT to seek green and sustainable development under the wave of rapid development of smart technology.

Is human capital risk lower in state-owned enterprises? — A textual analysis based on China's listed company annual reports

Based on the annual reports of China's A-share listed companies from 2007 to 2020, this paper constructs a human capital risk index of China's listed companies through the methods of machine learning and explores the impact of state ownership on corporate human capital risk. The results show that compared with non-state-owned enterprises (non-SOEs), state-owned enterprises (SOEs) have lower human capital risk in China. Mechanism tests suggest that SOEs can offer higher compensation and benefits and maintain more stable employment relationships, which reduce human capital risk significantly. Additionally, this effect is more pronounced during periods of high economic policy uncertainty, in regions with weaker talent policies, and in areas with a lower proportion of aging labor force. The study also reveals that SOEs have lower human capital attraction and human capital retention risk than non-SOEs. Furthermore, SOEs have more educated and skilled employees, which contributes to higher human capital. Last, this study finds state ownership enhances innovation output, total factor productivity, and economic value added by mitigating human capital risk.

A Study of Stock Returns in China's A-share Market Based on the Fama-French Three-factor Model

In recent years, the world's financial boom, all kinds of financial products are emerging, how to rationalize the pricing of financial assets, is a new test of asset pricing theory. The capital asset pricing model of the 1970s, although set up rigorously, many studies have shown that it is unable to fully explain the stock returns. In view of this, academics began to explore other variables affecting stock returns and gradually focused on multifactor models. In this regard, the Fama-French three-factor model stands out. In addition to focusing on the impact of the market premium factor on stock returns, it also simultaneously takes into account that the market capitalization factor and the book-to-market ratio factor also have a significant impact on stock returns. Although the explanatory power of the Fama-French three-factor model on stock returns has been verified in major developed capital markets abroad. However, when applying the three-factor model to the Chinese market, the views of various scholars are different. This paper examines the data of SSE A-shares for the past 10 years and tests the adaptability of the three-factor model in the Chinese market with monthly data, and finds that the market premium factor and the market capitalization factor are significantly effective in explaining stock returns, in contrast, the book-to-market ratio factor is relatively weak in its ability to explain stock returns.

Board Gender Diversity, Corporate Productivity and ESG Performance

This study is based on the two major strategies of new productivity and corporate ESG development, using data from China's A-share listed companies from 2011 to 2022 to empirically test the impact of female directors on corporate ESG performance, and the impact of corporate new productivity development on both. potential role. Research results show that the presence of female directors has a positive effect on improving corporate ESG; the development level of corporate new productivity can strengthen the positive impact of female directors on corporate ESG. In addition, further heterogeneity analysis found that in companies with strong profitability, female directors and corporate new productivity have a more significant role in promoting ESG.

The impact of digital finance on firm's inefficient investment: Evidence from Chinese A-share listed companies

Using data from China's A-share market, this study identifies that regional digital finance development significantly increases corporate investment inefficiency. This is because digital finance increases enterprises’ access to finance by reducing financing constraints. Digital finance development materially exacerbates corporate investment inefficiency by loosening financial regulations. The deterioration is not significant amid tightening financial regulations. While deterioration is significantly positive in non-state-owned enterprises (non-SOEs), it is not significant in state-owned enterprises (SOEs). The findings suggest that the government and firms must consider consequent investment risks amid digital finance development.

The mechanism of supply chain efficiency in enterprise digital transformation and total factor productivity

Digital transformation (DT) represents a crucial measure for enterprises to enhance production efficiency. Supply chain construction has become a key strategic focus, and its efficient operation serves as a vital safeguard for elevating overall production efficiency within the enterprise. Based on the data of China's A-share listed enterprises from 2001 to 2022, this paper employed econometric models to investigate the impact of enterprise DT on total factor productivity (TFP), with a particular emphasis on examining the mechanistic role played by supply chain efficiency (SCE). The research findings reveal that: (1) Enterprise DT can significantly enhance TFP. The robustness of these results persists even after undergoing a series of endogeneity tests. (2) SCE plays a crucial mechanistic role in the impact of enterprise DT on TFP. The research results have been fully empirically tested, enterprises can significantly promote the inventory turnover with the help of digital technology, and then improve the TFP. The research findings and corresponding policy recommendations can provide a theoretical basis for enterprises in formulating DT strategies and delineating the supply chain development direction. This holds significant practical implications for enhancing enterprise production efficiency and achieving carbon neutral goal.

