The impact of product market regulation on productivity through firm churning: Evidence from European countries

Productivity performance in European countries has been a policy concern for several decades. This paper shows that productivity can be enhanced by product market policies which, by increasing competition and efficiency, facilitate higher rates of firms’ entry and exit (i.e. firm churning). Drawing on annual country-sector data for the period 2000–2014 across the EU countries, we find that: (i) competition-enhancing regulation is associated with a higher rate of firm churning; (ii) firm churning, in turn, appears to be positively related to higher total factor productivity at the sector level by facilitating the entry of new competitive firms and the exit of less productive ones. Overall, we conclude that stringent product market regulation can be indirectly associated, via its impact on business dynamism, with the somewhat weak productivity performance in a number of EU countries. Thus, our results point towards substantial productivity gains that could follow from the introduction of further competition-enhancing measures in product markets.     

The impact of debt restructuring on firm investment: Evidence from China

This paper empirically investigates the causal effects of debt restructuring on firm investment using the propensity matching score with difference-in-difference (PSM-DID) method based on the panel data of listed companies in China from 2005 to 2016. The results show that the impact of debt restructuring on firm investment are heterogeneous among different property rights, industry natures, restructuring payment modes and amounts, and debt renegotiation characteristics. Our analyses indicate that debt restructuring has a more significant impact on promoting investment efficiency for state-owned enterprises (SOEs), firms in industries with excess capacity, and debt-restructuring firms that pay off debts with assets. Debt restructuring significantly aggravates overinvestment when the amount of debt restructuring is large. When shareholder bargaining power is higher than that of debtholders in the debt renegotiation, debt restructuring has a significant inhibitory effect on underinvestment. Smaller debt renegotiation frictions exacerbate underinvestment and help mitigate overinvestment. This paper provides a new perspective for understanding the rationality of debt restructuring and has implications for policymakers and corporate decision makers aiming to improve debt governance and investment efficiency.     

Political connections and corporate performance: Evidence from Pakistan

This study seeks to understand how political connections affect firm performance. Using a hand‐collected dataset of Pakistani firms from 2008–2014, our firm fixed effects and Heckman two‐stage regression results show that connected firms outperform those without political ties. Moreover, we show channels through which political benefits are realized in terms of greater access to debt, lower financing costs and lower tax rates. These benefits are found to be particularly large when firms are connected to politicians who held political positions most recently and firms connected through their owners. Finally, we do not find evidence for differences in political favours across regulated and unregulated industries.     

The impact of institutions on financial development: Evidence from East Asian countries

This paper examines the impact of institutions on regional financial development using a panel data model of 11 East Asian countries during 1996–2017. It divides the institutional factors into six economic factors and six legal‐political factors. The analysis demonstrates that the legal‐political institutional factors have a stronger impact on financial development than the economic institutional factors in East Asia. Improvement in institutional quality such as fiscal freedom, business freedom, control of corruption, government effectiveness, regulatory quality and rule of law can promote financial development. Improvements of these institutional factors facilitate the ability of enterprises to allocate resources and improve the strength of business operations, thereby reducing transaction costs and making the financial operating environment fairer and more efficient. With the improvement of institutional factors, financial development will have more opportunities to develop better. Institutional impacts are more pronounced in the financial development in Malaysia, Indonesia, the Philippines and Myanmar than in the other countries such as China, Japan, Korea and Singapore.     

The impact of digital finance on household consumption: Evidence from China

Using panel data from the China Household Finance Survey (CHFS) in 2013, 2015, and 2017 and the digital inclusive finance index developed by Peking University, this study examined impacts of the digital inclusive finance on household consumption and explored its mechanisms. Results suggest that the digital inclusive finance could promote households consumption. A heterogeneity analysis showed that households with fewer assets, lower income, less financial literacy and in third- and fourth-tier cities experienced larger facilitating effects of digital finance on consumption compared to their counterparts. For consumption categories, digital finance was positively correlated with food, clothing, house maintenance, medical care, and education and entertainment expenditures. In terms of consumption structure, digital finance mainly promoted the recurring household expenditures rather than the non-recurring expenditures. Further analyses based on the mediating model found that online shopping, digital payment, obtainment of online credit, purchase of financing products on the internet and business insurance, were the main mediating variables through which digital finance affected household consumption.     

