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Purpose: Common institutional ownership is a phenomenon that has extended throughout the capital markets in recent years and has a significant impact on business strategy decisions. The study intends to investigate the effect of common institutional ownership on corporate over-financialization and potential functioning mechanisms. Design/methodology/approach: Using panel data from Chinese-listed companies over the period of 2003–2021, the authors conduct regression models which controlled year-, industry- and regional fixed effects to explore the impact of common institutional ownership on corporate over-financialization. Findings: This study concludes that corporate over-financialization may be prevented via common institutional ownership. The mechanism test suggests that common institutional ownership inhibits corporate over-financialization by improving internal control quality and enhancing financial flexibility. Besides, heterogeneity analysis shows that the inhibiting effect of common institutional ownership on corporate over-financialization is more pronounced in stability-oriented institutional investors and high financing constraints firms. Originality/value: This paper makes a valuable contribution to the current studies on effective strategies to prevent enterprises from becoming overly financialized by recognizing common institutional ownership. Furthermore, this paper adds to the research on common institutional ownership's economic consequences. Finally, this study provides management implications for how to optimize corporate governance structures, curb the financialization of entities in practice and promote the development of the real economy. [ABSTRACT FROM AUTHOR]

Heterogeneous institutional investors' shareholding preferences have been driven to change by the deepening of ESG investment philosophy. Therefore, we examine the impact of corporate ESG performance on institutional investors' shareholding preferences and its mechanism of action. We conduct mixed OLS and mediation effect tests using data on ESG responsibility scores and institutional investors' shareholding ratios of A‐share listed companies in China from 2010 to 2020 as samples. We find that corporate ESG performance can significantly and robustly increase institutional investors' shareholdings; the mediation effect analysis shows that overall corporate ESG performance contributes to increases in corporate book and market values, thus encouraging institutional investors to increase their shareholdings. The heterogeneity analysis shows that independent institutional investors attach more importance to corporate ESG responsibility performance, and long‐term institutional investors attach more importance to corporate environmental performance; moreover, institutional investors have more significant ESG shareholding preferences for Chinese SOEs. Our study can strengthen the encouragement of institutional investors to integrate ESG investment concepts from multiple perspectives, such as research and analysis, portfolio management, risk control, and due diligence management, to design and develop targeted ESG investment tools, give full play to the role of shareholders and guide the sound development of listed companies from the perspective of investment strategy objectives. [ABSTRACT FROM AUTHOR]

Against the backdrop of sustainable development, enterprises, the general public, and regulatory bodies are exhibiting an escalating level of concern regarding the performance in environmental stewardship, social responsibility, and corporate governance collectively referred to as ESG (Environmental, Social Responsibility, and Corporate Governance). This research, from the vantage point of external fiscal policy, investigates the examination of the impact of tax incentives on corporate ESG performance. Drawing upon panel data spanning from 2010 to 2021 at the level of China's A‐share listed companies and grounded in the context of accelerated depreciation policy for fixed assets, this study commitment to both identify and empirically test the presence of a significant positive correlation between tax incentives and corporate ESG performance. Our analysis of the financial mechanism and the Research and Development (R&D) mechanism reveals that tax incentives are instrumental in alleviating the financing constraints faced by corporations, thereby augmenting their financial performance. Furthermore, they serve to intensify R&D efforts, thereby fostering the generation of green innovations. In conclusion, our findings underscore that tax incentive policies significantly enhance the ESG performance of enterprises with common institutional shareholdings, an effect attributed to the presence of governance and synergy effects. [ABSTRACT FROM AUTHOR]

This paper examines whether state ownership and political connections affect the relationship between customer concentration and cash holdings for Chinese listed manufacturing firms. We show that non‐state‐owned firms, but not state‐owned firms, hold more cash as customer concentration increases. In addition, political connections weaken the positive effect of customer concentration on non‐state‐owned firms' cash holdings. Our supplemental analyses further show that for non‐state‐owned firms with limited access to finance—for instance, firms with low analyst following, low institutional ownership, or low government subsidies—the effects of political connections on weakening the positive association between customer concentration and cash holdings are more pronounced. Additional robustness tests support our arguments. [ABSTRACT FROM AUTHOR]

The survival of zombie firms severely crowds out healthy corporate investment and employment growth, eventually undermining economic growth potential. Hence, how to properly address the problem of corporate zombification is an essential part of achieving high‐quality economic development in China. In recent years, the phenomenon of common institutional ownership has become increasingly widespread in the capital markets and has a significant impact on the strategic decisions of companies. There are currently two views on the corporate governance role of common institutional ownership: the synergistic governance effect and the collusive fraud effect. Using data from Chinese‐listed firms from 2009 to 2021, this paper finds that common institutional ownership can significantly inhibit the formation of zombie firms. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. Furthermore, the mechanism test suggests that common institutional ownership inhibits the formation of zombie firms by improving internal control quality and reducing agency costs. This paper contributes to the study of how to inhibit the formation of zombie firms by identifying common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for policymakers may be realised, which may help curb the trend of corporate zombification through equity‐based instruments. [ABSTRACT FROM AUTHOR]

