Chinese Growth Enterprise Market Research Articles

Capital structure, business model innovation, and firm performance: Evidence from Chinese listed corporate based on system GMM model.

This paper aims to verify the impact of capital structure on business model innovation and firm performance and the mediating effect of business model innovation. We use the data of the Chinese growth enterprises market (GME) listed high-tech firms from 2016 to 2022 as a dynamic panel data model with the system-generalized method of moments (sys-GMM), adopting return on asset and earning per share as firm performance. Our results show that capital structure has a lag effect on firm performance. The total debt ratio in the last period has a significant non-linear impact on the performance and business model innovation level of nowadays, presenting a U-shaped relationship. The first-order lag short-term debt ratio positively improves firm performance. Business model innovation significantly promotes better firm performance, and business model innovation does exist in the mediating effect between enterprise capital structure and its performance. These results remain robust to different sample sizes or proxy variables. This paper proposes some suggestions for firm operations and government policies based on the findings.

Can Green Innovation Affect ESG Ratings and Financial Performance? Evidence from Chinese GEM Listed Companies

Socially and environmentally responsible investing is becoming the benchmark in financial markets. Promoting emerging industries’ environmental performance, social responsibility, and corporate governance (ESG) ratings are increasingly becoming the consensus of multinational green financial institutions, investors, and governments. This study employs 3100 panel data from 2014 to 2019 to conduct empirical research on green innovation, ESG indicators, and the financial performance of China’s Growth Enterprise Market (GEM) listed companies. Based on the “causal steps approach”, we adopt the Sobel–goodman and Bootstrap test to explore the partial mediation effect of ESG indicators. Moreover, when testing the interactive effect of endogeneity, instrumental variables combined with two-stage least squares (2SLS) and a general method of moments (GMM) system are applied in the dynamic panel for robustness. Combing with the approach of ESG factors-integrated and ESG factors-embedded regression models, we find that: (1) Green innovation can significantly improve the ESG scores of GEM listed companies. (2) Both green innovation and ESG performance can improve the financial performances of GEM listed companies, and ESG performance plays an indirect mediating role in the promotion of green innovation on financial performance. (3) Both political connection strength and regional innovation capabilities can negatively moderate the promotion of green innovation on financial performance, and moderating the effect of corporate political connections is more significant than the regional innovation. This study expands the research on the effectiveness of ESG indices and green innovation from the view of micro-GEM companies, providing policy enlightenment for the sustainable development of emerging industries. Our findings provide noteworthy implications for regulators, academicians and practitioners interested in exploring green innovation, ESG rating and financial performance. In addition, providing regulators and the board of directors with insights into the company’s and country’s future growth prospects.

Fund style drift and stock price crash risk – analysis of the mediating effect based on corporate financial risk

PurposeThis paper aims to identify the direct impact of fund style drift on the risk of stock price collapse and the intermediary mechanism of financial risk, so as to better protect the interests of minority investors.Design/methodology/approachThis paper takes all the non-financial companies on the Chinese Growth Enterprise Market from 2011 to 2020 as study object and selects securities investment funds of their top ten circulation stocks to study the relationship between fund style drift and stock price crash risk.FindingsFund style drift is likely to add stock price crash risk. Financial risk is positively correlated with stock price crash risk. Fund style drift affects stock price crash risk via the mediating effect of financial risk, and fund style drift and financial risk have a marked impact on the stock price crash risk of non-state enterprises, yet a non-significant impact on that of state-owned enterprises.Originality/valueThis paper links fund style drift with stock price crash risk in an exploratory manner and enriches the study perspectives of relationship between institutional investors’ behaviors and stock price crash risk, thus enjoying certain academic value. On the one hand, it furnishes a new approach to the academic frontier issue concerning financial risk and stock price crash risk, and proves that financial risk is positively correlated with stock price crash risk. On the other hand, it regards financial risk as a mediating variable of fund style drift for stock price crash risk and further explores different influencing mechanism of institutional investors’ behaviors.

Can digital finance boost SME innovation by easing financing constraints?: Evidence from Chinese GEM-listed companies.

This paper summarizes the transmission chain of “digital finance-financing constraint-firm innovation” at the theoretical and practical levels, incorporates digital finance into the empirical analysis framework of firm innovation, selects the data of Chinese GEM(Growth Enterprise Market)-listed companies from 2011 to 2020, and matches the data of the digital inclusive finance index. The paper empirically examines the incentive effect and impact mechanism of digital finance on SME innovation through the two-way fixed-effects model and mediated-effects model by matching the data of China GEM-listed companies from 2011 to 2020 with the digital financial inclusion index data. The findings show that the digital development and promotion of digital finance play a significantly positive impact in helping SMEs innovate and stimulate innovation. The effect is realized by alleviating corporate financing constraints. Further, digital finance has different incentive effects on enterprises with varying rights of property nature, as well as on other regions.