Only strong short-term contrarian effect exists in Chinese stock market: The role of the T+1 trading mechanism

We use an alternative sorting method which groups stocks into return intervals rather than percentiles to test the relationship between the T+1 trading mechanism and the short-term contrarian effect in the China's A-share market. Our sample period is from January 2010 to December 2020. China's stock market exhibits a significant contrarian effect in daily, weekly, and monthly frequencies, while the momentum effect is not significant. This paper argues that the special T+1 trading mechanism of China's stock market is the reason for this typical anomaly. The essence of the T+1 trading mechanism is a marketability put option, and this paper takes the volatility as the core of the analysis. This study shows that stock market volatility has a significant impact on the overnight return, with higher volatility leading to a higher discount. Through different daily, weekly, and monthly frequency groupings, the study finds that the winner's portfolio would reverse significantly in the next period. Under the T+1 mechanism, the high return stock portfolio is also characterized by high volatility and high turnover. The contrarian effect of China's stock market is unique in that both the winner's portfolio and the loser's portfolio will fall, but the winner's portfolio will fall more. The reversal of the winner's portfolio dominates in the entire market. The paper provides a new explanation for the contrarian effect and adds a unique explanation to the study of worldwide contrarian effect.

Emerging Stock Market Integration and Corporate Bond Credit Spreads

ABSTRACT Stock market integration into the world financial markets has been a common and important practice in emerging countries over the past several decades. Relying on the staggered inclusion of China A-shares into MSCI indexes, we employ a difference-in-differences analysis and find that bond credit spreads of firms significantly decrease after the firms’ stock securities are included in the MSCI indexes. We also find that stock market integration reduces credit spreads by improving the stock liquidity, firm reputation, and alleviating information asymmetry. The effect is more pronounced among firms with greater financial constraints or higher performance volatility. Overall, our study provides evidence that emerging stock market integration can generate bond market benefits for firms.

New quality productivity and environmental innovation: The hostile moderating roles of managerial empowerment and board centralization

As new quality productivity (NQP) emerges as a rising star of productivity that can effectively leverage technological innovation and sustainability, this study aims to explore the relationship between NQP and environmental innovation, with a particular focus on the roles of managerial empowerment and board centralization within the context of China A-share listed companies. Utilizing the entire sample of China A-share market from 2013 to 2022, the study analyses the effectiveness of various dimensions reflecting innovation engagement among Chinese listed companies. For measuring NQP, the entropy method is employed to calculate the weights. By controlling for industry and year effects, the study examines both the main and moderating effects of managerial empowerment and board centralization. Additionally, heterogeneity tests, robustness checks, and two-stage least squares (2SLS) estimation were conducted to address endogeneity concerns. The results demonstrate that NQP significantly enhances environmental innovation, with managerial empowerment supporting this positive effect and board centralization obstructing it. The positive effect of NQP is particularly evident in state-owned enterprises, while in heavily polluting industries, the anticipated positive moderating effect of top managers disappears due to strict regulatory environments. Furthermore, board centralization negatively moderates environmental innovation, especially in lightly polluting sectors where internal governance is more sensitive. The study underscores the importance for policymakers to tailor regulations that balance managerial empowerment and board centralization to enhance the transformation of NQP into environmental innovation. Future research is needed to further investigate different background settings and the mechanisms through which NQP influences sustainability.