By adapting a well‐known model in the literature, the current paper sharpens the theoretical predictions on how competition intensity and institutional ownership interact to influence corporate innovation decisions, and adopts data from Chinese listed firms to empirically test the validity of two potential mechanisms. The split‐share reform of 2004–2005, whose timing and speed were largely beyond the firms' control, is used as a quasi‐natural experiment to address the potential endogeneity of institutional share. Similar to the existing results, we find support for the career concern mechanism rather than the lazy manager mechanism. But in addition to the complementary effects between institutional share and competition intensity on corporate innovation documented in their work, our findings also imply that competition discourages innovation when the share of institutional investors is low but encourages innovation when the institutional share is high. The opposite effects of competition on innovation with or without institutional shares is accounted for by the negative correlation between competition and innovation success, which is an assumption in our theoretical model that departs from the existing literature, but fits the reality of China's economic transition. Additional evidence relating listed firms' managerial turnover to their institutional shares is also in support of the career concern mechanism. Combined with the substantial increase in innovation after the split‐share reform, these findings demonstrate the strong positive role of institutional investors in encouraging innovation, but also offer more insight into the complex process that determines corporate innovation, especially where ownership structure is still in flux. [ABSTRACT FROM AUTHOR]

This study selects stock data of listed companies in China's A-share stock market from 2011 to 2020 as research samples. Using a fixed-effects model, it examines the impact of analyst optimism on stock price collapses and the moderating effect of information disclosure quality. Simultaneously, it conducts additional research to explore the potential transmission mechanisms involved. The main findings are as follows: Firstly, a positive correlation exists between analyst optimism and the risk of stock price collapse. Secondly, improving information disclosure quality of listed companies can enhance the positive impact of analyst optimism on the risk of stock price collapses and expedite the market's adjustment of overly optimistic valuations of listed companies. Additionally, analyst optimism can increase the risk of stock price collapses by affecting institutional ownership. These findings provide theoretical support for regulatory authorities to revise and improve the "information disclosure evaluation" system, regulate the analyst industry, guide analyst behavior, and encourage listed companies to enhance internal governance and improve information disclosure practices. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to examine whether and how financial performance feedback influences green innovation performance by drawing on the behavioral theory of the firm (BTOF) and relying on motivation-based logic. Design/methodology/approach: A total of 17,558 firm-year observations from 3,062 publicly traded firms in China are used as the research sample. Findings: The results reveal that low-performing firms are less likely to conduct green innovation activities because managers burden pressure to meet short-term targets. This study further finds that these relations are moderated by institutional ownership. Originality/value: This study contributes to the BTOF literature by linking performance feedback to green innovation activities. This study applies a motivation-based logic to relate performance below and above aspirations to green innovation activities. This study introduces institutional ownership as a boundary condition. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of institutional investor horizons on investment efficiency in China. By analysing 26,831 firm‐year observations from Chinese listed companies, we find that long‐term (short‐term) institutional ownership is negatively (positively) associated with the level of inefficient investments. A battery of robustness tests indicates causality. Further analyses reveal that the rise in environmental uncertainty and information asymmetry are transmission channels for increased inefficient investments. Moreover, we find that the single controlling shareholder and state owner can curb the management myopia induced by short‐term institutional investors while they do not impede the monitoring effort of long‐term institutional investors. [ABSTRACT FROM AUTHOR]

Given the ubiquity of family businesses and the growing importance of ecological sustainability, it is crucial to promote family businesses to carry out green innovation activities and enhance their green innovation capability. In recent years, the prevalence of common institutional ownership in capital markets has attracted the attention of the academic community. Drawing on socioemotional wealth theory and strategic reference point theory, this paper tries to explore the impact of common institutional ownership on green innovation in family businesses. Using data from Chinese‐listed family businesses from 2009 to 2021, this paper finds that common institutional ownership can facilitate green innovation in family businesses. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. The mechanism test suggests that common institutional ownership enhances green innovation in family businesses by improving the internal control quality and reducing financing constraints. This paper contributes to the study of how to effectively facilitate green innovation in family businesses by identifying the common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for family businesses and policymakers may be realized, which may help family businesses to enhance their green innovation capabilities and contribute to the green transformation of society. [ABSTRACT FROM AUTHOR]

Due to the increasingly serious environmental pollution, stakeholders are paying more attention on the environmental behavior of enterprises. Our paper investigates how institutional investors affect the quality of corporate environmental information disclosure (EID). Using a sample of A-share listed firms from the heavily polluting industries in China during 2008 to 2016, we conduct correlation analysis, OLS regression, and Tobit regression methods and find that institutional investors' shareholdings are positively correlated with the quality of EID. When institutional investors increase 1% shareholdings of the firm, the EID quality improves by 0.03%. In addition, the high concentration of institutional ownership enhances the impact of institutional investors' shareholdings on the EID quality. But this positive correlation is only observed in companies in regions with a high marketization level. Our paper extends the research on the influential factors of EID and improves the understanding of the impact of institutional investors on corporate environmental behavior. [ABSTRACT FROM AUTHOR]

