Non-state Enterprises Research Articles

Extreme climate, local fiscal decentralization, and corporate sustainability

ABSTRACT Extreme weather events pose a significant threat to the sustainability of Chinese enterprises. This study investigates their impact on corporate sustainability and the moderating effect of local fiscal decentralization. Using a fixed-effects model with A-share listed companies from 2007–2021, it finds that extreme weather negatively impacts corporate sustainability, but fiscal decentralization mitigates this effect, notably in central-eastern regions and non-state enterprises. Recommendations include increasing local fiscal autonomy, accelerating SOE reforms, and enhancing environmental governance to bolster local governments’ climate resilience and foster overall economic and corporate sustainability.

Government Subsidies, Market Competition and Firms' Technological Innovation Efficiency

Based on the classification of Chinese listed companies, this paper selects the financial statement data of Chinese listed companies from 2008 to 2022 to conduct an empirical study, and the empirical results confirm that Government subsidies can promote enterprises to enhance the efficiency of technological innovation; Market competition can encourage enterprises to enhance the efficiency of technological innovation and The impact of government subsidies on the efficiency of technological innovation of non-state enterprises is more significant, while other information remains unchanged. The impact of government subsidies on the technological innovation efficiency of non-state-owned enterprises is more significant. Through empirical research, this paper understands the impact of government subsidies and market competition on the technological innovation efficiency of enterprises, which is conducive to providing a reference for the government to formulate enterprise subsidy policies.

Impact of China's carbon emissions trading scheme on firm-level pollution abatement and employment: Evidence from a national panel dataset

As an emerging economy, China has implemented market-oriented carbon emissions trading schemes in response to growing environmental challenges. Yet, concerns persist regarding the potential hindrance of these policies on socio-economic progress due to increased costs and possible declines in employment rates. Using a novel rich panel dataset of small-medium enterprises from 2011 to 2015, this study employs time-varying difference-in-differences methods to provide robust empirical evidence on the effect of these carbon trading policies. The findings reveal that the trial programs notably decreased sulfur dioxide emissions at the firm level by 2–3%, concurrently fostering a 6–7% increase in employment, indicating the realization of a ‘double dividend.’ An analysis of variations demonstrates that non-state enterprises, foreign-owned companies, and industries with substantial pollution levels experienced the most significant benefits, particularly with heightened positive impacts on employment observed in Western regions. Upon delving into the mechanisms involved, it becomes evident that initial job losses were offset by the emergence of new positions due to the expansion in output and the effects of substituting factors resulting from green investments catalyzed through the carbon trading initiative. These compelling findings strongly advocate for the widespread implementation of market-based tools on a national scale, providing robust support for concurrently addressing environmental concerns and promoting livelihood objectives within the specific context of China.

The impact of ESG performance on corporate risk-taking: empirical evidence from China

ABSTRACT Using China’s A-share listed companies from 2011 to 2021 as a research sample, the study analyzes and empirically examines the impact of ESG performance on corporate risk-taking. The results show that ESG performance has a negative association with risk-taking, which is consistent with the ‘stress hypothesis’. Mechanism tests show that ESG performance dampens risk-taking by increasing corporate transparency. Both top management team stability and institutional ownership negatively moderate the inhibitory effect of ESG performance on corporate risk-taking. Further analysis reveals that the inhibitory effect of ESG performance on corporate risk-taking is more prominent in non-state enterprises and financialized enterprises.

Examining the transformation of postindustrial land in reversing the lack of urban vitality: A paradigm spanning top-down and bottom-up approaches in urban planning studies

A distinct rise of global interest in the role of cultural and creative industries in post-industrial urban development calls for the transformation of our industrial heritage into creative clusters. Despite many factories being removed in deindustrialization, some enterprises still preserve and reuse the former industrial lands. However, the inconclusive judgments on the performances of creative clusters call for an in-depth examination of the underlying mechanism of transforming dilapidated urban industrial spaces. In addition, few empirical studies have revealed the commonalities and differences of market entities employing both the top-down and bottom-up approaches during the redevelopment.In this article, a multilevel transformation, and the consequent spatial performance in three postindustrial lands in Beijing have been examined based on big data analysis, field observation and in-depth interviews. We reached three conclusions. First, in addition to the angle of participatory planning, the deep exploration of specific market entities as an intermediate joint among different parties in protecting and reusing the postindustrial lands uncovers a distinct perspective of urban revitalization. Second, the finding of the enterprises' role in mitigating the conflicts between bottom-up and top-down approaches further testifies to a less-dichotomous perspective in urban regeneration studies. Last, though the examination of the multilevel transformation mechanism reflecting the difference between state and nonstate enterprises in property-led management, a generic paradigm behind the trend of relying on enterprises in revitalizing the large-scale postindustrial lands is revealed.

