Shenzhen Stock Exchange Research Articles

How components of ESG performance impact corporate risk-taking?

Corporate risk-taking (CRT) is crucial for sustainable business development. The focus of this study is to examine the relationship between components of ESG performance (ESGP) and corporate risk-taking. We conduct an empirical analysis using CSI ESG score data of A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2009 to 2022. The conclusions are as follows: (1) ESGP exerts a facilitating effect on CRT. Specifically, environmental performance inhibit CRT, whereas social responsibility and corporate governance performance enhance CRT. (2) The facilitating effect of ESGP on CRT is more pronounced at lower levels of equity concentration. (3) ESGP enhances CRT by increasing the level of innovation and institutional investor shareholding. The contribution of this study is to help firms change CRT by adjusting the components of ESGP.

Impact of firm’s supply chain network position on digital transformation: evidence from China

Purpose Given the complexity and increasing interdependence of supply chain networks, a broader perspective beyond a simple binary relationship is needed to analyse the impact of supply chain networks on firms. Based on social network theory, this study aims to explore the relationship between firms’ network position in the supply chain network and digital transformation, as well as the moderating effects of structural holes and network partners’ digitalisation. Design/methodology/approach This study analyses a sample of Chinese A-share companies listed on the Shanghai and Shenzhen Stock Exchanges for the period 2011–2020 using regression analysis to test hypothesised relationships. Findings A firm’s centrality in the supply chain network is positively related to its digital transformation, and that the firm’s structural holes and the level of network partners’ digitalisation can both strengthen the positive influence of network centrality on digital transformation. Moreover, the heterogeneity analysis reveals that the positive effect of firms’ network centrality on digital transformation is more pronounced in non-SOEs and upstream firms. Practical implications In the pursuit of digital transformation, firms should recognise the significance of their position in the supply chain network and enhance their capability for information and resource acquisition by proactively strengthening their business cooperation with other network members. Moreover, firms should emphasise the value of open networks and their partners in supply chain networks. Originality/value This study applies social network theory to investigate the role of a firm’s external supply chain network in its digital transformation, clarifying the context and boundaries in which a firm’s position in the supply chain network influences digital transformation. The results extend the research and theoretical perspective on digital transformation and the consequences of supply chain networks.

CVC Involvement, Digital Transformation, and Risk-Taking of Investee Companies: Evidence from China

ABSTRACT This paper investigates the impact of corporate venture capital (CVC) involvement on digital transformation and the risk-taking behavior of investee companies. Based on data on manufacturing companies listed on the Small and Medium-sized Enterprise (SME) board and the Growth Enterprise Market (GEM) of the Shenzhen Stock Exchange from 2015 to 2022, we find that CVC involvement helps boost the risk-taking level of investee companies. This is because CVC promotes corporate digital transformation, which in turn enhances corporate risk-taking. Finally, we show that the promoting effect of CVC on corporate risk-taking is more pronounced for investee companies with a small size and investee companies with a high degree of operating leverage. Our findings provide novel evidence for the effect of CVC on corporate risk-taking in the digital age.

Management myopia and corporate innovation in China: Focus on the moderating role of equity incentives

This study selected a sample of A-listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2022 to examine the relationship between management myopia and corporate innovation. The findings are as follows. First, management myopia has an inhibiting effect on corporate innovation, whereas market competition significantly enhances such innovation. Second, equity incentives can alleviate the inhibiting effect of management myopia on corporate innovation by motivating managers to focus more on long-term development and innovation investments. Third, market competition has different impacts on innovation of companies with different levels of ownership. In this regard, its impact on companies with high equity concentration is more significant. Finally, market competition has different impacts on the innovation of state-owned and private enterprises, with a more significant impact on the latter.

Selling short and management tone: evidence from the margin trading market

ABSTRACT The objective of this study is to investigate the impact of short-selling mechanisms on management net tone. By utilising data from A-share listed companies on the Shanghai and Shenzhen stock exchanges between 2007 and 2017, the analysis employs a difference-in-differences model which reveals that short-selling mechanisms significantly reduce management net tone. The conclusions drawn from this study remain robust after a series of stringent tests. Further analysis reveals that in non-state-owned enterprises, firms with lower information transparency, and those operating within superior market and legal environments, short-selling mechanisms effectively suppress management tone inflation. Additionally, the study identifies analyst coverage and executive compensation as mediating channels through which short-selling mechanisms influence management net tone. This research provides valuable theoretical insights for regulatory bodies concerning the disclosure of non-financial information by listed companies.