This study examines the impact of heterogeneous foreign institutional investors on innovation in Chinese listed firms from 2009 to 2020. Empirical results indicate that foreign institutional investors from regions with high cultural distance are associated with a significant increase in corporate innovation of Chinese firms. Moreover, the results remain robust to alternative cultural distance measures and methods that address endogeneity. This research provides novel evidence regarding the role of foreign institutional investors in China. [ABSTRACT FROM AUTHOR]

Focusing on a sample of 9387 observations in China over the period 2016−2019, this paper empirically examines whether the presentation reform of R&D expenses that is changed from notes to income statements, mitigates corporate financial constraints of Chinese listed companies. Findings offer evidence that the financial constraints of firms decrease after the policy change, which is owing to the alleviation of information asymmetry. Further analysis reveals that the effect of the presentation reform on financial constraints is less prominent among companies that are state‐owned, audited by the "Big four" and of higher institutional ownership. Overall, our study provides evidence supporting the influences of the format reform of financial reports and has implications for information users, regulators, and standard setters. [ABSTRACT FROM AUTHOR]

By proxying 'awe culture' (i.e., reverence for life and ethical behaviour) with regional induced abortion rates, we examine the impact of awe culture on corporate social responsibility (CSR) in a sample of Chinese firms. We find that firms located in areas with higher induced abortion rates spend less funds on CSR activities and obtain lower CSR scores. The findings remain intact after an array of robustness tests. Further analysis shows that the effect of awe culture on CSR is more pronounced in areas with weaker law enforcement and where the local government emphasises economic growth targets. However, the effect becomes insignificant when firms are well‐represented by top executives with overseas experience, foreign directors, and a high proportion of female board members. The significance of the effect also diminishes for non‐state‐owned firms, and firms with higher institutional ownership and higher cash holdings. Moreover, the lack of awe culture attenuates the positive impact of CSR on firm value. Overall, we document that awe culture, as an informal institution, shapes CSR behaviours. [ABSTRACT FROM AUTHOR]

This paper studies the influence of institutional ownership on the Chinese A‐shares' ESG performance. Findings reveal the positive improvement from institutional investors, and this impact is stronger in firms with better‐expected ESG performance and low initial ESG performance. Besides, heterogeneous institutional investors have different influences, and only a pressure‐resistant institution plays the promotion role. Further studies based on the period following the financial crisis and when emphasising the environmental protection policy reveal that financial motivation and reputation motivation could be the reason for institutional holding. Our findings are robust after using the instrumental variable analysis, controlling for firm fixed effects, and replacing institutional holdings, and could be beneficial for the governance of firms in China. [ABSTRACT FROM AUTHOR]

This study draws insights from the New Stakeholder Theory to investigate the influence of green credit policy on firm diversification. Using a sample of publicly listed firms in China from 2006 to 2018, we find that green credit policy has increased the degree of corporate diversification for heavily polluting firms. In addition, the positive impact of green credit policy on industrial diversity is more significant for heavily polluting firms which are state-owned, bigger in size, with institutional ownership of shares and located in provinces with higher level of marketisation. Moreover, financial constraint is an important mediating variable for green credit policy to influence corporate diversification. An important implication of our study is that corporate diversification can be a strategic choice made by heavily polluting firms to overcome financial constraints as a result of the green credit policy. In fact, greater corporate diversity can ensure the survival of polluting firms by allowing them to operate in industries with less environmental regulations. [ABSTRACT FROM AUTHOR]

We investigate the relationship between board diversity (relation-oriented diversity, task-oriented diversity, and overall board diversity) and financial statement comparability. We find that diverse boards are positively associated with financial statement comparability, suggesting that board diversity improves governance mechanisms by alleviating agency conflicts, leading to higher comparability than homogenous boards. We also find that institutional ownership positively affects the association between board diversity and financial statement comparability. Furthermore, the positive effect of diversity, institutional ownership, and comparability are more pronounced in non-state-owned firms and non-crisis periods. Our findings remain consistent with a battery of econometric techniques and measures of comparability. This study provides new insights regarding the role of boardroom diversity in shaping the qualitative aspect of financial reporting, i.e., financial statement comparability. [ABSTRACT FROM AUTHOR]

Along with the further reforms of state-owned enterprises (SOEs), urban China has experienced an evident increase in wage inequality. Using provincial-level data for the period 1993–2013 and individual-level data from five waves of the China Household Income Project from 1988 to 2013, this paper investigates how the SOE reform affects wage distribution in urban China by considering three mechanisms: wage determination, ownership structure and institutional segmentation. The results of this study show that overall inequality increased with the reduction of SOEs' share in the economy. Moreover, through a detailed Oaxaca–Blinder re-centred influence function decomposition, this experiment obtains consistent and robust results. Based on the theory of soft budget constraint, this study demonstrates that the increase in urban wage inequality has been mainly caused by wage structure effects. Since the SOE reform in the 1980s, the wage determination mechanism has changed with the increase in the return of the labour force to education. During this period, institutional segmentation was of less significance in explaining the wage gap between SOEs and non-SOEs. Furthermore, the accelerating ageing process of China's population had no significant effects on the trajectory of urban wage inequality throughout this period. [ABSTRACT FROM AUTHOR]