Unlocking the impact of digital technology progress and entry dynamics on firm's total factor productivity in Chinese industries

In today's digital era, technology serves as a fundamental pillar of the digital economy, greatly transforming business models and re-evaluating the enterprises' worth. This theoretical study incorporates digital technology factors into a task-based model to discuss the impact of digital technology advancement and entry price on corporate total factor productivity (TFP) using 2008–2021 data from Chinese-listed companies. The findings show that advances in digital technology considerably help in improving corporate TFP. According to digital technology's pricing strategy, a decrease in the entry price is essential to advancing digital technology and improving TFP. An improvement in corporate management and operational capabilities contributes to incorporating digital technologies at a lower price, thus enhancing corporate TFP. In addition, digital technology advancement generates a heterogeneous TFP effect, which is highlighted in regions with well-protected intellectual property rights, enterprises with high-tech certifications, and nonstate enterprises. These findings demonstrate the empowering effect of emerging technologies on high-quality corporate development and provide strategic insights for companies to achieve digital transformation.

The effect of environmental credit rating on audit fees: A quasi-natural experiment from China

Environmental credit rating (ECR) is a new policy that deeply integrates the construction of ecological civilisation and the social credit system in China; however, there is a paucity of research on the response of external auditors to the ECR. This study takes the environmental credit evaluation policy implementation as a quasi-natural experiment, using China's A-share listed companies in heavily polluting industries from 2008 to 2019 as samples. We construct a heterogeneous timing difference-in-differences model to empirically explore the impact of ECR on audit fees. The results show that the ECR significantly reduces companies' audit fees. Importantly, our analysis suggests that the ECR improves environmental information transparency and enhances sustainable operation ability, thereby reducing audit fees. Further analysis shows that the negative correlation between the ECR and audit fees is more obvious in non-state enterprises, in poor legal environments and low levels of trust. Our study provides scientific evidence for the economic consequences of the environmental credit evaluation policy and enriches the literature on the factors affecting audit fees. It has revelatory significance for China and other developing countries to implement and improve the environmental credit evaluation policies and better guide enterprises to fulfil their environmental responsibilities.

Does Carbon Trading Lead to Green Technology Innovation: Recent Evidence From Chinese Companies in Resource-Based Industries

The carbon emission trading scheme (ETS) is critical to China's ability to reach the established carbon dioxide (CO₂) emissions reduction goal by 2030 and carbon neutrality by 2060. To determine whether the pilot ETS policy promulgated in China in 2011 has induced green technological innovation, we conducted a multidimensional empirical test to assess the financial and green patent licensing data of Chinese A-share (publicly listed) enterprises in Shanghai and Shenzhen from 2004 to 2019. Using a difference-in-difference model with robustness checks, we did not find that the pilot ETS has had green innovation effects on entire industries or all manufacturing. However, we did identify significant green innovation improvements in some resource-based industrial enterprises, and the promotion effect led to more green utility models than green invention patents. Furthermore, the policy's greatest green-innovation effects are reflected primarily in new patents/utility models for low-carbon, energy-saving, and alternative energy technologies, particularly among large and nonstate enterprises. The impact mechanism tests indicate that the pilot policy encourages green innovation primarily through four policy instruments: increasing benefit income for resource-based industrial enterprises, reducing financial constraints, granting subsidies, and increasing incentives for enterprise R&D. Therefore, this article not only confirms the effectiveness of carbon emission trading market policy, but also provides scientific guidance for the realization of green technology innovation.

Can network attention effectively stimulate corporate ESG practices?—Evidence from China

Environmental, social, and governance (ESG) has emerged as a widespread concern for all societal segments. This study aims to explore the influence of network attention on corporate ESG practices from an investor perspective. We find that rising network attention significantly increases corporate ESG practices. Specifically, network attention plays the role of external monitoring, image promotion incentives, and mitigation of financing constraints to make companies willing to challenge ESG practices. Additionally, the promoting effect of network attention on firms’ ESG practices was more significant in higher marketization processes, severely competitive industries, and non-state enterprises. In the internet era, companies must pay attention to the flow effect caused by network attention, meet stakeholder demands, and pursue long-term sustainable development.

Environmental judicature and enterprises’ green technology innovation: a revisit of the Porter Hypothesis

The existing research on the judicial system as the subject of environmental regulation has largely ignored in the Porter Hypothesis. Using the establishment of the environmental court in China, we construct the time-varying difference-in-differences model and use it to examines the rationality of the Porter Hypothesis. The main findings of this study are as follows: (1) as an effective form of environmental regulation, environmental courts significantly improve the level of enterprises’ green technology innovation, which demonstrates the Porter hypothesis positively in China; (2) the establishment of environmental courts can effectively enhance the quality of green technology innovation, and the effect is more significant amongst non-state enterprises and heavily polluting enterprises; (3) The possible mechanisms for the effect of environmental courts on enterprises’ green technology innovation are further verified, including enhancing the environmental attention from government and green financial support from the market. Through the findings of this study, we are able to uncover the effects of environmental judicature on enterprises’ green technology innovation and provide a practical foundation for the development of environmental judicature specialisation.

