National Equities Exchange Research Articles

Stock liquidity and the signaling value of patents: Evidence from china's national equities exchange and quotations market

Young and technology-oriented firms suffer from asymmetric information in seeking access to finance. An increase in stock liquidity can improve a firm's stock price informativeness and mitigate such information problems. We expect that firms will patent less when they face an increase in liquidity if patenting is used as a costly signal mechanism to demonstrate firm quality. By examining an exogenous policy shock that dramatically improves the stock liquidity of treated firms in China's National Equities Exchange and Quotations (NEEQ) market, we document evidence that treated firms patent less after the shock. Our findings reveal the importance of liquidity in reducing the deadweight costs caused by asymmetric information and the signaling value of patenting, and urge caution regarding the sole use of patent applications to measure innovation performance in entrepreneurial firms.

Motivations And Effects of NEEQ's Transfer To SSE STAR Market In The Context Of Registration Reform: A Case Study Of TZTEK

NEEQ, officially known as the National Equities Exchange and Quotations, is the third national equity trading venue after Shanghai Stock Exchange and Shenzhen Stock Exchange. The National Equities Exchange and Quotations Corporation Limited (NEEQ Co. Ltd.) was registered with the State Administration for Industry & Commerce (SAIC) on September 20, 2012 with registered capital of RMB 3 billion, and was inaugurated on January 16, 2013 and gradually opening up to all regions nationwide. For small and medium-sized enterprises (SMEs), NEEQ offers a vital financing channel and enhances their liquidity. As a result, the number of enterprises listing on the NEEQ market has surged. However, this growth has brought about certain issues that cannot be ignored and have become increasingly serious. These issues include a high concentration of equity ownership and a decline in market liquidity. Consequently, the trading volume and turnover rate of NEEQ-listed companies have been decreasing year by year. This decline has significantly constrained the growth potential of some promising enterprises, such as TZTEK. These companies, which typically have good growth prospects, are often compelled to consider transferring to a different board in pursuit of sustainable development. This paper will first introduce the research significance and background of this chosen topic. Secondly, it will provide an overview of TZTEK's background of board transfer and transfer process. Then, it will analyze the motivation behind TZTEK's board transfer from the perspectives of financing, shareholder structure, and company valuation. The study will also involve an analysis of market effects, growth capability, and debt repayment capacity for TZTEK, both before and after the board transfer, using a series of relevant data. Finally, the paper will conclude with a summary of the research findings.

Digital financial inclusion and corporate investment efficiency: Evidence from small‐ and medium‐sized enterprises in China

AbstractThis study investigates the influence of digital financial inclusion (DFI) on the investment efficiency of small‐ and medium‐sized enterprises (SMEs) in China. Employing a dataset of listed National Equities Exchange and Quotations firms over the period from 2011 to 2020, we find robust evidence that the development of DFI improves the investment efficiency of underinvested SMEs. However, no such effect is observed for overinvested SMEs. The mechanism analysis indicates that DFI can mitigate the underinvestment problem of SMEs by restraining their risk‐taking behaviors and easing their financial constraints. Furthermore, we find that the positive effect of DFI on underinvestment is more pronounced for SMEs with weaker financial statuses or in less competitive industries.

Does NEEQ’s tiered system enhance corporate labour share？

ABSTRACT In the context of improving the multi-level capital market structure and promoting common prosperity, we examine the impact of NEEQ’s (National Equities Exchange and Quotations) tiered system on corporate labour share. We find that the corporate labour share significantly increases when the firm enters the innovative layer from the common layer, which indicates that tiered system can optimise the structure of labour income distribution and facilitate employees to better share the enterprises’ achievements. Our further evidences indicate that (1) this positive relation is more pronounced for firms whose stock liquidity improves more; (2) reducing the cost of capital is an important channel through which the tiered system promotes corporate labour share; and (3) the tiered system visibly affects labour share for firms facing higher financing constraints, meeting lower information transparency, or with a higher complementary effect between labour and capital factors.