This research applies the dynamic slack-based measure (DSBM) model to evaluate the dynamic efficiency of manufacturing companies in the long run and uses the Censored Least Absolute Deviations (CLAD) model to analyze the effect of corporate governance on their overall efficiency and the efficiency of each input factor. We find the following main results. First, overall efficiency of the manufacturing industry listed companies is low. 2) Debt efficiency is lower than the efficiency of shareholders' equity and exhibits a downward trend. 3) Labor efficiency is the lowest among all inputs. 4) The efficiency of the medicine and bio-products industry is the highest, while the efficiency of the paper and printing industry (which causes serious pollution) is the lowest. 5) Companies with low export intensity and high capital intensity are the most efficient, while companies with high export intensity and low capital intensity are the least efficient. 6) Ownership concentration and efficiency have a significantly positive U-shape relationship. 7) Board size and efficiency have a significantly inverted U-shape relationship. 8) An actual controller with a state-owned nature has a significantly negative impact on efficiency. 9) Executive compensation, equity incentive, and institutional ownership have a significantly positive impact on efficiency. [ABSTRACT FROM AUTHOR]

Research Question/Issue: This paper examines the relation between institutional cross‐ownership from the same industry (hereafter, INSTCO) and corporate social responsibility (hereafter, CSR) for Chinese publicly traded firms. We also investigate whether the relation between INSTCO and CSR depends on the strength of the internal and external corporate governance. Research Findings/Insights: Based on a sample of Chinese listed firms from 2009 to 2017, we find that INSTCO is significantly positively associated with firm CSR performance. We interpret our results under the signaling theory of strategic CSR spending, according to which CSR spending is a valuable signal that distinguishes firms from peers, particularly in an environment with severe information asymmetry. The effective monitoring of INSTCO drives managers to engage in the CSR signaling more actively. Furthermore, this positive association between INSTCO and CSR signaling is only found among firms with strong internal and/or external corporate governance. Theoretical/Academic Implications: The findings in this paper indicate that the well‐documented monitoring role of INSTCO also has important implications on firms' social performance. Moreover, our findings contribute to the literature on strategic CSR spending by highlighting the role of CSR spending as a signaling device in China as the largest emerging market. Lastly, both internal and external corporate governance significantly moderate the impact of INSTCO on firms' social performance. Practitioner/Policy Implications: CSR initiatives are valuable signals. Policy makers should be aware that common ownership may enhance stakeholders' welfare due to INSTCO's monitoring effect, since this study documents a significantly positive effect of INSTCO on corporate social performance. Investors in the Chinese market should also be aware of the nontrivial signaling function of CSR activities, especially in a strong internal governance and/or an investor‐friendly external governance environment. [ABSTRACT FROM AUTHOR]

This study examines the effect of financial statement comparability on stock liquidity. Drawing from information asymmetry arguments, we posit that greater comparability increases financial transparency, which improves the information environment and increases stock liquidity. Our results show a positive relationship between comparability and stock liquidity. However, the effect of comparability on stock liquidity is only significant for non state-owned enterprises. Additionally, institutional ownership strengthens the impact of comparability on stock liquidity. Our findings suggest a more pronounced comparability effect on stock liquidity for firms with greater information opacity. Overall, our study indicates that higher comparability decreases information asymmetry and facilitates investors' decision-making. [ABSTRACT FROM AUTHOR]

This study assesses operating efficiency and its drivers in China's inefficient publicly traded real estate companies via dynamic slack‐based measure data envelopment analysis and panel regression techniques. This paper also investigates operating efficiency as a company characteristic impacting stock returns using a portfolio formation test. The results indicate that only 27 out of 106 listed real estate companies are operationally efficient. Return on assets, capital structure, higher education, and institutional ownership positively and significantly impact operating efficiency. The reward of an increase in operating efficiency is seen in its positive influence on stock returns. Listed real estate companies should improve the efficiency of their operational activities to generate higher stock returns. [ABSTRACT FROM AUTHOR]

The study aims to empirically analyze the effect of board diversity measurement in demographic diversity (i.e., age, gender, and nationality) and cognitive diversity (i.e., education, financial expertise, and tenure) dimensions on the probability of financial distress in an emerging market, China. Additionally, evaluate whether foreign institutional ownership mediates between board diversity and financial distress nexus. Distinctly, the fixed-effects of panel regression method are employed to examine a sample of 13,740 firm-year observations covered from 2009 to 2018. The study reveals that board diversity reduces financial distress likelihood, and foreign institutional ownership mediates this relationship. Further, applied two-stage GMM to resolve the possible endogenous problem, and the robust models also verified the results. First, the study findings contribute particularly in the Chinese context that board diversity is positively associated with financial distress, suggesting that diverse boards are helpful to reduce financial distress likelihood. Second, foreign ownership is attracted through the improved board diversity. Third, foreign ownership has a substantial impact on shaping the board diversity's effect on the likelihood of financial distress. The study findings are novel and imply that firms having diverse boards attract foreign institutional ownership by reducing asymmetric information. Subsequently, foreign institutional investors are helping to reduce financial distress likelihood. [ABSTRACT FROM AUTHOR]

