State-owned Firms Research Articles

The opposite innovation impacts of air and water pollution regulations: Evidence from the total emissions control policy in China

This paper uses a unique firm-level data set from China’s two most developed regions, the Yangtze River Delta (YRD) and the Pearl River Delta (PRD), to examine the effects of environmental regulations on innovation. Variations in air and water pollution reduction plans under the Total Emissions Control Policy from the 10th to the 12th Five-Year Plans (2001–2015) are explored to measure the stringency of environmental regulations faced by industrial firms. To alleviate endogeneity concerns, we calculate city-level fair pollution reduction volumes which rely only on each city’s contribution to national pollution emissions in the base years and use them as instrumental variables of reduction plans. The two-stage least square estimations reveal that while air pollution regulation (APR) motivates industrial firms to innovate, water pollution regulation (WPR) hinders firm innovation. We confirm the opposite effects by estimating the impact on entrepreneurs’ perceptions of the importance of innovation in industrial firms’ development. Heterogeneity effect analysis shows that APR also hinders innovation in heavily air-polluting industries and state-owned firms, and WPR produces a decreasing innovation-hindering effect over time, which is larger in the YRD region than in the PRD region. We interpret the opposite impacts with the fact that water pollution discharges are more equally distributed across industries than air pollution emissions, resulting in more pervasive and stringent WPR.

The double-edged sword effect of digital capability on green innovation: Evidence from Chinese listed industrial firms

This study investigates the impact of digital capability on green innovation and its moderating mechanism. The results show that a firm's digital capability has a significant inverted U-shaped effect on its green innovation, thereby confirming the existence of non-linear changes in the green innovation process. Moreover, organizational slack and executive education can moderate the relationship between digital capability and green innovation, with available slack, recoverable slack or executive education having a positive effect, and potential slack having a negative effect. Further study shows that digital capability of private firms, foreign firms or firms in the eastern region has a greater impact on green innovation than that of state-owned firms, local firms or firms in the central and western regions. Additionally, digital capability contributes to the economic value transformation of green innovation, but environmental performance improved by green innovation does not significantly depend on digital capability. Based on these findings, policy implications of improving green innovation are discussed.

Contribution of digital governments to digital transformation of firms: evidence from China

ABSTRACT Rapid advances in information and communication technologies have promoted the evolution of digital governments and the digital transformation of firms (DTF). As a provider of public services and a regulator, the government is associated closely with the operations of firms. However, the manner by which a digital government contributes to the DTF remains unknown. In this study, we use a sample of Chinese A-share listed firms in 2021 to determine the configurations of digital government components that generate different levels of DTF via fuzzy set qualitative comparative analysis. Empirical results show that the synergy of multiple digital government components, instead of a single digital government component, generates high and non-high levels of DTF. Additionally, a digital government heterogeneously affects the digital transformation of state-owned and non-state-owned firms. Non-state-owned firms are more dependent on high-performing digital governments than state-owned firms in achieving high levels of DTF. These findings contribute to the understanding of the important role of digital governments and promote investigations into the driving mechanisms of the DTF.

Managerial ownership and labor income share

This paper investigates the influence of executive compensation on labor income share. I expect that higher managerial shareholding reduces labor income share. Consistent with this conjecture, the empirical evidence suggests that both augmented innovation investment and alleviated bankruptcy costs explain the reduction in labor income share. Our results remain robust by addressing the potential unobserved variable concerns and reverse causality issues. Heterogeneity tests show that the effect is more pronounced in firms with weaker political connections, higher institutional ownership, higher customer concentration, and in state-owned firms. This study contributes to the merging literature on the lowering of labor income share.