How smart city building improved corporate performance: empirical evidence of China’s a-share listed companies

Smart city construction is crucial for regional economic development, and the micro-level impact of such construction on business operations cannot be ignored. Based on the panel data of Shanghai and Shenzhen A-share listed companies from 2008 to 2020, this paper investigates the relationship between smart city construction and firm performance and its mechanism of action. The study findings show that (1) smart city construction significantly improves enterprise performance; (2) the improvements are significant across all industries and regions; and (3) the impact of smart city construction on small and medium-sized enterprises (SMEs) and nonstate enterprises is more significant than that on large enterprises and state-owned enterprises. These findings provide a theoretical framework and fresh perspectives for encouraging coordinated regional development and new urbanization construction.

Investor Sentiment, Financing Constraints, and Earnings Persistence

ABSTRACT Based on the background of investor sentiment volatility in the capital market, this article empirically examines the relationship between investor sentiment and corporate earnings persistence and its impact mechanism using a first-order autoregressive model with a sample of Chinese A-share non-financial listed companies from 2007 to 2019. It is found that rising investor sentiment helps improve corporate earnings persistence when investor sentiment is moderate, with financing constraints playing a part in mediating the effect. The test of heterogeneity in corporate life cycle and nature of ownership found that rising investor sentiment significantly mitigates the financing constraints in growth stage and non-state enterprises, which in turn improves their earnings persistence.

Labor protection and enterprise digital transformation: A quasi‐natural experiment based on the enforcement of Social Insurance Law in China

AbstractThis study examines the impact of Social Insurance Law in 2011 on enterprises' digital transformation, using a quasi‐natural experiment with difference‐in‐differences method. Implementation of the law contributes to enterprises' digital transformation. Mechanism tests reveal that implementation of the law promotes enterprise digital transformation by increasing labor costs. Heterogeneity analysis demonstrates that nonstate enterprises, enterprises with weaker financing constraints, and mature enterprises experience a more pronounced impact of the law. Enterprises in regions with highly integrated digital development and those in industries with a high level of digital transformation are more affected by the law.

Climate policy uncertainty and corporate green innovation: Evidence from Chinese A-share listed industrial corporations

Confronted with the increasingly severe climate change, frequent changes in Chinese government decrees have enhanced climate policy uncertainty. This study explores the relationship between climate policy uncertainty (CPU) and corporate green innovation (GI) using data from A-share industrial companies listed in China's Shanghai and Shenzhen markets from 2011 to 2020. Results show that climate policy uncertainty positively contributes to firms' green innovation. Secondly, there is significant heterogeneity in the effect of uncertainty in climate policy on firms' green innovation, with a more substantial effect on non-state enterprises, energy-providing industries, and technology-intensive firms. Furthermore, climate policy uncertainty can increase regional environmental regulations and the level of R&D investment by firms, leading to an increase in the level of green innovation by firms. Reducing differential policy treatment by governments and increasing R&D investment by firms are, therefore, important ways to enhance green innovation and improve the competitiveness of enterprises.

Financial misconduct and corporate innovation: evidence from China

PurposeThis study aims to examine the real effects of financial misconduct on corporate innovation.Design/methodology/approachThe authors use a sample of Chinese A-share listed firms from 2006 to 2017. This study uses several empirical strategies to deal with endogeneity concerns, including Heckman’s two-stage correction approach, propensity score matching and instrumental variables.FindingsThe authors’ findings consistently show that financial misconduct impedes corporate innovation. Furthermore, the authors’ analysis demonstrates that the negative impact of financial misconduct is more pronounced in nonstate enterprises. The authors also show that financial misconduct discourages innovation through information, short-termism and financing channels.Practical implicationsThis paper is of particular interest to policymakers, as firm behavior is heavily regulated and altered by securities laws and regulations over time. The authors recommend firms to observe financial regulatory laws to promote capital market integrity and enhance shareholder value through innovation projects. The authors also recommend that regulators provide incentives that encourage corporate transparency and use new technologies to detect financial misconduct quickly.Originality/valueFew studies in literature investigate the real consequences of financial misconduct on firm investments. Hence, this paper fills this gap by analyzing the implications of financial misconduct on corporate innovation. This study is one of the first to provide new insights into the adverse effects of financial misconduct on firm-level innovation, supported by empirical evidence.