Identity theory in economics reveals that organisational identification motivates managers to take actions that are strongly aligned with firm interests. Nevertheless, organisational identification may also play a role in personal incentives. Leveraging the availability of CEO organisational identification data from the national internal control survey of listed firms in China, we document a positive impact of CEO organisational identification on corporate innovation. We also find that the positive impact is more pronounced for firms whose CEOs own shares, that are followed by more financial analysts, and that have higher institutional ownership. Additional analyses suggest that the interaction between CEO organisational identification and corporate innovation investment significantly enhances firm value. Overall, our study shows that CEO organisational identification is a non‐trivial driver of firm innovation and growth. [ABSTRACT FROM AUTHOR]

Based on the microdata of Chinese listed enterprises from 2012 to 2017, we empirically examine the nonlinear relationship between institutional ownership and enterprise innovation. We find that institutional ownership has an inverted-U nonlinear relationship with enterprise patenting when enterprise characteristics and fixed effects such as time, region, industry type and ownership type of enterprises (SOE or NSOE) are controlled and the endogeneity is considered. This nonlinear relationship significantly varies among active, passive, pressure-resistant and pressure-sensitive groupings of institutional investors. Employing the mediation model proposed by Hayes and Preacher (2010) [Quantifying and testing indirect effects in simple mediation models when the constituent paths are nonlinear. Multivariate Behavioral Research, 45(4), 627–660], we further investigate the mediating effects of financing constraints and R&D manipulation. The results show that institutional ownership linearly drives enterprise innovation by alleviating financing constraints but nonlinearly affects the enterprise innovation by manipulating R&D activities. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the relationship among corporate environmental disclosure (CED), earnings management (EM) practices and accounting conservatism in Chinese listed firms and determine how internal corporate governance (CG) mechanisms moderate these relationships. Design/methodology/approach: This study uses two different EM practices, accrual-based EM (AEM) and real EM (REM), to analyze the relationship between CED and EM practices, as well as accounting conservatism. The final sample consisted of 1,619 observations, documented between 2015 and 2019. The panel data method was applied to estimate the relationship among CED, AEM and REM, as well as the moderating effect of CG on this relationship. Findings: This study finds a negative relationship between CED and EM (both AEM and REM) and a positive relationship between CED and accounting conservatism. Further, CG, measured as the independent director ratio, institutional ownership and state-owned entities, was found to moderate these relationships. Practical implications: Chinese policymakers should reinforce CED because it reduces corporate EM practices and improves accounting conservatism. Further, CED, as a mandatory requirement, may be expanded to all industries, that is, beyond the highly polluting industries listed on China's stock exchanges. Originality/value: This study is among the first to examine the relationship between CED and EM practices from both the AEM and REM perspectives and the one between CED and accounting conservatism. It also extends extant analyses by investigating the moderating effect of CG on these relationships in China. [ABSTRACT FROM AUTHOR]

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study examines the association between corporate site visits and visited firms' financial reporting quality. Using a sample of publicly listed firms in China for the years 2009 through 2018 and four different measures of financial reporting quality, we find that firms receiving more site visits have higher financial reporting quality. Specifically, we find that corporate site visits are associated with a lower level of accrual‐based earnings management and a lower likelihood of financial violations and financial restatements. Moreover, we document a positive association between corporate site visits and the evaluation of earnings disclosure quality. We also find some evidence that the positive association between site visits and financial reporting quality is more pronounced among firms with greater institutional ownership and among state‐owned enterprises. Taken together, our findings underscore the monitoring role of corporate site visits in enhancing visited firms' financial reporting quality. This research could be of interest to regulators and institutional investors by providing insight into assessing the benefits of selective access events that may influence the quality of financial reports. [ABSTRACT FROM AUTHOR]

Using a sample of Chinese listed firms from 2007 to 2017, this paper examines the impact of Confucianism on earnings management. We find that Confucianism is significantly negatively associated with earnings management. Further analyses suggest that the inhibitory effect of Confucianism on earnings management is more pronounced when firms have weak monitoring mechanisms such as poorer corporate governance, lower institutional ownership, and less analyst coverage. Moreover, only Confucianism has a significant restraining effect on earnings management after controlling for both Confucianism and religion. Overall, our study not only contributes to the literature on earnings management from the perspective of informal systems but also deepens our understanding of the economic consequences of Confucianism at the firm-level. [ABSTRACT FROM AUTHOR]

This study examines whether and how institutional investors play a corporate governance role in executive pay in China. Based on a sample of Chinese listed firms from 2005 to 2015, we find that higher institutional investor ownership is negatively related to excessive management compensation; this indicates that institutional investors play a governance role in listed firms' decisions on management payment. Institutional investors are more likely to have an influence on executive compensation through their representatives on the corporate board or by conducting site visits, especially when their ownership is high. They will also react, as in the US, by 'voting with their feet'; that is, holding fewer shares than they would otherwise, if firms pay excessive executive compensation, especially when their ownership is low. Cross‐sectional analyses show that the negative impact of institutional ownership on excess management compensation is more evident when firms are not owned by the government, monitored by fewer analysts, and located in regions of China with weak legal investor protection. Our results indicate that institutional investors in China can play an important governance role, especially for firms with characteristics such as location and analyst coverage, for which outside monitoring mechanisms will be in high demand. [ABSTRACT FROM AUTHOR]