Influence of Corporate Information Transparency on Foreign Institutional Investors' Shareholding Behavior: Evidence from Public Listed Companies in China

In 2003, China implemented the Qualified Foreign Institutional Investor (QFII) system, which has garnered considerable interest from international institutional investors in the mainland market. As global investors, QFIIs depend significantly on precise, thorough information to bolster their investing criteria. Consequently, the transparency of corporate information becomes a crucial factor for QFIIs. However, due to the relatively late development of the Chinese market, an imbalanced structure of listed companies and information asymmetry, the information disclosure of listed companies has been subject to certain degrees of distortion. Therefore, to better facilitate the development of China's securities market and to help QFIIs fully realize their advanced value investment strategies, this paper aims to study the impact of corporate information transparency on the stockholding behavior of foreign institutional investors. This paper begins by reviewing the literature on the factors influencing institutional investor holdings, corporate transparency, and the characteristics of foreign institutional investors' stockholding. It then defines the concepts of corporate information transparency and foreign institutional investors, analyzes the current state of information transparency in Chinese listed companies, and examines the development of the QFII system in China. The theoretical framework explores the mechanisms through which corporate information transparency influences the stockholding behavior of foreign institutional investors. In the empirical analysis, the paper plans to measure the information transparency of listed companies from three perspectives: earnings quality, information ratings by the Shenzhen Stock Exchange, and the number of analyst followings, to investigate how corporate information transparency influences QFII stockholding behavior.

Can digital transformation promote hospitality and tourism firms’ investment? Moderating effect of financing constraints and economic policy uncertainty

ABSTRACT Research on corporate investment is widely acknowledged as essential in the realm of financial management within the hospitality and tourism sector. Drawing on information asymmetry and resource dependency theories, this study examines the effect of digital transformation on hospitality and tourism firm investment and explores how financing constraints and economic policy uncertainty moderate these effects. We utilized firms engaged in tourism, hotel, catering, and transportation, listed on the A-share market of China’s Shanghai and Shenzhen stock exchanges from 2009 to 2022, as our research sample. Our findings indicate that digital transformation enhances investment in hospitality and tourism companies. Furthermore, this positive effect was more pronounced for firms with reduced financing constraints and heightened economic policy uncertainty. These findings reveal ignored tourism and hospitality investment antecedents and enrich academic understanding by expanding firm-specific boundaries. This study provides practical insight into how hospitality and tourism firms can boost investment through digital transformation.

Top management team stability and maturity mismatch between investment and financing: the moderating effects of state ownership and institutional ownership

PurposeAccording to the resource-based theory, a firm’s unique resources and capabilities are the key to its competitive advantage. This paper aims to investigate the effect of top management team (TMT) stability, an important intangible resource of the firm, on the maturity mismatch between investment and financing of companies. Additionally, we explore the moderating effects of state ownership and institutional ownership in this context.Design/methodology/approachThis study conducts an empirical analysis based on the ordinary least squares (OLS) model with a sample of Chinese companies listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2022.FindingsThe results show that TMT stability significantly mitigates the degree of maturity mismatch. Both state ownership and institutional ownership weaken the negative effect of TMT stability on maturity mismatch. Besides, alleviating financing constraints is a crucial pathway through which TMT stability influences maturity mismatch.Practical implicationsThe findings help firms to effectively retain TMT talents and reduce the occurrence of maturity mismatch.Originality/valueThis paper not only helps to expand the research on the economic effects of TMT stability but also provides new ideas on how to alleviate the maturity mismatch of companies.

Economic policy uncertainty and common prosperity within the enterprise: Evidence from the Chinese market.

In the continuous development of the Chinese economy, the desire for common prosperity among the people has become increasingly strong. However, the complex domestic and international situations, along with the economic uncertainties post-pandemic, have introduced significant uncertainties into government economic policies. In the long term, this uncertainty has a profound impact on intra-enterprise common prosperity, affecting society at large. This paper focuses on non-financial listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2020, examining the negative effects of economic policy uncertainty on intra-enterprise common prosperity. The results indicate that economic policy uncertainty has a significant adverse impact on intra-enterprise common prosperity, and this impact is more pronounced in state-owned enterprises, those in the growth life cycle, and companies with poor innovation capabilities and limited external support. Companies enhancing social responsibility and overall factor productivity can help mitigate these negative effects. Furthermore, in dynamic features, as the level of intra-enterprise common prosperity increases, the negative impact of economic policy uncertainty gradually diminishes, while the positive effects of overall factor productivity and corporate social responsibility on enterprises become more evident.

