Non-state-owned Enterprises Research Articles

Environmental legitimacy pressure, political connection and impression management of carbon information disclosure

Using sample firms from eight energy-intensive industries included in the State Council of China’s Notice on the Pilot Work of Carbon Emission Trading from 2015 to 2019, this study examines the relationship between environmental legitimacy pressure and impression management of carbon information disclosure, and explores the moderating effect of political connection on this relationship. The baseline results show that environmental legitimacy pressure is positively associated with impression management of carbon information disclosure, and political connection moderates this relationship, that is, the positive association between environmental legitimacy pressure and impression management of carbon information disclosure in politically-connected firms is stronger than that in non-politically-connected firms. The results are robust to various sensitivity tests. Further analyses show that (i) the positive association between environmental legitimacy pressure and impression management of carbon information disclosure in non-state owned enterprises (non-SOEs) is stronger than that in SOEs, (ii) firms facing higher negative environmental legitimacy pressure have stronger motivation to conduct impression management of carbon information disclosure, (iii) firms facing environmental legitimacy pressure conduct both selective disclosure and expressive manipulation but they have stronger motivation to conduct expressive manipulation. This study extends the literature on impression management of carbon information disclosure. The findings in this study provide policy implications not only for China but also for countries with large carbon emission.

The Effect of Government Subsidies on Firm R&D Investment in China: From Perspectives of Ownership and Market Power

This study examines the effects of government innovation subsidies under different combinations of market power (i.e., the relationship between enterprises, upstream suppliers, and downstream customers) and different types of ownership from the perspective of the contemporary marketing microenvironment. Based on the panel data of listed Chinese manufacturing companies from 2009 to 2018, the empirical results show that, in the case of higher buyer power, government subsidies will significantly promote the R&D investment of enterprises and the positive effect is not affected by nature of the enterprise’s ownership. In the case of lower buyer power and seller power, government subsidies significantly promote the R&D investment of nonstate‐owned enterprises, but have no effect on state‐owned enterprises. The conclusions of the study further verify that, under different combinations of market power, there are significant differences in the effects of innovation subsidies for enterprises with different forms of ownership, and these provide a theoretical point of reference for the government to implement innovation subsidies. This study not only fills the theoretical black box of the relationship between government subsidies and enterprise innovation but also provides relatively new empirical evidence for the related research on innovation subsidies in developing countries.

Digital Finance Development and the Digital Transformation of Enterprises: Based on the Perspective of Financing Constraint and Innovation Drive

In the context of the digital economy, the digital transformation of enterprises, as an important accelerator of new economic and social development, cannot be separated from the support of financial resources. Based on the data of China’s A‐share listed companies from 2011 to 2020, this paper studies the influence of digital finance development on the digital transformation of enterprises and its mechanism of action. The empirical results demonstrate that digital finance development plays a significant role in promoting the digital transformation of enterprises, and the promotion effect is stronger for nonstate‐owned enterprises, but the promotion effect of digital finance development on the digital transformation of enterprises is weaker in western regions and peripheral cities than that in eastern and central regions and central cities. Digital finance development can alleviate the financing constraint of enterprises, thus facilitating the digital transformation of enterprises. Digital finance development can drive enterprise innovation, thus promoting the digital transformation of enterprises. Therefore, this paper suggests that the government should steadily advance digital finance development. Meanwhile, financial institutions should speed up the construction of digital platforms and strengthen their support for innovative projects. In addition, enterprises should actively seize the opportunities brought by digital finance development and accelerate the construction of digital transformation.

The effect of a list: How firms on key pollution supervisory list disclose environmental information?

This paper studied how firms on China's key pollution supervisory list (KPSL) disclose environmental information in corporate social responsibility (CSR) reports according to legitimacy theory. Using a sample of A-shares listed Chinese firms from 2012 to 2019, it is shown that firms on KPSL utilize longer text and more tables and figures in their environmental information disclosure (EID), but adopt less positive textual tone to describe environmental performance. Besides, state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs) have different presentation styles. These styles for EID do not contribute to firm performance, especially adopting less positive textual tone negatively influences firm reputation.

Value variations of political ties in the acquisition of R&D capabilities: The roles of non-SOEs and dysfunctional competition

The issue of how enterprises acquire research and development (R&D) capabilities from their political ties is neglected by previous studies. Drawing on the resource-based view, this study examines the effect of political ties on the acquisition of R&D capabilities. Moreover, based on institutional theory, this study offers contingent situations that specify how can nonstate-owned enterprises (non-SOEs) and dysfunctional competition determine the value variations of political ties in the acquisition of R&D capabilities. Besides, this study also investigates the effect of the acquisition of R&D capabilities on radical innovation. The findings from a survey of 189 Chinese firms indicate that political ties of enterprises have a positive effect on the acquisition of R&D capabilities. Furthermore, non-SOEs weakens the effect of political ties on the acquisition of R&D capabilities. However, dysfunctional competition strengthens the relationship between political ties and the acquisition of R&D capabilities. Besides, the acquisition of R&D capabilities is positively related to radical innovation.