In the context of Chinese enterprises' privatization reforms, the relationships between ownership structure and optimal capital structure and between ownership structure and firm performance are worth attention. Using data on listed companies in China, this article uses the panel smooth transfer regression (PSTR) model and multiple regression models to test the nonlinear relationship between capital structure and firm performance. The optimal capital structure is calculated using the partial correlation function of the PSTR model, and the ownership structure–optimal capital structure relationship is analysed. This research found that (a) the effect of the debt‐to‐asset ratio on firm performance shows a nonlinear relationship with sudden changes in characteristics, and a debt‐to‐asset ratio interval exists that can significantly improve firm performance; (b) under the premise of the effect of ownership checks and balances, an increase in ownership concentration can improve the optimal capital structure; thus, enterprises can achieve effective operations with higher debt; (c) the promotion effect of ownership concentration on firm performance varies depending on a company's debt‐to‐asset ratio; and (d) different industries have different optimal capital structures. The raw materials industry has a high optimal capital structure. A series of robustness tests verify the robustness of these conclusions. This research enriches the theoretical interpretation of the optimal capital structure and provides new insights into the relationship between ownership structure and firm performance. The conclusions drawn by this article are helpful to enterprises making corresponding financial decisions and the government in formulating corresponding capital market systems. [ABSTRACT FROM AUTHOR]

We study how geographic proximity to financial centers affects price efficiency. Using high‐speed railway connections between firm cities and their nearest financial centers in China as exogenous shocks, we find stocks of connected firms are more efficiently priced than those of firms that are not connected. Consistent with our hypothesis, ease of travel has a stronger effect on firms that are closer to financial centers, smaller, have less institutional ownership and financial analyst coverage, and are not on the short sales list. Our paper highlights the importance of the geographic proximity of firms to financial centers on financial market efficiency. [ABSTRACT FROM AUTHOR]

We study the cross-sectional effects of investor sentiment on stock price crash risk from the perspective of investor behavioural biases. We develop a firm-specific investor sentiment measure, and find that stocks with stronger investor sentiment are more prone to a future price crash. The positive relation is more pronounced for stocks eligible for margin trading, as higher investor sentiment induces greater margin buy/cover by optimistic investors. Short interest moderates the impact of optimistic sentiment on crash risk. The positive relation is also particularly prominent for stocks with a more speculative appeal, especially for those with lower institutional ownership. [ABSTRACT FROM AUTHOR]

This paper investigates investors' reactions to takeover rumours in China's stock markets from 2004 to 2014. While we find pre-rumour price run-ups (abnormal returns) for merger and acquisition (M&A) targets, the pre-rumour market overreaction is significantly positive only for target firms that are state-owned enterprises (SOEs). There are no significant abnormal returns for M&A rumour targets over a 41-day event window (−20, +20). Nonetheless, capital market reactions to true rumours are higher than reactions to false rumours, indicating that investors can typically distinguish between them. Finally, we document that while firms with higher institutional ownership have a higher probability of being the subject of false M&A rumours, rumoured targets with higher institutional ownership experience lower market reactions. [ABSTRACT FROM AUTHOR]

The study aimed to empirically investigate the impact of board diversity variables (age, gender, nationality, education, tenure, and expertise) on the investment preferences of foreign institutional investors in an emerging market, China. For this, sample data consisted of 1374 nonfinancial Chinese firms from 2009 to 2018. The study used OLS regression as a baseline regression, a fixed effect model to control omitted variable bias, and the two-step systems GMM model to control the endogeneity problem. The study revealed that board diversity variables (gender, nationality, education, and financial expertise) are positively associated with foreign institutional ownership in Chinese nonfinancial firms, implying that foreign institutional investors own a high percentage of Chinese nonfinancial firms with diversity of gender, nationality, education, and financial expertise. Age and tenure of board diversity, on the other hand, have little correlation with foreign institutional ownership. Further, the robustness regressions also confirmed the relationship between board diversity and foreign institutional ownership. This study made a unique attempt to provide empirical evidence that firms having diverse boards attract foreign institutional ownership by reducing asymmetric information. [ABSTRACT FROM AUTHOR]

Taking a strategic fit perspective, we investigate the relationships between task environment (environmental dynamism), institutional environment (state ownership and institutional development), and innovation strategy (cooperative strategy) in the context of China. Using a longitudinal data set of Chinese manufacturing firms from 2012 to 2017, we confirm that environmental dynamism positively drives firms' decisions to cooperate for innovation. This driving effect is stronger for state-owned firms and firms located in regions with limited developed institutions. Overall, no one-size-fits-all innovation strategy exists, and the appropriateness of a strategy depends on the coalignment of a series of external and internal factors. The theoretical and practical implications of this finding are explored. [ABSTRACT FROM AUTHOR]