The Economics of the Public Option: Evidence from Local Pharmaceutical Markets

We study the effects of competition by state-owned firms, leveraging the decentralized entry of public pharmacies to local markets in Chile. Public pharmacies sell the same drugs at a third of private pharmacy prices, because of stronger upstream bargaining and market power in the private sector, but are of lower quality. Public pharmacies induced market segmentation and price increases in the private sector, which benefited the switchers to the public option but harmed the stayers. The countrywide entry of public pharmacies would reduce yearly consumer drug expenditure by 1.6 percent. (JEL D22, I18, L32, L65, O14)

Can digital technology innovation promote total factor energy efficiency? Firm-level evidence from China

The study is based on panel data of listed manufacturing companies from 2010 to 2022, identifies digital technology innovation (DGTI) by using patent data, uses two-step stochastic frontier with Shepard energy distance function to measure total factor energy efficiency (TFE), and analyzes the impact of DGTI on TFE. Research has found that the larger the scale of DGTI, the more conducive it is to TFE. DGTI can also promote TFE by improving environmental responsibility fulfillment and internal control quality, while, DGTI may hinder TFE by increasing operating costs. In the heterogeneity, DGTI has a stronger promoting effect on the TFE of large-scale firms and state-owned firms. In the central and western regions, DGTI has a U-shaped effect that first inhibits and then promotes TFE. Moreover, intellectual property protection, information infrastructure, and digital industry agglomeration will all promote the positive impact of DGTI on TFE. This study aims to provide implications for improving energy efficiency and promoting digital technology research and development.

Emissions Reduction Target Plan and Export Product Quality: Evidence from China’s 11th Five-Year Plan

Determining how environmental policy affects export competitiveness is essential for achieving win–win objectives in environmental governance and trade development. We examine whether and how China’s emissions reduction policy declines the firm’s export product quality during the 11th five-year plan via the difference-in-difference-in-difference method. The main findings of this paper are as follows: (i) Compared with less polluting industries, the export production quality declines 5.74% and 3.31%, respectively, as the pollution reduction targets of SO2 and chemical oxygen demand (COD) are set 1 unit higher in more polluting industries. (ii) The negative effect is greater in Western regions as well as state-owned firms. (iii) Local officials facing promotion pressure are more incentivized to raise emissions reduction goals, as well as greater increasing emissions abatement costs, thus leading to greater declines in export quality. However, the innovation compensation effect still remains. (iv) The negative effects can be mitigated through product switching that contributes to resource allocation within firms towards their core products, or executing the first-mover advantage in response to the emissions reduction plan.

Do environmental courts break collusion in environmental governance? Evidence from corporate green innovation in China

The environmental courts represent institutional innovation in the judicial system independent of administrative regulations, this study examines whether and how environmental courts promote corporate green innovation by breaking collusion in Chinese heavily polluting listed firms from 2003 to 2020. Based on a staggered difference-in-difference analysis, our findings show that environmental courts have a stronger stimulating effect on green innovation quality and no effect on low-quality green patents. This effect is particularly more pronounced for firms with lower risk-taking ability, higher green agency costs, and state-owned firms. We also confirmed that environmental courts enhance authoritative judicial constraints on local governments, thereby curbing collusion and forcing them to implement environmental protection subsidies and administrative penalties to optimize corporate green innovation structure. Our fine-grained analysis indicates that independent green patents are more sensitive to environmental courts than collaborative ones. However, corporate green R&D efficiency does not improve following the establishment of environmental courts. Overall, our study underscores the importance of strengthening environmental justice as an effective mechanism for facilitating a just transition to a low-carbon green economy.

The interactive effect of environmental penalties and environmental subsidies on corporate environmental innovation: Is more better or worse?

Most previous studies fail to investigate the interactive effects of different environmental instruments. Whether adopting more environmental instruments is better or worse for corporate environmental innovation (CEI) remains unclear. In this study, we distinguish between regulatory pressures as punitive pressures (environmental penalties, EP) and incentive pressures (environmental subsidies, ES) and focus on investigating whether EP and ES act as complements or substitutes on CEI. The results reveal that the interactive effect of EP and ES can act as substitutes rather than complements in promoting CEI. The results remain unchanged after a series of robustness tests. Further heterogeneity analysis reveals that the substitutive effect of EP and ES on CEI is more pronounced for state-owned firms and for firms operating in regions characterized by higher environmental quality and greater marketization. Our results provide valuable insights for the government on achieving an optimal outcome by mixing environmental instruments to promote CEI.