The impact of infrastructure investments on income inequality: Evidence from US states

Our analysis of US state-level data on an annual frequency, from 1976 to 2008, sheds new light on a plausible causal link between infrastructure investments, namely public spending on highways, and income inequality. This causal relationship is drawn out using the number of seats in the US House of Representatives Committee on Appropriations (HRCA) as an instrument to identify quasi-random variations in state-level spending on highways. An exogenous pattern which emerges when a state gains an additional member to the HRCA is that it is allocated with new federal grants. This increase in federal transfers for infrastructure financing results in slashing of expenditures on highways and a crowding-out effect of federal funding for state investments on highways. Spending cuts on highways produced by a new HRCA member being attained by a state can unwittingly cause income inequality to rise over a short 2-year time horizon. Similar challenges with decentralized development to finance infrastructure via federal transfers to state and sub-national governments may be encountered by other industrially advanced, emerging and low-income developing economies. US data over the mentioned period reveal a strong positive correlation with state spending on highways and wages paid for construction jobs. Suggestive evidence indicates that the construction sector also plays an important role in the transmission channel from a rise in state spending on highways to lowering income inequality, albeit during specific intervals, as opposed to on a long-term basis.     

The effect of short sale constraints on analyst forecast quality: Evidence from a natural experiment in China

We examine the effect of short selling on analyst forecast quality following the pilot program in China in 2010 that allows short selling for selected companies. We find that reduction in short sale constraints significantly improves analyst forecast quality for these pilot-firms when compared to non-pilot firms. Specifically, analyst forecast errors for pilot firms are smaller and forecast dispersions are narrower. Further, we show that the improvement of analyst forecast quality is more prominent for firms with lower prior price efficiencies and disclosure quality, and in locations with lower institutional development. Our findings suggest that short selling activities serve an important role in facilitating the speed of information incorporation and improving the information environment faced by firms.     

The effect of minimum wage on firm markup: Evidence from China

Our paper examines the impact of minimum wage on firm markup in China. We find that minimum wage generates a positive effect on firm markup. More value-enhancing innovative activities, TFP improvement, and efficient labor resource allocation are the potential channels. Further, the positive influence of minimum wage is more pronounced for privately-owned firms, for firms with higher labor intensity and firms with less financial constraints. Besides, these findings are generally robust to different estimation methods. Our results provide new insights into understanding the channels through which labor regulation may cause the change of markup for the emerging markets countries.     

The dynamic impact of intellectual capital on firm value: evidence from China

We examine the dynamic relationship between intellectual capital (measured by human capital and organizational capital) and firm value of Chinese listed firms. We do causality identification using system GMM and IV estimation, and find no significant relation between human capital and firm value, but organizational capital positively affects firm value with a lag. Our findings are robust to firms with different property rights, of different sizes, or in different industries, with the only exception of capital-intensive firms, in which human capital has a significant influence on firm value. The results imply that the improvement of organizational system plays a more important role in raising the value of a firm in a typical developing country, like China.     

The power of market mood — Evidence from an emerging market

This article focuses on investor behavior and, consequently, the mood in the market. By using a self-organizing network we develop a model which tries to capture the market mood and serves as an indicator of the reasonableness of selling or purchasing securities. In this sense, the final result of this model is the same as in the model-type prediction of future stock prices, with the only exception being that one is not required to know the concrete future values of the selected security. This will indirectly support the hypothesis that psychological factors are an important (if not key) market driving force.     

Effects of regulatory burden and corruption on firm performance: Evidence from Moldova

Firms in Moldova face a high level of regulatory burden, as proxied by the number of inspections by public authorities. At the same time, they face high levels of corruption. We examine the effect of frequent inspections on four measures of firm performance: labour and total factor productivity, and levels of tangible and intangible assets. We also investigate how corruption affects the relationship between inspections and firm performance. We perform panel data analysis using firm-level administrative data and survey data from Moldova in 2005–2015. The results show that inspections and corruption each affect firm productivity negatively, but corruption moderates the negative effect of inspections. We also find that inspections and intangible assets are positively correlated, but this correlation is weaker for higher levels of corruption. Finally we examine whether these results differ by industry, firm size and ownership types. Inspections and corruption affect medium and large firms, and state-owned enterprises differently from micro and small firms and private firms respectively.     

The impact of interest rate and exchange rate volatility on banks' stock returns and volatility: Evidence from Turkey

This paper investigates the effects of interest rate and foreign exchange rate changes on Turkish banks' stock returns using the OLS and GARCH estimation models. The results suggest that interest rate and exchange rate changes have a negative and significant impact on the conditional bank stock return. Also, bank stock return sensitivities are found to be stronger for market return than interest rates and exchange rates, implying that market return plays an important role in determining the dynamics of conditional return of bank stocks. The results further indicate that interest rate and exchange rate volatility are the major determinants of the conditional bank stock return volatility.     

Firm performance and economic development: Evidence from a unique dataset of China

Using a unique firm-level dataset from 2007 to 2015, we investigated the characteristics and trends of China's economic development from the perspective of firm performance. We found that China's economic development in the recent decade has made the following achievements: less reliance on investment for growth, enterprises’ deleveraging, a more competitive market environment and improvement in labour income distribution. Yet, it still faced severe challenges, such as increasing tax and fee burdens, high employment pressure, low total factor productivity (TFP) growth rate, and how to realize the coordinated development of the economy and environment.     