This paper examines whether strategic corporate social responsibility (CSR) disclosures are value relevant for investors and analysts in the context of China. Using a sample of Chinese listed firms from One Belt One Road (OBOR) theme indices, we construct a rating system of strategic CSR disclosures including five dimensions and 20 indicators and perform a principal component analysis and a non‐hierarchical cluster analysis to group sample firms. We find that the market has a positive reaction to strategic CSR disclosures, but the market fails to perceive whether such disclosures are credible. We also find that the number of analysts following a firm is positively associated with its strategic CSR disclosures, and the positive association between strategic CSR disclosures and analysts following is less pronounced for firms with lower credibility. Additional analyses demonstrate that the higher the strategic CSR disclosure quality the more the positive market reaction and that the higher the strategic CSR disclosure quality the more the numbers of analysts following, but this positive association between disclosure quality and analysts following is discounted by a firm's lower credibility. Additional analyses further confirm that the CSR disclosure mandate has a negative moderating effect on investors' and analysts' positive reactions to strategic CSR disclosures. We do not find convincing evidence that the ownership of foreign institutional investors (QFII) has a moderating effect on investors' and analysts' reactions to strategic CSR disclosures. Finally, our extended analyses reveal that strategic CSR disclosures have a positive effect on firm performance with a complementary mediation of innovation. [ABSTRACT FROM AUTHOR]

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This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms' investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand‐alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control‐ownership wedge, state‐owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems. [ABSTRACT FROM AUTHOR]

The present study provides empirical evidence on how chief executive officer (CEO) tenure influences the corporate social and environmental disclosures (CS&ED) of all listed non-financial Chinese firms from 2008 to 2016. We used fixed-effect panel data regression model to test our hypothesis. The findings show a negative impact of CEO tenure on CS&ED. Our study provides evidence that CS&ED increases in the early service tenure of CEOs than in their later service periods, as the early increase followed by a decline indicates the presence of non-linear inverted U-shaped association between CEO tenure and disclosure practices. In further analyses, we find that the negative effect of CEO tenure on CS&ED is more pronounced for the firms having a larger number of information intermediaries and independent directors, such as higher level of institutional ownership, analyst's coverage, and more independent directors in a firm. We found the stronger and robust outcomes after controlling the endogeneity problem. In conclusion, this study can be useful for policymakers to link CS&ED with firm economic practices to attain sustainable development goals. Moreover, CS&ED implementation can be an effective means for the managers to mitigate career-concerns. [ABSTRACT FROM AUTHOR]

The percentage of institutional ownership in China has increased gradually. Does this characteristic of Chinese institutional investors affect their participation in corporate governance, which in turn, affects corporate tax avoidance activities? We take 1108 listed Chinese companies from 2009 to 2017 to study this issue. The paper uses average daily total market capitalization as an instrumental variable to test the endogeneity problems. We run a quantile regression (QR) at the median level as robustness testing to overcome the fat tail of financial data. Then, the shareholding ratio of majority shareholders is introduced to verify that ownership concentration is one of the mechanisms through which institutional shareholders influence corporate tax avoidance decisions. The findings are as follows: The proportion of institutional investors' shareholdings is positively related to the degree of enterprise tax avoidance. The increase in institutional investors' shareholdings is likely to promote corporate tax avoidance. When the level of ownership concentration is low, the increase in institutional ownership can play a greater role in promoting tax avoidance. [ABSTRACT FROM AUTHOR]

We evaluate the explanations for accrual anomaly in the Chinese stock market using the decomposition method. The results show that institutional ownership best explains the accrual anomaly with an explanatory power of about 46%, equity growth (EG) explains 12% of the anomaly, and the residual fraction of around 32% is unexplained by any candidate explanations. Our findings indicate that the naïve investor fixation hypothesis is favored to explain the accrual anomaly in China, and the existing explanations cannot fully explain the anomaly. [ABSTRACT FROM AUTHOR]

Using a hand-collected database, we evaluate 328 illegal insider trading cases in the Chinese financial market from 2007 to 2018. Insiders, on average, make less profits than a single buy-and-hold strategy in the same period. This low performance is exacerbated when target firms are state-owned and with high institutional ownership. A firm's size, 6-month past returns, debt ratio, and firm age have marginal impacts on the illegal returns. Two potential mechanisms derived from the US market are tested but they show divergent roles in our model setting. This study calls for alternative mechanisms in understanding market efficiency in emerging markets. [ABSTRACT FROM AUTHOR]

Our study examines the influence of institutional investors on firm investment efficiency based on nonfinancial firms listed on Chinese stock exchanges over the period 2009–2014. Our results show that institutional ownership generally improves firm investment efficiency. However, after considering the independence of institutional ownership, we find that only pressure-resistant institutional ownership increases firm investment efficiency by alleviating both overinvestment and underinvestment. We also find that the pressure-resistant institutional investors' horizon matters. In particular, pressure-resistant institution investors who have higher shareholdings are more stable—that is, they tend to hold shares longer and thus have a more intensive effect on firm investment efficiency. Our results also show that relaxing external financing constraints, reducing agency costs, and increasing executive incentives significantly improve firm investment efficiency. The results are robust to controlling for endogeneity. Documenting the positive influence that pressure-resistant institutional investors have on firm investment efficiency and the channels through which they improve firm investment efficiency should be of interest to investors, regulators, and academics. [ABSTRACT FROM AUTHOR]