Environmental protection tax law and corporate financial fraud: Evidence from listed firms in China

Taxation constitutes a fundamental element in the administration of a country. The environmental protection tax, an essential green tax system in China, offers enhanced flexibility compared to regulatory measures predicated on administrative orders. It performs a crucial and substantial role in enabling organizations to progress toward superior growth. This research endeavor aims to analyze the impact of green taxation on corporate financial misconduct. Data about China's A-share listed companies from 2011 to 2022 is analyzed to achieve this. A difference-in-differences model is developed by integrating the 2018 Environmental Protection Tax Law implementation into a quasi-natural experiment. Implementing the Environmental Protection Tax Law reduces the quantity and propensity of financial fraud within organizations. The results of the mechanism test suggest that the enforcement of the Environmental Protection Tax Law may hinder the involvement of businesses in financial misconduct through the promotion of information transparency and the strengthening of managerial pressure. The effect of enforcing the Environmental Protection Tax Law on mitigating corporate financial fraud is more significant for organizations that have adopted equity incentives for their CEOs and have greater degrees of digitization, according to a heterogeneity analysis.

Do controlling shareholders' equity pledges exacerbate the stock price crash risk? -A study based on margin trading and securities lending transactions in China's securities market

It clarifies the influence mechanism of controlling shareholders' equity pledges, margin trading and securities lending, and stock price crash risk from the perspective of corporate governance, etc. This paper establishes a main and interaction effect regression model to empirically test the impact mechanism of controlling shareholders' equity pledge on stock price crash risk and the moderating effect of margin trading and securities lending in the process of this impact based on the measures of stock price crash risk, controlling shareholders' equity pledge level, as well as margin trading and securities lending transaction size, using China's A-share listed companies from 2010 to 2020 as the sample. It finds that: (i) The higher the controlling shareholder's equity pledge ratio of listed companies, the lower the stock price crash risk. (ii) There is no significant effect of margin trading and securities lending transactions on stock price crash risk. (iii) Securities lending transactions have a positive moderating effect in the impact of controlling shareholders' equity pledges on stock price crash risk, but the moderating effect of margin trading transactions is insignificant.

Analysis of Existing Problems in Chinese A-share Market and Relevant Solutions

China's A-shares have developed rapidly in recent years, with huge market volume and scale, and have become an important direction for corporate financing and mass investment. There are still many problems in the A-share market, which will affect the development of the A-share market. There is a problem of slow delisting in the A-share market, which will lead to bad enterprises not being cleared in time, and the frequency of market update is not enough, which needs to be alleviated by further improving the legal system and changing policies. Some sectors of the A-share market have the problem of downward market, resulting in financing difficulties for companies in these sectors and unable to develop normally. This problem can be fixed by increasing the proportion of companies that pay dividends to attract investors. Listed companies in the A-share market may also have goodwill problems, which will seriously affect investor confidence and reduce the amount of investment. It is necessary to improve the goodwill accounting policy, so that goodwill can be correctly measured and reflected. Finally, A-share market funds have the problem of homogeneity, which leads to vicious competition in a single sector and is unfriendly to small and medium-sized enterprises. The government can mitigate such problems by encouraging innovation and regulating the market, diversifying stock development. It is necessary to study the problems of the A-share market and give solutions of the existing problems, which can make the country, enterprises and investors have a more intuitive understanding of the market so they can make corresponding responses to market changes.

Decoding the influence of servitization on green transformation in manufacturing firms: The moderating effect of artificial intelligence

This research addresses three crucial dimensions in operations management: the servitization of manufacturing, the utilization of artificial intelligence (AI) platforms, and green transformation. Employing the by-production method, we construct a metric for green transformation applicable to listed firms. Our comprehensive analytical framework integrates the resource-based view and information asymmetry theories, enabling systematic investigation into the influence of manufacturing servitization on firms' green transformation. In addition, we examine the moderating effect of AI platforms on the execution of servitization strategies. The empirical foundation of our study is an annually updated dataset of 554 manufacturing firms listed on China's A-share market. Our findings reveal a strong positive correlation between the deployment of servitization strategies and the green transformation of firms. This association withstands multiple robustness tests, including core variable substitution, outlier removal, and adjustments in clustering standard errors. Our research uncovers notable nuances. The effect of servitization on green total factor productivity is more visible for eastern and central China firms. Also, state-owned enterprises demonstrate a more conspicuous influence from servitization strategies. However, we observe a slight diminishing of this effect in firms audited by the Big Four. An essential contribution of our study is the illumination of the role AI platforms play in enhancing the efficacy of servitization. These AI platforms facilitate the creation of tailored solutions that curtail resource wastage, thus amplifying the positive effect of servitization strategies on green transformation.