Antecedents of Return on Venture Capital Investment – Evidence From Chinese Growth Enterprise Market

This study examined how enterprise growth factors affect the return on venture capital investment for enterprises listed on Chinese Growth Enterprise Market (GEM). Using a sample of 235 venture capital backed enterprises listed on Chinese GEM over three years, we collected data from each company’s prospectus and listing documents. We also collected data from Chinese QINGKE Research Center Database. We found that (1) three growth factors (profitability, operational capability and innovation capability) were positively associated with venture capital return. (2) Both the composite growth indicator and the optimized composite growth indicator are positively related to venture capital return. The theoretical and practical implications are discussed.

Influences of university-industry alliance portfolio depth and breadth on growth of new technology-based firms: Evidence from China

In emerging economies, new technology-based firms (NTBFs) often engage in multiple alliances with universities and research institutes simultaneously to access external knowledge and resources crucial for their survival and growth, thus forming university-industry alliance portfolios (UIAPs). However, little scholarly attention has been paid to this phenomenon. Using panel data of 549 firm-year observations from 149 manufacturing NTBFs listed on Chinese Growth Enterprises Market (GEM) Board, we develop a set of multi-level fixed-effect liner regression models to investigate effects of UIAP relational-dimension configurations on NTBF growth along with the moderating effects of government subsidies. Results reveal negative effects of UIAP depth on firm growth and positive impacts of UIAP breadth on firm growth. Furthermore, results show that government subsidies weaken the negative relationship between UIAP depth and NTBF growth, along with the positive relationship between UIAP breadth and NTBF growth. Contributing to previous research on alliance portfolios, university-industry collaborations, and firm growth, this study provides some practical implications for both industry practitioners and policymakers in emerging economies.

Underwriter reputation and IPO underpricing: The role of institutional investors in the Chinese growth enterprise market

This paper investigates the effects of underwriter reputation on initial public offering (IPO) underpricing in the Chinese Growth Enterprise Market, in light of the conflicting evidence in the literature on IPO underpricing. Using data during the post global financial crisis period, we find that IPO firms with prestigious underwriters have lower market-adjusted initial returns on average. We further find that prestigious underwriters reduce IPO underpricing by minimizing the time gap between the offering and listing, choosing high-quality firms to underwrite, and reducing information asymmetry between issuers and investors. In the presence of institutional investors, however, we find that more underpricing occurs, as these investors tend to obtain access to IPO shares at a higher price discount via private placements. This new finding suggests that the institutional investors have a role to play in the case of high under-pricing, which partly gets corrected via underwriter reputation.

Modeling the Impacts of Venture Capital Investment on Firm Innovation

Taking firms listed on the Chinese Growth Enterprise Market (GEM) in 2008–2017 as the sample, this study investigates the impact of venture capital (VC) investment on Chinese firm innovation using propensity score matching and a difference-in-differences (PSM-DID) model. The results show that, overall, firms’ innovation inputs and outputs do not show obvious enhancement due to VC entry, but instead show a strong and then weak inhibitory effect. VCs have heterogeneous impacts on firm innovation; that is, compared to other types of firms, firms with technology-dependent characteristics and firms whose actual controllers are experts in the same industry can effectively mitigate the adverse impact of VC on innovation inputs and gradually promote growth in the quantity and quality of the innovation outputs after the second year of VC entry. This study not only reveals the impact of VC on firm innovation activities in the Chinese capital market but also provides empirical evidence to help improve the financial innovation service system and the use of the capital market to promote innovation in China.