CEO’s Science and Engineering Background and Green Innovation: Evidence From China

This study examines whether a CEO with a science and engineering background (CEOSEB hereafter) affects green innovation. Data of A-listed industrial firms registered on the Shanghai and Shenzhen Stock Exchanges are analyzed from 2008 to 2018. Findings indicate that CEOSEB has a significant positive impact on green innovation. This research also tests the moderating effect of the firm’s resources, CEO compensation, and media coverage on the CEOSEB and green innovation nexus. Results show that the firm’s resources and media coverage are positive, whereas compensation negatively affects the CEOSEB and green innovation association. Finally, our results depict that the impact is more pronounced in state-owned firms than in private-owned enterprises. Results remain robust to a battery of econometric techniques. These findings offer novel insights into the clean and sustainable development literature from the perspective of the CEO’s educational background.

Oil price uncertainty and corporate inefficient investment: Evidence from China

Motivated by the substantial influence of oil price uncertainty (OPU) on corporate investment and the importance of corporate investment efficiency, this study focuses on the impact of OPU on corporate inefficient investment. Using a sample of Chinese listed firms from 2007 to 2019, we find that OPU negatively affects inefficient investment. This negative effect is consistent in the over-investment and under-investment sub-sample. Our findings are consistent with the real options theory and the strategic growth option theory. We also find that a shortening debt maturity structure is one of the underlying mechanisms through which OPU reduces inefficient investment. In addition, heterogeneity analysis indicates that the negative effects of OPU on inefficient investment are more pronounced in state-owned firms, firms with higher financing constraints, and firms with lower ownership concentration. Furthermore, we find that OPU emanating from positive oil price changes has a stronger negative impact on inefficient investment. This study comprehensively investigates the relationship between OPU and corporate inefficient investment from perspectives of over-investment and under-investment, and it enriches macro perspective evidence for the determinants of corporate inefficient investment.

Carbon emission trading scheme and corporate financialization: Evidence from China

To achieve the carbon goals, the Chinese government initially implemented the carbon ETS in 2013 in 7 pilot provinces and cities. Using the firm-level financial and management data of the A-share listed companies in the 30 provinces of mainland China from 2008 to 2020, this paper examines the ETS impact on corporate financialization by constructing a DID model. The result supports the “crowd-out” effect that the implementation of ETS decreases corporate financialization and this negative impact is weaker on the state-owned firms, located in the eastern region of China, and are not in the manufacturing industry. These findings imply that other than the original target to reduce carbon emissions, the ETS, by its market-based nature, is effective in reducing the risk of over-financialization.

Do as I Say, Not as I Do: Tax Avoidance by State-Owned Firms

Do as I Say, Not as I Do: Tax Avoidance by State-Owned Firms

Clarifying Several Misjudgments regarding China’s Economic Trends

China’s economic growth rate has shown a general downward trend since 2010, and in unadjusted figures, the difference between the economic aggregates of China and the United States widened during 2022 and 2023. Consequently, misinformation concerning China’s economic trends has appeared both in China and abroad. This study aims to refute the misinformation by demonstrating that China’s economy has not fallen into a prolonged recession, and that the downward trend of China’s economic growth is not a result of suppressing private enterprises while privileging state-owned firms. The gap between the economic aggregates of the United States and China has not begun to widen, and it is wrong to suggest that China can achieve sustained high-quality development through further privatization, marketization, and liberalization.

Does climate risk impact firms' ESG performance? Evidence from China

Owing to its devastating nature, climate risk has become one of the top concerns of the world community. The literature on the effects of climate risk on environmental, social, and governance (ESG) performance is scarce. Using data from Chinese A-share listed firms from 2010 to 2019, this study aims to determine whether climate risk affects firms' ESG performance. The findings show that climate risk has a detrimental effect on the ESG performance of Chinese firms. A heterogeneity analysis shows that the negative effect of climate risk on firms' ESG performance is most pronounced for state-owned firms, growing and declining firms, and firms with more institutional investor shareholders. Furthermore, a mechanistic analysis shows that financing constraints, corporate diversification, and media attention enhance the negative effect of climate risk on ESG. In addition, after addressing several robustness checks and endogeneity issues, our conclusions remain valid. Thus, this study indicates the need to develop a comprehensive policy to achieve development goals by considering and valuing the impact of climate risk on firm's ESG performance.