Digital age imperatives and firm internal control quality: evidence from CEOs personal trait and type of state-owned enterprises

PurposeIn the context of an evolving digital-based global economy, this study aims to investige the impact of digital transformation (DT) on a firm’s internal control (IC) quality. It also explores how the personal traits of (CEOs) – such as age, gender and educational background – intersect with DT to shape the IC quality in various types of state-owned enterprises (SOEs).Design/methodology/approachThe study uses the data from China A-shares non-financial enterprises, listed on Shanghai and Shenzhen stock exchanges between 2007 and 2020. Using the fixed effect regression method alongside various statistical techniques, such as propensity score matching, alternative analysis and instrumental variables analysis, yields robust findings. These methods effectively address issues related to functional form misspecification and potential biases from omitted explanatory variables.FindingsThe findings reveal a positive impact of DT on firm IC quality, and this impact is more pronounced in firms when the CEO is female, young and possesses a higher level of education. Notably, the study also distinguishes between central and local state-owned enterprises (SOEs), highlighting that DT has a greater influence on IC quality in central SOEs, where CEOs often have higher political ranks and closer to government monitoring. Overall, the findings are robust and consist to alternative variable and other statistical methods.Research limitations/implicationsFollowing are the significant implications for both academia and business. First, firms that effectively adopt DT to enhance IC not only gain a strategic advantage over competitors but also establish efficient risk management practices and a robust IC system. Second, better IC resulting from DT can enhance investor and stakeholder confidence. This is particularly important for publicly traded companies, where investors and analysts closely scrutinize the robustness of IC systems. Third, DT could result in cost savings over time, as automation and streamlined processes may reduce the need for manual efforts and resource-intensive tasks associated with IC.Originality/valueThe findings are contributed to the literature in multiple ways. It enhances our comprehension of the intricate DT-IC quality relationship, and provides valuable insights into the transformative impact of DT on organizational operations and risk management. It also introduces a novel perspective by investigating how CEOs personal traits intersect with DT to shape IC quality, contributing to upper echelons theory. Furthermore, it expands the discussions on firm ownership by considering the types of SOEs (central vs. local), in the DT-IC quality context.

Does CEO Compensation matter Aggressive Tax Planning in China: Evidence from Chinese Ownership Properties

This study aims to explore the impact of CEO compensation on aggressive tax planning (ATP) in China's A-share listed companies, and to reveal the moderating effect of firm size on CEO compensation and ATP. This study uses panel data analysis to explore the relationship between CEO compensation and ATP in China. From the perspective of listed companies in China, the largest developing market, during 2017-2022, the study provides evidence that CEO compensation is positively correlated with ATP, and that this relationship is also moderated by firm size. This study recognizes the crucial role of CEO compensation in the ATP of Chinese listed companies, and fills the gap of previous studies by studying the impact of CEO compensation. At the same time, the novel introduction of firm size as a moderating variable also highlights its effectiveness in Chinese corporate governance. The findings have important implications for participants in China's listed companies, managers' labor markets, and tax regulators. The unavailability of data, the sampling selection of companies, and the impact of focusing only on CEOs without considering other executives in the sample constitute limitations of this study. Although these limitations may weaken the explanatory power of the model, they set the avenue for future research.