R&D Intensity, Domestic Institutional Environment, and SMEs’ OFDI in Emerging Markets

Outward foreign direct investment (OFDI) of small and medium-sized enterprises (SMEs) from emerging economies has emerged as a significant phenomenon in global markets. However, extant research has not paid sufficient attention to this trend. Particularly, there is a lack of understanding of how SMEs’ internal resources may interact with their domestic institutional environment in driving OFDI. Drawing on the resource-based view and the institutional theory, this study fills this gap and examines how research and development (R&D) intensity influences OFDI frequency of SMEs from China, one of the largest emerging economies, and the moderating effects of coercive pressure, normative support, and mimetic force from SMEs’ domestic, regional institutional environment. Using a sample of 2620 Chinese SMEs publicly-listed on the Chinese Growth Enterprise Market during 2010–2017, we find that R&D intensity can be viewed as a key strategic resource that drives Chinese SMEs’ OFDI frequency and that three factors in their regional institutional environment (regional marketization, ties to industry associations, and peer OFDI frequency in the region) strengthen the relationship between R&D intensity and SMEs’ OFDI. This study contributes to the literature on SMEs’ OFDI by demonstrating the importance of combining the resource-based view and institutional theory to examine the roles played by both SMEs’ internal resources and their domestic institutional environment in driving their OFDI activities in emerging economies.

The Effect of Female Participation in Top Management Teams on the Firms’ Innovation of Chinese Growth Enterprise Market (GEM) Companies

The Effect of Female Participation in Top Management Teams on the Firms’ Innovation of Chinese Growth Enterprise Market (GEM) Companies

The sentiments of open financial information, public mood and stock returns: an empirical study on Chinese Growth Enterprise Market

This study links public mood to stock performance and examines the moderating role of co-occurring sentiments as expressed at open financial information platforms in this relationship. Drawing on the agenda-setting and source credibility theories, we developed hypotheses with the use of 345 stocks listed on the Chinese growth enterprise market and data on public mood, and open financial information sentiments collected between 1 October 2012 and 30 September 2015. Our findings suggest that public mood has a significant, positive impact on stock returns; more interestingly, we found that public mood has a stronger positive impact on stock performance than open financial information sentiments. Furthermore, the study found a positive interactive effect between public mood and open financial information sentiments, and determined that variation in public mood is a driving force with a market reaction, while the co-occurring open financial information sentiments amplify the effect of public mood on stock returns.

The sentiments of open financial information, public mood and stock returns: an empirical study on Chinese growth enterprise market

This study links public mood to stock performance and examines the moderating role of co-occurring sentiments as expressed at open financial information platforms in this relationship. Drawing on the agenda-setting and source credibility theories, we developed hypotheses with the use of 345 stocks listed on the Chinese growth enterprise market and data on public mood, and open financial information sentiments collected between 1 October 2012 and 30 September 2015. Our findings suggest that public mood has a significant, positive impact on stock returns; more interestingly, we found that public mood has a stronger positive impact on stock performance than open financial information sentiments. Furthermore, the study found a positive interactive effect between public mood and open financial information sentiments, and determined that variation in public mood is a driving force with a market reaction, while the co-occurring open financial information sentiments amplify the effect of public mood on stock returns.

Non-founder CEOs, R&D investment and output

Purpose The purpose of this study is to investigate the impact of non-founder CEO succession on firms’ research and development (R&D) decision, and further explore its mechanism and economic consequences. Design/methodology/approach Using founders’ personal-level information of entrepreneurial firms in the Chinese growth enterprise market from 2009 to 2015, the authors empirically investigate whether firms can be motivated to launch more R&D activities as the result of switching to non-founder CEOs. The author’s further test the impact of non-founder CEOs on R&D output to distinguish their motivation. Moreover, the authors use stepwise regression to explore the mechanism and possible channels. Findings The authors find that R&D investment significantly increases in firms with non-founder CEOs and the R&D output that comes in the form of patent exhibits an upward trending in numbers, too, ruling out non-founder CEOs’ incentive to chase private benefits. Specifically, the authors find that non-founder CEOs can promote R&D investment through their more professional human capital and better internal control. The authors also show mitigating effects under different circumstances on the relationship between non-founder CEOs and R&D investment. Practical implications This study helps the authors to understand the impact of non-founder CEO succession on R&D investment in emerging markets. It also indicates that human capital of non-founder CEOs is critical in driving firms’ innovation, proposing policy suggestions to improve formal intermediary labor market of professional CEOs. Originality/value This study provides elaborate theoretical analysis and empirical tests on the mechanism and economic consequences of (non-)founders’ impact on R&D activities.