The joint effects of financial development and the business environment on firm growth: Evidence from Vietnam

This work examines the complementary effects of local financial development and the business environment on the growth of Vietnamese firms. For the period from 2009 to 2013, we combine firm-level data covering more than 40,000 firms from the Vietnam Enterprise Survey with province-level data from the Vietnam Provincial Competitiveness Indicators. Our estimation strategy builds upon a novel copula-based estimator that accounts for potential endogeneity biases without requiring external instruments. Our results show that financial development and a favourable business environment generally promote firm growth, but some components of the business environment, such as low entry costs, access to land and business service support, foster firm growth more strongly than financial development. Most importantly, financial development and the business environment interact positively in their effects on firm growth. The impact of local financial development on firm growth is higher in provinces with a competitive business environment. Conversely, improvements in provincial competitiveness have a greater impact on firm growth in provinces with a more developed financial sector. The results clearly show that policies to promote local financial development need to be coordinated with measures to improve the broader business environment.     

Provincial economic performance and underpricing of IPOs: Evidence from political interventions in China

We examine the underpricing of 2,131 Chinese initial public offerings (IPOs) between 2005 and 2017. The results indicate that state-owned enterprises (SOEs) controlled by the local government (local SOEs) offer significantly higher underpricing when they go public than SOEs controlled by the central government and non-SOEs do. This phenomenon is evident for local SOEs from less developed provinces, after controlling for the direct effect of regional economic performance. These results suggest local government officials underprice initial public offerings to make regional companies successfully go public to promote the regional economy.     

收敛抑或发散:来自中国区域经济非平衡增长的经验证据

按照共同的确定性线性时间趋势，可将我国28个省市自治区划分为四个区域（直辖市、经济发达、经济较发达和经济落后区域），这些区域的经济增长存在着四个“俱乐部”收敛的特征。同时，在直辖市和经济发达区域的“俱乐部”之间还存在着绝对β-收敛的趋势。另外，在经济发达、经济较发达和经济落后区域的“俱乐部”之间，经济差距存在显著的持续扩大趋势。可以证明中国区域经济平衡非增长现象严重，贫富差距逐步扩大。     

The impact of IT investment on firm performance in China: An empirical investigation of the Chinese electronics industry

Over the past three decades, the impact of information technology (IT) investments on firm performance has been the subject of active research. Although many studies have shown positive and significant benefits derived from IT investment, the findings of almost all these studies are based on data collected in developed countries. Few studies have been conducted to validate these results and to determine whether or not they are still applicable in developing countries. This study tries to investigate the effects of IT investment on firm financial performance in the electronics industry of China, still classified as a developing country, and compare it with the United States. Findings show that IT investment has a positive impact on firm performance in China. Moreover, the impact in China is not different from what occurred in the United States in terms of direction and the size against the assertion of previous studies and expectations.     

The evolution of corruption and development in transitional economies: Evidence from China

It is widely accepted in the literature, that the level of corruption is negatively and robustly related to economic development. However, skeptics argue that for transitional economies, this relationship may not hold. Economic reform loosens up the control of local officials and can increase corruption; Corruption and per capita income can be positively related. Using panel provincial data of China from 1995 to 2014 on prosecuted cases of corruption, we discover that during the early phase of China’s economic reform (during Zhu Rongji and Hu-Wen administrations), a positive short-run relationship is indeed observed. But, there is a robust negative long-run cointegration relationship between corruption and per capita income. The development of the market economy improves private wage and income in the long-run. The relatively inefficient and low returns to ordinary corruption cannot compete with rising market returns, which lead to dwindling corruption. However, the share of major corruption cases is increasing over time to be able to compete with rising market wages.     

河北农业科技园区建设现状与可持续发展研究

河北农业科技园发展到今天,已经颇具规模。然而,管理运行机制中出现的一些问题成为河北农业科技园发展的瓶颈。本文通过分析河北农业科技园管理运行机制中存在的问题,提出必须要采取现代化的经营管理措施,推追其可持续性发展。     

The impact of foreign direct investment on innovation: Evidence from patent filings and citations in China

This paper studies how foreign direct investment (FDI) affects innovation in the host country, using matched firm-level patent data of Chinese firms. The data contain multidimensional information about patent counts and citations, which, together with an identification strategy based on Lu et al. (2017), allows us to measure innovation comprehensively and to uncover the causal relationship. Our empirical analysis shows that FDI has positive intra-industry effects on the quantity and quality of innovation, as well as radical innovation, by Chinese firms. We show that these positive effects are driven by increases in competition, rather than by knowledge spillovers from FDI which is measured by patent citations between domestic firms and foreign invested enterprises (FIEs). We further investigate the inter-industry effects of FDI and find that FDI has positive vertical effects on innovation in upstream sectors through backward knowledge spillovers.