The positive impact of increased government bailout on weakening corporate default risk

Abstract Along with the increasing uncertainty of the global economy and the spread of the new crown pneumonia epidemic, the risk challenges to economic development have increased significantly, and the risk of corporate debt defaults has become more pronounced. As an important component of the capital market, the bond market also began to experience credit bond defaults during this period. Since 2021 the global bond market has shown a sharp increase in defaults, with the default rate of non-state enterprise bonds significantly higher than the overall market, and the capital market has also ushered in a period of pain and accelerated credit risk release. Enterprises are on the verge of bankruptcy restructuring and urgently need the government to provide a bailout and stabilize the market. Therefore, this paper uses the financial data of Chinese listed companies from 2016-2021, constructs a relief intensity variable using the equity pledge rate of listed companies before the relief (2021), and empirically analyzes the impact of local government relief and financing cost on the default risk of listed companies using an intensity double difference model. The results of this study show that: (1) local government bailout significantly reduces the default rate of listed companies by 13%; (2) the effect of local government bailout varies significantly depending on whether listed companies have connected transactions with financing platform companies, and the increase of bailout intensity increases the return on assets of listed companies with related transactions with financing platform companies by 9.8%, which laterally reduces the default rate of corporate debt; (3) the cost of financing is an important mechanism by which local government bailouts affect the credit default rate of listed companies, with a regression correlation of 0.75; (4) the above effect is more pronounced in regions with a higher degree of marketization, with a 9% increase in the effect. The findings of this paper are important for actively managing the risk of dual corporate debt and credit defaults and enhancing the effectiveness of macroeconomic regulation during the epidemic period.

The loss of political connections and corporate financialization

This paper examines firms' financial asset allocation motives from the perspective of loss of political connections. Based on listed companies in China's stock market, we show that the loss of political connections leads enterprises to hold more financial assets based on preventive saving motives, leading to a stronger tendency of financialization, and this effect is significant only among non-state enterprises but not among state enterprises. Meanwhile, non-SOEs with low debt financing levels tend to hold more financial assets, while non-SOEs with high debt financing capacity keep their financial investment levels relatively the same.

Discussing the Issue of Compliance with the Law on Paying Social Insurance Contributions by Non-State Enterprises in Vietnam

In Vietnam, although non-state enterprises account for a very high proportion of the total number of enterprises in the country, the rate of participation in social insurance for employees is still low, the amount of contributions to the social insurance fund is still limited, late payment of social insurance and evasion of payment of social insurance is common. This shows that non-state enterprises have not strictly complied with the law on social insurance contributions. The authors used the method of researching documents, collecting data from secondary sources, and using traditional statistical and analytical methods to clarify the legal provisions on Social insurance contributions and the status of compliance with the law on social insurance contributions by non-state enterprises in Vietnam (status of participation and contribution to social insurance funds, delayed payment of social insurance). On that basis, the authors propose some recommendations to strengthen compliance with the law on social insurance of non-state enterprises in Vietnam.

Research on the Effect of the New Environmental Protection Law on the Market Competitiveness of China’s Heavily Polluting Enterprises

Based on a difference-in-differences model, this study examines the effect of environmental regulation on the market competitiveness of heavily polluting enterprises, their mechanisms, and the space for effective implementation. Which all listed heavily polluting enterprises between 2010 and 2019 are included as the experimental group, and all other firms in the same industries listed on the Chinese stock market as the control group. The results indicate that environmental regulations have significantly increased the market competitiveness of heavily polluting enterprises in China. Furthermore, China’s New Environmental Protection Law (NEPL) has improved the market competitiveness of heavily polluting enterprises through strategic, flexible mitigation effects. Finally, the NEPL in regions with eastern or non-state enterprises has a significant impact on market competitiveness. The government should further improve laws and regulations for environmental protection, increase environmental regulations, and apply policies based on the differences in heavily polluting enterprises.

The effects of reputational sanctions on culpable firms: Evidence from China’s stock markets

We examine an important yet understudied form of reputational sanction in China, namely public criticisms imposed on culpable firms by the Chinese stock exchanges from 2013 to 2018. We find significantly negative cumulative abnormal returns around the announcement date, and they were affected by several factors, including financing propensity, governance mechanism, and equity nature. However, the market reaction is significantly negative only for firms relying on external financing and non-state enterprises, and importantly, becomes insignificant in cases where the firm had self-exposed misconduct before the official announcement of public criticism. Further, we examine other effects of public criticism, finding that public criticism does not improve firms’ long-term values, nor produce strong deterrence to change their behaviour. Overall, the evidence of the effects of public criticism on culpable firms is mixed, suggesting that reputational sanction is a weak, if not ineffective, instrument of market regulation in China.