Quality of Financial Information Disclosure and Efficiency of Resource Allocation Under Dual-Track System: Empirical Evidence of Registration System Reform in China

ABSTRACT This study examined the listed companies in China’s National Equities Exchange and Quotations (NEEQ) from 2014 to 2021 to investigate the influence of the financial disclosure quality of IPO companies on the speed of passing in different systems of registration and approval from the perspective of resource allocation efficiency. In the trial registration system, high-quality financial disclosure was found to significantly improve IPO enterprises’ speed of passing, while venture capital and its characteristic variables enhanced the relationship between the financial disclosure quality and speed of passing; Distinguishing between regional marketability and firm characteristics attributes reveals that the contribution of venture capital to the relationship between financial disclosure quality and speed of passing is more pronounced in the sample of firms in low marketability regions, high technology, and smaller size. In addition, further research shows that the enterprises with high financial disclosure quality in the registration system sample have higher long-term excess returns after listing. Finally, the conclusion is still robust after using the generalized tendency matching score (GPSM) and instrumental variable method (IV) to eliminate endogenous interference. The conclusion provides empirical support and a theoretical basis for reforming the registration and issuance system in emerging market countries.

The Impact of Debt Financing on Startup Profitability

If a start-up company is unable to grow due to a lack of capital, it is prudent to investigate the possibility of using debt as a source of funding. This study examines the impact of debt financing on the profitability of start-ups using trade-off theory and pecking order theory and uses regression analysis to select factors that are correlated with debt financing structure and profitability for listed companies on the National Equities Exchange and Quotation System (NEEQ) from 2012 to 2021. At the end of the theoretical and empirical analyses, the impact of debt financing on the profitability of start-ups is analyzed and corresponding countermeasures are proposed. Finally, the findings of the study are summarized and the shortcomings of the study and the prospects for future research are outlined. The findings of this study are that debt level structure is negatively related to profitability, indicating that gearing has a negative impact on the profitability of start-ups. In terms of debt type structure, mercantile credit has a positive effect on the profitability of start-ups and bank financing have a detrimental effect on profitability. Overall, debt financing has a negative impact on the profitability of start-ups, but business credit has a positive impact on profitability.

Exploring the impact of R&D intensity, human capital, patents, and brand value on business performance in small and medium enterprises (SMEs)

The study of business performance has a substantial impact on improving the internal management and economic performance of companies. By analysing the previous literature, this paper chooses to measure the factors affecting business performance at four levels, including R&D investment intensity, human capital, patents, and brand value. The purpose of the study is to find out whether these selected factors work equally well for small and medium-sized enterprises. The sample size was 846 Chinese small and medium enterprises from different industries. The firm performance indicators were ROA and ROE. The data has been collected through National Equities Exchange and Quotations platforms based on updated annual reports in 2019. Finally, a stepwise descriptive analysis and multiple linear regression were conducted and predicted the tendency of business performance. The analysis provided the linear combination of four independent variables (R&D, human capital, patents, and brand value) which are significantly related to the dependent variable (business performance). In conclusion, we found that there is a positive impact of patents and brand value on business performance. In detail, we concluded that only production and highly educated personnel show a positive influence. For R&D intensity, there is no strong connection could be observed. In practical terms, this paper allows SME firms to appreciate the importance of human capital, patents, and brand value.

Enhancing Food Security through Digital Inclusive Finance: Evidence from Agricultural Enterprises in China.