Network centrality and innovation performance: the role of formal and informal institutions in emerging economies

PurposeThe impact of network centrality on innovation performance is inconclusive. The purpose of this paper is to examine how formal and informal institutions affect the influence of network centrality on firms’ innovation performance in emerging economies by integrating social network theory and institutional theory.Design/methodology/approachMultisource and lagged data from 234 technology-based entrepreneurial firms listed on the Chinese Growth Enterprise Market were leveraged to test a proposed research model.FindingsResults suggest that formal institutions (marketization) positively moderate the relationship between network centrality and innovation performance, whereas informal institutions (social cohesion) negatively moderate this relationship. Moreover, formal and informal institutions have a strong joint impact on such relationship, that is, the effect of network centrality on innovation performance is most positive when marketization is high and social cohesion is low.Originality/valueThis empirical research provides new insights into whether and how firms can grasp the innovation benefits of network centrality by exploring institutional contingencies. It further sheds on light the scope of the network centrality–innovation issue by extending its research context to Chinese entrepreneurial firms.

Stock Net Entropy: Evidence from the Chinese Growth Enterprise Market.

By introducing net entropy into a stock network, this paper focuses on investigating the impact of network entropy on market returns and trading in the Chinese Growth Enterprise Market (GEM). In this paper, indices of Wu structure entropy (WSE) and SD structure entropy (SDSE) are considered as indicators of network heterogeneity to present market diversification. A series of dynamic financial networks consisting of 1066 daily nets is constructed by applying the dynamic conditional correlation multivariate GARCH (DCC-MV-GARCH) model with a threshold adjustment. Then, we evaluate the quantitative relationships between network entropy indices and market trading-variables and their bilateral information spillover effects by applying the bivariate EGARCH model. There are two main findings in the paper. Firstly, the evidence significantly ensures that both market returns and trading volumes associate negatively with the network entropy indices, which indicates that stock heterogeneity, which is negative with the value of network entropy indices by definition, can help to improve market returns and increase market trading volumes. Secondly, results show significant information transmission between the indicators of network entropy and stock market trading variables.

Stock Price Volatility and Policy Bailout: Evidence from Growth Enterprise Market in China

Growth enterprises in China have been increasing their paces to raise capital through Growth Enterprise Market (GEM) since October, 2009. Based on mass Monte Carlo simulation, this article utilizes multi break structural change method to examine the fluctuation characteristics of GEM stock index in China. This study indicates that time series of Chinese GEM stock index are not characterized by mean reversion. Therefore, the policy bailouts in the market including the rescue package of the government in June 2015 are ineffective because they are already offset by other factors. The long-run growth of GEM stock index depend on the supply and demand situation in capital market as well as the growth of national economy but has no connection with the policy bailouts. The results provide policies making guidance on GEM in China with empirical evidence.

An Empirical Analysis of Stock Price Risk in Chinese Growth Enterprises Market - A GARCH-VaR Approach

The aim of Growth Enterprises Market (GEM) is to provide financing channels to burgeoning and high-technology companies which cannot be listed in the main board. GEM is a supplement to the main board. As an emerging securities market, GEM shows a unique volatility compared with the main board. The volatility of GEM has connections and differences with the main board market. Studying the price volatility of GEM contributes directly to the healthy growth of GEM and the main board. This paper investigates the risk characteristics of GEM and provides several measures to deal with the risk. In this paper, VaR based on GARCH model is utilized for empirical tests. Therefore, this paper studies the characteristics and the extent of volatility risk of GEM stock price systematically.

Pyramid IPOs on the Chinese Growth Enterprise Market

ABSTRACTIn this article, we investigate initial public offerings (IPOs) of high-tech firms on the Chinese Growth Enterprise Market (GEM). Almost half of the GEM IPOs are set up in pyramid structures. The likelihood of a pyramid structure increases with the size of the IPO firm and state control. Our results do not suggest that pyramids are set up to overcome financial constraints. However, we document that pyramid IPOs are discounted before the IPO. The subscription price-to-book ratio is significantly lower for pyramid IPOs, and this translates into higher underpricing. We conclude that IPO investors demand a higher risk premium when investing in pyramid IPOs.

Chinese Growth Enterprise Market and Business Performance Analysis on Small and Medium Sized Firms and Venture Firms Before and After Listing

Chinese Growth Enterprise Market and Business Performance Analysis on Small and Medium Sized Firms and Venture Firms Before and After Listing

Ownership Structure of the Chinese Growth Enterprise Market

This paper provides a first look at the ownership structure in the Growth Enterprise Market (GEM) of China which is a new market launched in 2009. By analyzing the unique dataset, I find that 46% of firms in our sample are created through pyramids. I identify the status of ultimate owner of each firm, and find that the ultimate owners in the GEM are entrepreneurs while in the main board the state is the ultimate owners in most of companies. My results suggest that pyramidal ownership structures have a detrimental effect on firm performance.