Supplier Instability and Idiosyncratic Risk in China: A Risk Mitigation Perspective from Real Options

ABSTRACT Although supply chain instability has garnered significant attention from both academic and practical fields, the propagation of instability-induced risk along the supply chain remains unclear. This study complements the extant literature by exploring the association between the instability of a firm’s upstream suppliers and the firm’s idiosyncratic risk. Analyzing firms listed on the Shenzhen Stock Exchange and Shanghai Stock Exchange in China from 2014 to 2019, we find that firms with greater supplier instability exhibit higher idiosyncratic risk. However, this risk contagion is weaker for firms with more real options (i.e. greater investment opportunities and managerial flexibility) and for firms in regions with higher levels of FinTech digitalization. The impact of supplier instability on idiosyncratic risk remains robust after addressing endogeneity concerns. Our results provide a deeper understanding of the sources of firms’ idiosyncratic risk in the context of supply chain instability and identify tools to mitigate this risk.

Collusion or supervision? Between auditor and audit firm – tax planning’s perspective

PurposeThis study aims to investigate the impact of auditor industry specialization (AIS) on clients’ tax planning at the audit firm level and individual auditor level, respectively.Design/methodology/approachThe study’s sample consists of 44,637 firm-year observations of Chinese firms listed on the Shenzhen and Shanghai Stock Exchanges during the period from 2002–2020. The data are collected from the Taiwan Economic Journal. Panel regression is used to test hypotheses. Additionally, a two-stage least squares model is used to address concerns about possible endogeneity.FindingsThe relationship between tax planning and AIS is significantly positive at the audit firm level, while it is significantly negative at the individual auditor level.Originality/valueThe authors use manually collected data to investigate the distinct impacts of two AIS metrics on tax planning: the number of clients and the scale of clients.

Does a business education make for better innovative managers? An empirical examination of CEOs’ business education, CEO duality and R&D investment intensity

This study aims to explore how chief executive officers (CEOs) business education influences their company's investment in Research and Development (R&D) taking into account the moderating impact of CEO duality. Risks related to investment in research and development might have an impact on CEOs who are responsible for improving management effectiveness and company value. Insufficient education among executives can hinder effective oversight. Findings from analyzing data from 1632 firm-year observations from 2015 to 2020 of companies listed on the Shanghai and Shenzhen Stock Exchanges reveal that CEOs with dual roles tend to prioritize R&D investments and innovation. Additionally, CEOs without a Master of Business Administration (MBA) or executive MBA education (EMBA) exhibit a greater willingness to take risks leading to more innovation and spending on R&D. This research emphasizes the need to consider CEOs' demographics, board structures and governance mechanisms to promote innovation in companies.

The Levels of Government Environmental Attention and Enterprises’ Green Technological Innovation

This study utilizes data from listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2023 and employs text analysis methods to investigate the impact of government environmental concerns on corporate green technology innovation and its underlying impact mechanisms. The empirical findings demonstrate that heightened government environmental concerns significantly foster corporate green technology innovation. This relationship remains robust across a series of sensitivity analyses. The impact mechanism analysis reveals that increased government environmental concern leads to a heightened intensity of environmental regulation, drives the intelligent transformation of enterprises, and enhances the implementation of corporate environmental strategies, collectively contributing to the improvement of corporate green technology innovation capabilities. Furthermore, the heterogeneity analysis indicates that the effect of government environmental concerns is more pronounced in state-owned enterprises, mature enterprises, and industries with lower pollution levels. This study underscores that the government’s intensified focus on environmental issues can effectively promote corporate green technology innovation, thereby promoting sustainable economic and social development and supporting the dual goals of environmental protection and economic growth.

An Empirical Study on Asset Pricing Models Based on The Chinese A-Share Market

Based on the analysis of the A-share markets in Shanghai and Shenzhen Stock Exchange from 2000 to 2023, this paper systematically evaluates the applicability and explanatory power of the Capital Asset Pricing Model (CAPM), the Fama-French Three-Factor Model (FF3) and the Fama-French Five-Factor Model (FF5) in the Chinese market. The study finds that although CAPM has some explanatory power in the early stage, the three-factor and five-factor models can better explain the cross-sectional changes in stock returns as the market develops. In the descriptive statistics, each factor's volatility and correlation reveal the Chinese market's unique characteristics, such as the relative strength of small-cap and growth stocks. In the regression analysis, the results of the Fama-MacBeth regression showed that the significance and explanatory power of the market factor, size factor and value factor were different in different models. Further robustness analysis reveals the COVID-19's impact on the model's performance through the sub-period analysis. This paper provides a new perspective on understanding the asset pricing of China's A-share market and a theoretical basis for investors' investment decisions. It also points out the limitations of existing models in explaining emerging market equity returns. It suggests that future research can deeply explore the performance of more factors in different market environments.