How Does Corporate Party Committee Governance Affect Charitable Donations? Evidence from Heavy-Pollution Industries in China

Charitable donations are an effective way for heavy-pollution industries to reduce their environmental reputation risk. In China, the communist party committees within corporations play a key role in decisions regarding charitable donations. However, relatively little is known about the relationship between the governance of corporate party committees and charitable donations. Using data from Chinese listed firms in heavy-pollution industries from 2013 to 2018, we found that corporate party committee governance enhanced the willingness of firms to donate and to increase the amount of their donations significantly. The effect on intention of charitable donations was pronounced for non-state-owned enterprises (NSOEs), whereas the effect on the amount of donations was pronounced for state-owned enterprises (SOEs). Party committee governance increased the amount of charitable donations in regions with a higher level of marketization, but it reduced the amount of charitable donations in firms/industries with a high degree of monopoly. Our findings provide insight for the decisive role of party committees in corporate charitable donations in heavy-pollution industries.

The Impact of Stock Price Crash Risk on the Cost of Capital: Empirical Study from China

This study analysed the effect of Sock Price Crash Risk (SPCR) on the cost of capital in Chinese listed firms in the Shenzhen stock exchange and the shanghai Stock Exchange. A sample of 290 firms based on the highest value of assets of each firm was used. The cost of capital consists of two factors; the cost of equity (COE) and the cost of debt (COD). The SPCR is measured by using two statistics, one is NCSKEW means the negative coefficient of skewness of the firm-specific weekly returns and the second is DUVOL that means Down to-Up Volatility used to measure the crash likelihood weekly return of firm-specific and used the Modified PEG ratio model of Eston approach to measuring the cost of equity. We used panel data to run the regression model analyses. SPCR was found to have a significantly positive relationship with the cost of equity and cost of debt. Also, the sample was divided into the State-Owned enterprise (SOEs) and Non-State-Owned enterprises (NSOEs) for comparison. The results show that the impact of SPCR on the COE and COD is stronger in SOEs than NSOEs. The regulators need to improve and strengthen the development of laws and regulations related to company information disclosure, to reduce the cost of capital of listed companies and improve the efficiency of financing the Chinese capital market. Companies need to work together to strengthen internal controls, create a good disclosure environment, and prevent the SPCR.

Firm Funding and Investment under Bank Credit Control Policy: Evidence from China

Using the 2014 China Banking Regulatory Commission (CBRC) credit control policy as a quasi-natural experiment, this paper demonstrates that credit supply contraction leads to a significant reduction in firm’s external funding, cash holding, and investment. Analysis of both loan-level and corporate-level data reveal that new bank loans issuance of targeted firms dropped significantly after the regulation. State-owned banks are identified as the main policy implementer. By instrumenting the change of loans issuance with the policy shock, I further discover the amplifying effect of large declines in bond issuance and trade credit for the targeted firms. Cash holdings were used to cushion the financing gap. Investment dropped and inefficient investment increased due to the shock. Interestingly, whereas such impacts were significant for non-state owned enterprises, state-owned enterprises (SOEs) were barely affected. Overall, I conclude that the lending control policy led to less capital resources allocated to non-SOEs but not SOEs. JEL classification numbers: G21, G28, G32, G38. Keywords: Bank lending, Firm funding, Firm investment, SOBs, SOEs, Credit policy, Credit rationing.

The impact of COVID-19 on firm innovation: Evidence from Chinese listed companies

This study examines the impact of COVID-19 on firm innovation using the data of Chinese listed companies from January 2020 to October 2020. The results show that at the national level, COVID-19 inhibits firm innovation in China. At the regional level, there are no differences in the impacts of COVID-19 on Hubei province and other regions. At the firm level, compared with non-state-owned enterprises (NSOEs), COVID-19 has a greater negative effect on the innovation quality of state-owned enterprises (SOEs). Innovation in large companies is more vulnerable to COVID-19 than in small and medium-sized enterprises (SMEs).

The impact of air pollution on corporate cash holdings

Based on the data of A-share listed companies in Shanghai and Shenzhen from 2013 to 2017 and the air quality monitoring data released by the China National Environmental Monitoring Centre, this paper conducts an empirical test on the relationship between air pollution and corporate cash holdings. The empirical research found that: first, air pollution increases the level of enterprise cash holdings. Second, there are some differences between heavily polluting and non-heavy polluting enterprises. The impact of air pollution is more significant in non-heavily polluting enterprises. Furthermore, the results show that the relationship between air pollution and cash holdings is significant regardless of the level of regional financial development. However, the influence of air pollution on cash holdings has a significant positive influence on nonstate-owned enterprises, while state-owned enterprises do not have such a significant impact. The research conclusions are conducive to revealing the relationship between the natural environment and micro-financial activities.