This paper examines the impact of institutional ownership on merger and acquisition (M&A) performance of Chinese listed firms from 2006 to 2017. The results indicate that institutional ownership positively affects M&A performance, and so does institutional ownership concentration. Moreover, the results suggest that pressure-sensitive, large, and domestic institutional ownership have a greater positive effect on M&A performance than pressure-insensitive, small, and foreign institutional ownership. [ABSTRACT FROM AUTHOR]

The study investigates the impact of four type institutional ownerships (independent institutions vs. gray institutions, and domestic institutions vs. qualified foreign institutions) on systematic risks in China. In order to identify this effect, this study used the annual data of Chinese A-share listed companies held by institutional investors during the period of 2005-2016 for empirical analysis. Then, the CAPM one-factor model and Fama-French three-factor model were used to analyze the relationship between institutional ownership and systematic risks, in addition to compare the empirical results among pre-, during and post-crisis. This study also performs a robust verification of the results, which using the Hausman test to determine the fixed effects model and the random effects model, which model is more suitable. The empirical results show that independent institutions increase systematic risks of stock in the pre-crisis, however, in the post-crisis independent institutions, grey institutions and domestic institutions reduce systematic risks of stock. During the crisis, none of institutions investments has a significant effect on stock systematic risks. As for foreign institutions, the performance of their supervision in periods of pre-crisis, during crisis and post-crisis is not obvious. [ABSTRACT FROM AUTHOR]

Shi, P.; Hu P.; Chen X., and Zhang, F., 2019. The impact of institutional ownership on corporates' environmental responsibility: Empirical evidence from coastal public companies in China. In: Yu, T.-s. (ed.), Environmental Sustainability: Water Resources Integrated Management and the Development of Coastal Environments. Journal of Coastal Research, Special Issue No. 96, pp. 5–11. Coconut Creek (Florida), ISSN 0749-0208. The environmental problems in coastal areas of China are attracting more and more attention, and how to control and guide coastal enterprises to fulfill environmental responsibilities have become an urgent issue to be solved. Institutional ownership, as an external supervisory force, can play a restrictive role in the production of enterprises. Therefore, this paper includes the data of China's coastal public companies from 2010 to 2016 to study the relationship between institutional ownership and corporate environmental responsibility (CER). The results show that institutional ownership, as an external restraint force, can promote enterprises to actively fulfill CER, which is more significant in state-owned enterprises. Further research also finds that different types of institutional ownership have heterogeneous roles in restraining enterprises from fulfilling environmental responsibilities. The conclusions of this study can provide theoretical support for enterprises to adjust equity structure and enhance the performance of environmental responsibility by introducing external ownership. Based on these findings, government may also formulate corresponding policies and promote the implementation of environmental responsibility. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to explore how multinationality affects multinational companies' (MNCs) downside risk and the moderate effects of ownership structure in the setting of emerging markets based on Chinese publicly traded manufacturing MNCs. Design/methodology/approach: The author derives hypotheses based on real options theory and agency theory, and tests hypotheses by using Tobit model and a unique data set of Chinese A-shared publicly traded manufacturing MNCs in the period of 2010–2016. Findings: The empirical results suggest that multinationality is positively related to downside risk and this effect is subjected to ownership structure for firms in emerging markets. In particular, multinationality of MNCs with a high level of ownership concentration, managerial ownership and institutional ownership is more likely to reduce downside risk. Practical implications: The main conclusion of this paper highlights the importance of ownership structure of MNCs in explaining the real options value of multinationality, and conveys to owners of MNCs in China and other emerging markets the need to strengthen firms' governance if they want to maximize the benefits of multinational operations. Originality/value: This study extends existing studies by taking ownership structure into consideration and highlighting the importance of agency problem in the examination of multinationality and downside risk, which provides a potential explanation for previous mixed evidence. This study also provides new evidence for the relationship between multinationality and downside risk by using a unique sample from China, an emerging market country. [ABSTRACT FROM AUTHOR]

This paper examines the impact of institutional ownership on the performance of private equity placements (PEPs) for listed firms in China. We find that the presence of institutional investors can alleviate the information asymmetries between listed firms and the market. The market reaction to PEP announcements is significantly smaller if there is a higher portion of institutional shareholdings. Long‐term firm operational performance after PEPs is positively correlated with institutional shareholdings. Moreover, we find that the relationship between institutional shareholdings and PEP performance is mainly driven by nonlisted corporate investors and mutual funds. Finally, the relationship between PEP performance and institutional shareholdings is stronger in smaller PEP issuers. [ABSTRACT FROM AUTHOR]

China's higher education is facing a structural excess capacity crisis. Duopoly models that consist of two universities are constructed in attempt to investigate the impacts of demand price elasticity, product differentiation, subsidies, and cost efficiency on excess capacity. In doing so, it turns out that the ownership of capacity decision power in higher education will exert an effect on the extent of excess capacity and the impact on the product differentiation on excess capacity. The higher the subsidies granted to universities or the lower the cost, the more the excess capacity in one university, but the less in the other university. When universities have the capacity decision power, the demand price elasticity and excess capacity constitute a Type U relationship. While the government owns the capacity decision power, both are positively correlated to each other. These conclusions have a certain realistic significance for the higher education reform in China. [ABSTRACT FROM AUTHOR]