Reverse mixed ownership reform and financial risks in private enterprise

The mixed ownership reform is an important part of the economic restructuring in our country. In addition to the participation of non-state-owned capital in soes, it is also more and more common for state-owned capital to participate in the reverse mixed ownership reform of private enterprises. As an important force in China's economic development, the national economy has entered a new normal in recent years, and due to the impact of COVID-19, the Sino-US trade war and other events, many private enterprises have fallen into financial crisis and entered a "wave of closure." Based on this background, this paper empirically studies the impact of state-owned capital shareholding on the financial risk of private enterprises by using the sample of A-share listed enterprises in Shanghai and Shenzhen Stock exchanges from 2007 to 2021. In addition, this paper also discusses the influencing mechanism from two aspects of resource acquisition and governance supervision, and further analyzes that the effect of reverse mixed ownership reform of private enterprises on reducing financial risk mainly comes from the shareholding of state-owned non-financial institutions. This paper enriches the research on the economic consequences of reverse mixed ownership reform and the influencing factors of financial risks, and provides new ideas for improving the ability of private enterprises to prevent financial risks and promoting the healthy and stable development of private enterprises.

Impact of Equity Liquidity on Corporate Value—— Based on The Empirical Analysis of China's A-Share Listed Companies

Since the establishment of the Shanghai and Shenzhen Stock Exchange, China's stock market has experienced a development process from scratch, from small to large, and from weak to strong. During this period, the liquidity of China's stock market has increased significantly. The stock market can affect the real economy by changing the motivation and influencing the behavior of enterprises, which is crucial to economic development. Many scholars at home and abroad have studied the impact of stock liquidity on enterprise value from different perspectives. This paper finds that the stock liquidity has a significant positive impact on the value of enterprises. The higher the level of stock liquidity, the higher the enterprise value, and the company's equity structure can play a role as an intermediary variable in the process of stock liquidity affecting the enterprise value.

Research on High-quality development of enterprises based on an intelligent background

In the global economy, intelligent technology has attracted much attention as a crucial factor in propelling enterprises towards achieving high-quality development growth. Taking the financial reports of A-share listed companies in Shanghai and Shenzhen Stock exchanges published from 2007 to 2022 as samples, this study explores the influence and mechanism of intelligent technology on the high-quality development of enterprises. The study finds that intelligent technology has a substantial positive impact on enhancing the high-quality growth of businesses, especially by improving innovation efficiency and management efficiency. In addition, digital inclusive finance and the digital economy have a positive moderating effect on the relationship between intelligent technology and the high-quality development of enterprises. These results offer practical backing for the advancement of corporate intelligence and establish a vital theoretical and empirical foundation for companies to uphold their competitive edge in an intensely competitive market landscape.

Regional fintech development, financing constraints, and enterprise innovation: evidence from China’s A-share non-financial listed companies

ABSTRACT This study uses a fixed effect model to examine the impact based on a sample of non-financial A-share listed companies in the Shanghai Stock Exchange and Shenzhen Stock Exchange from 2010 to 2019. The empirical results show that regional fintech development has a significantly positive effect on enterprise innovation, while heterogeneity analysis results indicate that this effect is more significant for small and medium-sized enterprises and secondary industry fields. Further research finds that regional fintech development not only has significant spatial autocorrelation, but it also has spillover effects on enterprise innovation. Additionally, the mechanism test shows that financing constraints are part of the mediating factor between regional fintech and enterprise innovation. We conclusively present three recommendations for enriching the development of regional fintech, thus allowing for increased innovation potential and the sustainable growth of companies.

The Impact of Employee Stock Ownership Plans on Capital Structure Decisions: Evidence from China

The determination of the capital structure is a critical component of a company’s financial decision-making process. The question of how to optimize a firm’s capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China’s capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms’ capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms’ capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm’s major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions.

Exploring the Relationship Between Environmental, Social, and Governance and Tax Avoidance Strategies

This study investigates how each environmental, social, and governance (ESG) dimension relates to tax avoidance in well- and poorly governed firms. The analysis uses data from 2016 to 2020 on A-share companies listed on the Shanghai and Shenzhen stock exchanges and three panel methodologies: pooled ordinary least squares, random effects, and fixed effects models. The results show that not all ESG dimensions are equally associated with tax avoidance, and the relationship between ESG and tax avoidance differs between well- and poorly governed firms. For well-governed firms, the social and governance dimensions positively correlate with tax avoidance, whereas the environmental dimension does not. For poorly governed firms, none of the three dimensions correlate with tax avoidance. These findings suggest that ESG and tax avoidance are more compatible than conflicting. Moreover, they underscore the importance of good corporate governance in enabling tax avoidance as an ESG-compatible strategy. This study addresses the debatable relationship between ESG and tax avoidance, which has significant implications for stakeholders, including managers, investors, and policymakers.