The Real Effects of Mandatory Corporate Social Responsibility Reporting in China

We investigate the real effects of corporate social responsibility (CSR) reporting regulation enacted in China in 2008 covering both state‐owned enterprises (SOEs) and non‐state‐owned enterprises (NSOEs). As the CSR reporting requirement applies only to select firms, the regulation presents a unique setting that provides us with a suitable control sample of firms not subject to the regulation. Using a difference‐in‐differences approach, we document that relative to firms that are not affected by the regulation, NSOEs and SOEs with low state ownership subject to the mandate are associated with increases in CSR expenditures. Moreover, the real effects manifest in non‐core initiatives for these firms, whereas they manifest in core operating activities for SOEs with high state ownership. Finally, the effects of the mandatory CSR reporting on profitability and shareholder value are negative.

Financialization and Corporate Performance in China: Promotion or Inhibition?

Using a sample of Chinese listed firms for the period 2009 to 2018, we analyze the relationship between the financialization of non‐financial corporations (NFCs) and corporate performance from both long‐term and short‐term perspectives. Our results show that the impact of financialization on firm performance is not simply a crowding‐out or pulling effect but rather depends on the type of financial assets held by the firms. The holdings of investment financial assets generally have a pulling effect on both the short‐term performance and market expectations of a firm's future profits as proxied by Tobin's Q, but they crowd out the innovation activities that are critical to long‐term performance. Although monetary financial assets positively affect corporate profitability, they inhibit the increase of return on invested capital and long‐term performance. Additionally, compared with monetary financial assets, investment financial assets play a more important role in promoting short‐term performance, although the crowding‐out effect on innovation activities is more prominent for investment financial assets. Furthermore, this paper also concludes that compared with manufacturing and non‐state‐owned enterprises (NSOEs), the role of financialization in promoting the performance of non‐manufacturing and state‐owned enterprises (SOEs) is more significant.

Do auditors consider alleged bribery when accepting clients? Evidence from Chinese non-state-owned enterprises

This study examines the relationship between firm-level alleged bribery and audit-related decisions for Chinese non-state-owned enterprises (NSOE). Using a sample of listed NSOEs in 2010–2016, we find that alleged bribery is negatively correlated with the probability of being accepted by top-tier auditors and is positively correlated with audit fees. These findings suggest that top-tier auditors are more reluctant to accept corrupt firms and also charge higher audit fees. Also, we find that the negative correlation between alleged bribery and the probability of being accepted by top-tier auditors is strengthened after an anti-corruption campaign launched by the Chinese government in 2013 and/or after the crackdown of provincial-level officials, and is more pronounced in less developed regions. Finally, we find that alleged bribery is positively associated with the level of earnings management, implying that alleged bribery likely increases irregularities in financial statements.

Corporate Investment and Shadow Banking Channel of Monetary Policy

This paper studies the heterogeneous response of State-owned enterprises (SOEs) and nonState-owned enterprises (nonSOEs) to the monetary policy. I find that SOEs’ investment declines by 5% - 12% more than nonSOEs after a 100 basis point monetary tightening shock using recent data from China. I provide evidence that a shadow banking channel could explain the empirical results. I show that, via a rise of shadow banking relative to bank loans, a monetary tightening shock raises the credit spread of SOEs to nonSOEs, which further slows down the investment of SOEs compared to nonSOEs.

Research on the Impact of Financial Flexibility on Innovation Investment from the Perspective of Institutional Ownership

Uncertainty in the business environment brings many challenges and opportunities to enterprises. This paper studies the impact of financial flexibility on innovation investment from the perspective of institutional ownership, using data of A-share high-tech enterprises from 2014 to 2018 as the empirical analysis sample. The results show that financial flexibility can promote innovation investment. Moreover, compared with state-owned enterprises, cash flexibility plays a more significant role in promoting non-stateowned enterprises, while debt flexibility only promotes innovation investment in non-state-owned enterprises. Through further research, it is found that the size of institutional investors’ shareholding has the positive moderating effect on the relationship between financial flexibility and innovation investment. In addition, non-independent institutional investors’ shareholding plays a negative role in regulating the impact of financial flexibility on innovation investment.