Executive legal background and quality of corporate accounting disclosure

Using China's A-share listed companies in Shanghai and Shenzhen from 2011 to 2022 as sample, we find that the legal background of executives has a positive effect on the quality of corporate accounting disclosure; the legal background of executives has a more significant effect on the quality of accounting disclosure in state-owned enterprises than in non-state-owned enterprises, and the quality of internal control plays a mediating role in the relationship between the legal background of executives and the quality of corporate accounting disclosure. Studying the impact of executives' legal backgrounds on the quality of corporate accounting information disclosure helps to gain a deeper understanding of how personal characteristics of executives affect corporate information disclosure behaviour. This not only expands the research field of the relationship between executive background characteristics and corporate behaviour, but also provides a new perspective and reference for executive recruitment and training in practice.

China's cognitive bias premium: An exploration of innovation information

The complexity of innovation information often results in investors' cognitive bias, manifesting as an imbalance in the significance attributed to innovation quantity versus innovation quality. Based on investor cognitive bias, this paper explores the problem of innovation pricing in China's A-share market. Empirical findings indicate that cognitive bias creates a premium, primarily driven by mispricing. Moreover, we contend that mispricing originates from the innovation information environment and firms' innovation strategy. Our heterogeneity analysis indicates that the cognitive bias premium is more pronounced in high-tech industries, firms with lower market capitalization, and those facing stronger financial constraints.

Patent pledge financing policy and stock price crash risk

This study investigates the intricate relationship between China's Patent Pledge Financing Policy and the susceptibility of stock prices to sudden drops, emphasizing the government's pilot program. Utilizing the rigorous double-difference-in-differences (DID) approach, we undertook a comprehensive analysis of China's A-share listed companies. Our findings unambiguously reveal that the patent pledge financing policy significantly impacts the stability of corporate stock prices. Additionally, our research highlights the key role of technological progress as a mediating factor, strengthening the link between the policy and stock price steadiness. Our data further indicates that factors such as company size and ownership type influence the impact of the Patent Pledge Financing Policy on the risk of stock price crashes, with larger and non-state-owned enterprises benefiting more significantly from this targeted policy intervention.

An Empirical Study on the Impact of Investor Gambling Factors on Stock Cross-Sectional Returns

This study explores how investors' gambling preferences affect the cross-sectional returns of stocks in China's A-share market through behavioral finance factors. The portfolio ranking method and Fama-Macbeth regression analysis show how gambling behavior affects stock returns. On this basis, a multi-factor model (CHG model) incorporating gambling factor innovation was constructed to capture market dynamics more accurately. Research shows that going long on a low gaming index stock portfolio and short on a high gaming index stock portfolio can achieve significant average monthly returns. After adjustment by the Fama-French three-factor model, the returns of this long and short portfolio are significant at the 1% level. Significantly. In the CHG model, the coefficient of the gambling index Gamble is -0.0241, and the t-statistic is -6.1858, which is significant at the 1% level, further confirming the negative impact of gambling preferences on stock returns. In addition, the CHG model's ability to explain anomalies is also better than the CH-4 model. This study provides a new perspective on understanding behavioral finance factors in the Chinese stock market, and the results highlight the importance of considering behavioral finance factors in asset pricing and investment decisions in a highly irrational market environment. Future research can further explore the performance of behavioral financial factors in different market environments, as well as the differences and similarities of behavioral factors in different markets.

The Impact of Low-Carbon Pilot City Policy on Corporate Asset Efficiency: Evidence from China's A-Share Listed Companies

This study employs machine learning and the difference-in-differences (DID) approach to analyze the impact of China's "Low-Carbon City" pilot policy on the asset efficiency of A-share listed companies. The findings indicate that the policy has generally suppressed corporate asset efficiency, particularly in state-owned enterprises and large-scale companies. The study also reveals that the policy's impact is not significant in enterprises located in the eastern regions. Further robustness checks are conducted through predictive analysis using the random forest model, confirming the stability of the results. This research provides a basis for optimizing low-carbon policies and is of significant importance for promoting corporate low-carbon transformation and sustainable economic development.