As a means of enhancing food security, efficient agricultural processing and the maintenance of a smooth supply chain are essential for ensuring food quality and reducing food wastage. Agricultural enterprises play a crucial role in the processing and transportation of food from farms to dinner tables. Operating income growth plays the vital role of ensuring that agricultural enterprises function in a stable manner while also indicating the quantity and quality of market food supply. Therefore, the objective of this study is to explore the impact of digital inclusive finance on food security by analyzing the effect of digital inclusive finance on the operating income of agricultural enterprises in China. By applying pooled OLS analysis to Chinese agricultural enterprises that are listed in the National Equities Exchange and Quotations, this study finds that digital inclusive finance can help improve agricultural operating income. The results reveal that digital inclusive finance can facilitate the promotion of agricultural operating income by increasing the supply of financing, accelerating inventory liquidity, and supporting investment in research and development. In addition, this study concludes that digital inclusive finance is more effective for increasing agricultural operating income as a result of its wider coverage and deeper utilization. Furthermore, the development of traditional finance is still necessary for the digitization of digital inclusive finance to be effective.

How does listing affect corporate innovation? Evidence from China’s National Equities Exchange and Quotations market

ABSTRACT Technological innovation is an important determinant of economic growth, and the Chinese government is trying to create a favourable environment for corporations at both the regulatory and policy levels to improve the innovation level of firms. We use a difference-in-differences model to explore the impact of going public on innovation in small and medium-sized enterprises. A total of 5522 companies listed on the NEEQ from 2013 to 2017 are selected as samples in this study. The main conclusions are as follows: (1) Listing on NEEQ has a significant innovation incentive effect, and compared to unlisted enterprises, the incentive effect has the dynamic characteristics of continuous increase; (2) Further research finds that in the eastern region, where marketisation is higher, as well as the emerging industrial areas, the incentive effect of listing reached 0.4558 and 0.2691 million yuan, respectively, from the perspective of enterprise scale, and listing mainly stimulated the innovation of medium-sized enterprises; (3) Financing constraints and signal transmission partly mediate the relationship between listing and corporate innovation.

Supplier-base concentration and efficiency: the moderating roles of R&D expenditure and market share

PurposeThis study addresses an important research question regarding how supplier-base concentration affects buyer efficiency. Drawing on the contradicting views of transaction cost theory (TCT) and resource dependence theory (RDT), the authors explore the main effect of supplier-base concentration on buyer efficiency and how this effect is contingent on buyers' characteristics (i.e. research and development (R&D) expenditure and market share).Design/methodology/approachBased on data collected from the Chinese manufacturing firms listed on National Equities Exchange and Quotations (NEEQ) between 2015 and 2019, the authors use a fixed-effect model as well as a two-stage least squares model to test the predictions.FindingsThe authors find that supplier-base concentration has a positive effect on buyer efficiency. In addition, when a buyer has higher levels of R&D expenditure and market share, the positive relationship between supplier-base concentration and buyer efficiency is strengthened.Originality/valueThis study contributes to a better understanding of the effect of supplier-base concentration. First, the authors provide theoretical and empirical evidence of the positive effect of supplier-base concentration on buyer efficiency. Second, the authors reveal the underlying mechanism of how to counter the potential drawbacks and benefit more from supply base reduction by introducing R&D expenditure and market share as contingencies.

Underperformance Duration and Strategic Change: An Attention-based View of the Firm

Performance feedback, especially underperformance feedback, is a vital factor influencing a firm’s strategic change; yet, there is little evidence on underperformance duration. Drawing on attention-based view and cognitive literature within psychology, we argue that the length of time that a firm has been underperforming leads to firms’ strategic change, while this effect could be moderated by the TMT stability, the firm’s goals, and the family governance of a firm. Specifically, we proposed that the TMT stability will weaken the effect of underperformance duration on strategic change, while the firm’s growth orientation will strengthen this effect. Furthermore, both of these moderating effects will be flattened by family ownership. Our hypotheses were supported by a ten-year panel data of 2070 firms listed on the National Equities Exchange and Quotations (NEEQ) in China. We also discussed the statistical and practical significance of the results.