Impact of Financialization on Production Efficiency of China's Marine Companies

Deng, J. and Liu, J., 2020. Impact of financialization on production efficiency of China's marine companies. In: Liu, X. and Zhao, L. (eds.), Today's Modern Coastal Society: Technical and Sociological Aspects of Coastal Research. Journal of Coastal Research, Special Issue No. 111, pp. 310–313. Coconut Creek (Florida), ISSN 0749-0208.Under the background of Chinese enterprises turning from real to virtual, the financialization of marine companies is becoming more and more serious. This article takes marine-listed companies as a research sample to study the impact of corporate financialization on production efficiency. The study found that the financialization of marine enterprises has an inverted U-shaped relationship with production efficiency. Research on the classification of financial assets found that short-term financial asset investment has no significant impact on the production efficiency of marine companies, whereas long-term financial asset investment has an inverted U-shaped relationship with production efficiency. The robustness test proved the reliability of the conclusion. This article also found that total financial asset investment and long-term financial asset investment of state-owned marine enterprises have a significant inhibitory effect on production efficiency, whereas the inhibitory effect of nonstate-owned marine enterprises is not obvious. The conclusion has practical significance for promoting high-quality development of China's marine-related industries.

Financial Attributes, Environmental Performance, and Environmental Disclosure in China.

Contest between the international or national enterprises stimulates the formation of innovative or improved products or of well-organized processes. Nevertheless, reliance on carbon-based materials and energy emission sources has been highlighted as a primary problem of the 21st century. The current study examines the influence of carbon disclosure information (CDI), media reporting and financial influence on state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs) by using Shenzhen and Shanghai’s heavy polluting listed industries’ dataset from 2014 to 2019. By applying different data approaches, the estimated results demonstrate that the CDI level is significantly negative related to SOE compared to NSOE. The estimated results explain that media’s positive reporting offsets the additional benefits to stakeholders. While media’s negative reporting negatively influences a firm’s competitive position, it mitigates the stock price and its social value. Our results suggest that external factors are encouraging for the financial values of stakeholders, along with those of enterprises.

Corporate deleveraging and financial flexibility: A Chinese case-study

Using a firm-by-firm longitudinal approach, we find that highly levered firms in the United States and China systematically deleverage to restore financial flexibility over a median six-year period. In the Chinese context, the deleveraging period from the market leverage peak to trough is five years for non-state owned enterprises (non-SOEs) and developing firms, and seven years for SOEs and mature firms. Non-SOEs and developing firms are less capable of restoring financial flexibility than their SOE and mature firm counterparts. Debt repayment is the main contributor to the deleveraging process for both Chinese and US firms. Share issuance contributes more than the retained earnings in the deleveraging process for Chinese firms.

Wage Differential between Rural Migrant and Urban Workers in the People's Republic of China

Using a recently constructed dataset that draws on the China Employer–Employee Survey, this paper provides new evidence on the earnings gap between rural migrant and urban manufacturing workers in the People's Republic of China. When we only control for province fixed effects, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers. We find that the gap in hourly earnings is larger than the gap in monthly earnings because rural migrant workers tend to work an average of 5.6% more hours per month than urban workers. Using these data, we also find that 87.4% of the monthly earnings gap and 73.9% of the hourly earnings gap can be attributed to differences in the individual characteristics and human capital levels of rural migrant and urban workers. Furthermore, we find that this unexplained earnings gap varies among different groups of workers. The earnings gap is much larger (i) for workers in state-owned enterprises than in nonstate-owned enterprises, (ii) for college-educated workers than workers with lower levels of educational attainment, and (iii) in Guangdong province than in Hubei province.

Can the Introduction of an Environmental Target Assessment Policy Improve the TFP of Textile Enterprises? A Quasi-Natural Experiment Based on the Huai River Basin in China

Green development is an inevitable requirement to build a modern economic system and fundamental solution to pollution problems. Exploring the relationship between environmental regulation and enterprise total factor productivity (TFP) has great significance for realizing the win-win goal of achieving both environmental protection and economic development. Based on a firm-level dataset from 2000-2007, this paper explores the economic effects of the Environmental Target Assessment Policy of Huai River Basin (ETAP, HRB) in 2004, an environmental regulation that clarifies the responsibility of local governments, by identifying changes in the TFP of the clothing industry (CMI). The empirical findings support that the ETAP can significantly promote improvement in the TFP using the difference in differences (DID) method. Robustness tests, such as the triple differences (DDD) and propensity score matching-difference in differences (PSM-DID), are used to address concerns about the DID approach. Analysis of dynamic effects shows that the ETAP has no impact on enterprise TFP in 2004 but significantly improve the TFP on the next three years (2005-2007). The heterogeneity test results indicate that nonstate-owned enterprises are more sensitive to the ETAP, and the coefficient of the average treatment effect is 0.033. In addition, the ETAP has no noteworthy impact on large- and medium-scale enterprises but results in an average increase of 0.037 in small-scale enterprises’ TFP.