Credit Resource Misallocation and Macroeconomic Fluctuations in China: From the Perspective of Heterogeneous Financial Frictions

Abstract In China, state-owned firms exhibit easier access to external credit but have lower productivity than private firms. We construct a dynamic general equilibrium model incorporating heterogeneous financial frictions to investigate their impact on credit resource misallocation and macroeconomic fluctuations in the Chinese economy. A calibration of our model suggests that heterogeneity in financial frictions can reduce macroeconomic volatility. The mechanism is that heterogeneity in financial frictions induces the procyclicality of credit resource misallocation within entrepreneurs, thus the procyclicality of productivity loss. The stabilization effect depends on the relative magnitude of the impact of the shock on credit resource misallocation within entrepreneurs compared to its impact on the output. In addition, we show that the cost of the stabilization effect of heterogeneity in financial frictions is that it reduces the economy’s aggregate TFP and output at the steady state. Our results imply that neglecting heterogeneity may overestimate the impact of financial frictions on economic volatility in previous studies.

Is there a green path to economic growth: a study on China’s low-carbon city initiative

ABSTRACT As global warming perennially captures the collective attention of governments worldwide, we employ a multi-period difference-in-differences regression model to understand whether China’s Low-Carbon City (LCC) Initiative could promote corporate financial performance. Our results manifest that LCC exerts a constructive impact on enterprises. While state-owned firms and those within traditional sectors exhibit a more conspicuous augmentation in their roa, enterprises in less developed regions confront more substantial challenges in meeting the stringent requirements. We suggest the government, as it continues to advocate for policies aimed at reducing carbon emissions, should conduct experiments and demonstrations tailored to the specific characteristics of each region, adopting more nuanced approaches. Our results proffer practical policy insights for decision-makers and the corporate sphere, aiding in a deeper comprehension and response to the paramount issue of carbon emissions.

Manufacturing breakthrough: analysing the differential effect of digital transformation on continuous innovation capability in enterprises

ABSTRACTThis study explores the relationship and influence mechanism between digital transformation and continuous innovation capability of enterprises, which shows that digital transformation promotes continuous innovation capability by enhancing corporate social responsibility, while the degree of fair competition in the market strengthens the relationship between digital transformation and continuous innovation capability. Data are derived from listed manufacturing industries in China from 2008 to 2020. The Heckman two-stage model is used to analyse the impact of digital transformation decisions on continuous innovation capability. Counterfactual estimation provides the average treatment effect of digitally transforming firms compared to non-digitally transforming firms. Empirical findings suggest that non-state-owned firms whose digital transformation multiplies the effect of continuous innovation capability, while state-owned firms do not benefit as much as expected; digital transformation has a better effect on improving the continuous innovation capability of high-tech firms than of non-high-tech firms.

The effects of polluting behaviour, dirty energy and electricity consumption on firm performance: Evidence from the recent crises

We examine the effects of polluting behaviour, dirty energy, and electricity consumption on firms' profitability during the recent crises (climate change, 2016 oil crisis and COVID-19) using a dataset of around 40,000 Vietnamese firms from 2011 to 2020. More specifically, we study how firm-specific characteristics affect energy consumption, polluting behaviour, and profitability. Our results show that (1) dirty energy consumption has a positive impact on firm performance; (2) larger firms and firms located in industrial zones tend to exploit dirty energy more than others; (3) state-owned firms manage resources better than privately owned firms; and (4) polluting firms are more profitable. After controlling for the Paris Climate Agreement, we find smaller polluting firms are affected more intensely than other firms. We also find that electricity consumption negatively impacts firm profitability, but the impact was alleviated during the oil and COVID-19 crises. Finally, our results indicate that recent crises negatively affected firms' profitability in the electric power generation, transmission, and distribution sectors. The findings of this paper suggest that more stringent policies are required around dirty energy consumption, and these policies must target larger organisations—particularly in industrial zones.

Female Directors and Investment Efficiency: New Evidence from an Emerging Market

Prior studies show that the effect of female directors on corporate investment efficiency is mixed. This article investigates this relationship in a weak corporate governance setting. With a data of 4,653 firm-years from 582 firms listed in Vietnam during the period 2009–2020, we find that female directors decrease corporate investment efficiency through increasing underinvestment and they have no significant effect on overinvestment. Moreover, the negative relationship between female directors and investment efficiency is stronger in state-owned firms.