Credit evaluation solutions for social groups with poor services in financial inclusion: A technical forecasting method

Financial inclusion aims to provide financial services at an affordable cost to low-income groups in need. However, the lack of effective credit evaluation information for such groups has hindered the innovative development of financial inclusion in the banking industry. This study proposes a slack constrained matrix factorisation model to supplement missing credit information. The method fills in missing data with known data in groups of similar credit behaviours. We empirically analyse the performance of this method in a supplemented credit information matrix and a sparse credit information matrix. We use actual credit data of farmers and herdsmen in extremely poor areas and small, medium and micro enterprises in National Equities Exchange and Quotations, China. This study concludes that the proposed credit evaluation methods based on sparse credit information can effectively improve the performance of traditional credit classification algorithms.

Research on Financing Efficiency of NEEQ Based on DEA Model

This paper firstly conducts practical research on Chinese NEEQ (National Equities Exchange and Quotations), evaluates the development status of NEEQ by referring to theoretical literature, and conducts academic research on related existing problems according to the status quo. On this basis, some NEEQ companies are selected as the empirical research orientation, and the financing efficiency of target companies is studied based on the DEA model. The study results found that NEEQ has problems such as low pure technical efficiency and a decline in total factor productivity.

Modelling Investment Choice Preference of Government Venture Capital Guiding Funds

The continuous development of the government venture capital guiding funds (hereinafter referred to as the “government guiding funds”) has provided financial support and development opportunities for the development of many small- and medium-sized enterprises (SMEs), and government guiding funds have been paid attention by more and more entrepreneurs and investors of SMEs. This paper takes the SMEs listed on the National Equities Exchange and Quotations (“NEEQ,” known as the New Third Board) as a research sample, systematically examines the factors that influence the selection of investment objects of government guiding funds, and studies the preference of government guiding funds from the aspects of financial characteristics and corporate governance of SMEs. The research results show that on one hand, ownership concentration, date of establishment, and asset size are significantly related to government guiding funds, while the return on equity (ROE), the asset-liability ratio, liquidity of assets, growth rate of main business income, and the operating net profit ratio failed to pass the significance test; on the other hand, operating profit ratio, investment interests, asset size, and the amount of investment of government guiding funds are significantly related, while investment rounds, date of establishment, ownership concentration, ROE, asset-liability ratio, liquidity of assets, and operating net profit ratio failed the significance test.

How optimal distinctiveness in business model affects SMEs performance? A contingency perspective

In recent years, the question about how business models contribute to competitive advantage and improve firm performance, has been fully discussed by strategic scholars. However, there coexist two controversial forces for SMEs in business model design: legitimacy and competitive pressure. How SMEs balance the tension between legitimacy and competitive pressures in business model design is an important issue which is less appreciated in prior work. In this article, we apply the concept of optimal distinctiveness to test how distinctiveness in business model affects SMEs performance. We apply the topic model methodology to the texts of business model sections in 2943 annual reports of SMEs listing on National Equities Exchange and Quotations (NEEQ) market in China, to measure the distinctiveness in each SME’s business model relative to industry average. Results show an inverted U-shape between distinctiveness in business model and SMEs performance. Further, this U-shaped effect is attenuated by firm age, whereas category heterogeneity (as well as nascent market) and subcategory distinctiveness strengthen the relevance of optimal distinctiveness in business model. These findings inject fresh insights into both business model literatures and the optimal distinctiveness perspective.

How does Business Model Matter for Technology-based SMEs? An Optimal Distinctiveness Perspective

In this article, we introduce the optimal distinctiveness perspective to the business model literature. We argue that distinctiveness in business model design have a nonlinear effect on performance of technology-based SMEs. Specifically, we highlight the distinctiveness in efficiency-centered and novelty-centered business model designs, which are two critical themes attracted the attention of many mainstream researches. To test our hypotheses, we develop a dataset that measures the distinctiveness in efficiency-centered and novelty-centered business model design of 385 technology-based SMEs in nascent market listed on National Equities Exchange and Quotations (NEEQ) market in China. Results show a U-shaped effect of distinctiveness in efficiency-centered business model design and an inverted U-shaped effect of distinctiveness in novelty-centered business model design on performance of technology-based SMEs. In addition, the local density within the industry positively moderates these relationships. These findings provide new insights into business model literatures and the optimal distinctiveness perspective

Board secretary’s financial experience, overconfidence, and SMEs’ financing preference: Evidence from China’s NEEQ market

ABSTRACT This article explains the impact of the board secretary’s financial experience on the financing preference from the perspectives of executive behavior and psychology. We use small and medium-sized enterprises (SMEs) listed on China’s National Equities Exchange and Quotations (NEEQ) market as an empirical research sample and confirm that SMEs who have board secretaries with financial experience prefer external financing, thus lowering the investment-cash flow sensitivity. Additionally, the empirical conclusions are robust after changing the measurement of financing, expanding the scope of financial experience definition, and removing state-owned SMEs from the sample for robustness testing. We also control for the endogeneity using a placebo test, PSM-DID, and instrumental variables. In further research, we find that overconfident secretaries prefer external financing; secretaries with financial experience can reduce information asymmetry to promote external financing, albeit mostly short-term loans.

Does new venture team power hierarchy enhance or impair new venture performance? A contingency perspective

Power hierarchy has the potential to both benefit and harm the functioning of new venture teams (NVTs) and hence new venture performance. Integrating structural contingency theory with the literature on power hierarchy, we propose that the effect of NVT power hierarchy on new venture performance is contingent on NVT homogeneity (as indicated by functional background homogeneity and shared team experience) and the powerholder's prior founding experience. Specifically, we propose that the effect of NVT power hierarchy on new venture performance will be positive when NVT homogeneity is low but negative when NVT homogeneity is high. Furthermore, this positive (negative) effect under low (high) NVT homogeneity will be strengthened by the powerholder's prior founding experience. Based on a five-year panel data of 285 new Internet ventures listed on the National Equities Exchange and Quotations (NEEQ) in China combined with qualitative fieldwork, our hypotheses received general support. We discuss the theoretical and practical implications of our findings on how NVTs should design power structures to achieve optimal new venture performance.

Value assessment of companies by using an enterprise value assessment system based on their public transfer specification

A reasonable value assessment method plays an important role in both companies’ internal management and their external transactions. Traditional value assessment methods like the relative valuation method need historical financial indicators and some market multipliers but ignore non-financial information included in the text. Startup companies are usually listed before they start to make a profit, which means traditional value assessment methods are unable to access reliable financial information. This study firstly investigates companies’ non-financial information and proposes a text-based Enterprise Value Assessment System (EVAS) to extract features. Then, two neural network-based models are constructed to predict one essential factor K in order to improve the P/B relative valuation method. Our experiment in China's National Equities Exchange and Quotations (NEEQ) shows an impressive result on companies’ value assessment compared to the traditional value assessment model. The result concludes that introducing non-financial text information into value assessment based on our system improves the accuracy of value assessment for startup companies.

Building a Junior Stock Exchange: Lessons from China

China established its own junior stock exchange, the National Equities Exchange and Quotations (NEEQ), to solve the financial constraints of small and medium enterprises (SMEs) in 2013. Its short history has witnessed a combination of a hot initial listing market on the one hand and actively delisted firms on the other hand, which is puzzling. We argue in this paper that the hot listing market is the result of governmental subsidies and the removal of entry restrictions. In contrast, the delisting decisions are based on a cost–benefit analysis associated with maintaining the listing status. Though the secondary market is highly illiquid due to intentional institutional restrictions, quoted firms can obtain external finance, which is highly valuable considering the financial repression policy adopted by China. However, because a large percentage of the quoted firms are SMEs, the direct listing costs, despite their absolute value being relatively low, are still significant. In addition, to protect investors, the enforcement actions of NEEQ also impose significant indirect costs on quoted firms.