This paper constructs a two-country model to understand the denomination role of international currencies in cross-border financial transactions. In order to understand the role of international currency purely as a denominated currency, this paper analyzes two types of international monetary systems. The first system is complete equal, that is, the currencies of the two countries are both international currencies, and both can issue bonds denominated in their own national currencies in the international market. The second system is completely unequal, where only one international currency, and the two countries can only issue bonds denominated in the international currency in the international market. In order to differentiate the equilibrium of the two types of international monetary systems by monetary factors, this paper imposes a symmetry setting on the economic fundamentals of the two countries. This paper introduces bond issuance constraints, thus avoiding the external constraint that the two countries can only issue bonds denominated in their own national currencies.When the currencies of the two countries in the international monetary system are completely equal, this paper shows that in equilibrium, both countries issue bonds denominated in their own currencies and purchase bonds issued by the other country, which shows a cross-holding equilibrium of bonds between the two countries. This is consistent with the conclusion of the classic international macroeconomic literature. Although both currencies are international currencies, the price of exports is determined by the local currency pricing, so changes in the import demand of either country will affect the import expenditure of that country and also affect the foreign exchange income of the other country, making both countries bear the exchange rate risk at the same time. Therefore, hedging the exchange rate risk arising from the uncertainty of future import and export demand creates an incentive for bond cross-holding between the two countries. For example, when a country's export income decreases as a result of another country's declining future import demand, its holdings of another country's bonds can then maintain the purchasing power of future imports. Of course, if the future import and export demands are certain, then the import and export prices can be determined in advance, and there will be no exchange rate risk, the incentive for bond cross-holding between the two countries will disappear. The conclusion of the model in this paper implies that in a complete equal international monetary system, the bond cross-holding in equilibrium is equivalent to each country issuing its own currency in the international market and using it to buy other countries' currencies, then each country's central bank will hold other countries' currencies to form foreign exchange reserves.When the currencies of the two countries in the international monetary system are completely unequal, the results of this paper show that in equilibrium, the country of the international currency issues bonds denominated in international currency, and the other country buys bonds in the international market, and there is no equilibrium of bond cross-holding. Meanwhile, the international currency appreciates in the current period and the financing cost of the country's bonds is lower than that of the non-international currency country, namely the so-called exorbitant privilege, which is formed only from the denomination role of the international currency. For non-international currency country, since financial transactions in the international financial market can only be denominated in international currencies, it will inevitably bear exchange rate risks whether it issues or buys bonds denominated in international currencies. The research in this paper also indicates that in such an unequal international monetary system, the exorbitant privileges of the international currency country will disappear when its debt reaches a certain level, i.e., such privileges do not exist without constraint. The paper further extends the model to the scenario of endogenous bond issuance constraints and a more general status of the two currencies, and then demonstrates that the so-called exorbitant privilege can still be obtained by international currency country. The conclusions of this paper have important policy implications for the path selection of a country's sovereign currency development into an international currency.

The interbank businesses of commercial banks serve as a crucial mechanism for managing short-term liquidity, adjusting fund surpluses and shortages, and optimizing resource allocation. However, these operations also entail various risks such as regulatory arbitrage, maturity mismatch, funds idling, and shadow banking. In recent years, it is not uncommon for domestic and foreign financial institutions to almost cause systemic risks due to the rapid growth of interbank businesses. For instance, in March 2023, Silicon Valley Bank and Signature Bank in the United States experienced consecutive crises due to liquidity problems stemming from unstable funding sources. According to the historical data from China's banking industry, the scale of non-core liabilities of deposit-taking financial companies increased from 1.66 trillion yuan to 13.95 trillion yuan from 2007 to 2016, while their proportion doubled during this period. Although deleveraging policies have reduced the proportion of interbank liabilities since 2017, its absolute scale remains high. The potential risk associated with excessive reliance on interbank liabilities of banks should not be underestimated.Interbank liabilities are classified as non-core liabilities, which possess inherent instability that can easily trigger liquidity risks on both the asset and liability sides of banks and liquidity risk is a significant contributor to systemic risk. In November 2023, the “Measures for the Capital Management of Commercial Banks” issued by China's General Administration of Financial Supervision increased the risk measurement weight assigned to interbank business, highlighting regulatory authorities' ongoing focus on preventing systemic risks associated with non-core liabilities.Starting from the perspective of non-core liabilities of banks, this paper discusses the theoretical mechanism and empirical evidence regarding the impact of non-core liabilities on banks' systemic risks through liquidity channels and draws the following conclusions. Firstly, banks relying on non-core liabilities financing to invest in illiquid assets will bring systemic risks, with larger banks experiencing a greater impact of non-core liabilities on their systemic risks. This paper replaces core explanatory variables and explained variables, changes the estimation method, considers risk events during the sample period, expands the sample based on KNN machine learning and news text sentiment data, and addresses endogeneity problems using heteroscedasticity-based instruments, Bartik instrumental variables, and Heckman two-stage model. The fundamental conclusion that non-core liabilities increase banks' systemic risk remains valid. Secondly, bank asset liquidity and liability liquidity serve as important mechanisms through which non-core liabilities affect systemic risks. The liquidity of bank is reflected in the discount rate applied to illiquid assets sold in advance; higher discount rates indicate greater asset liquidity risk. Liability liquidity is reflected in the unextended ratio of non-core liabilities; higher ratios imply increased liability liquidity risk. When faced with high levels of liquidity risk there is an enhanced positive impact of non-core liabilities on systemic risk due to excessive holdings of such debt by banks which exposes them to potential delays or failure in rolling over these obligations timely. In such scenarios where liability liquidity risk increases significantly, banks need to divest more illiquid assets for repaying non-core liabilities that have not yet been extended yet. If there is also a rise in asset liquidity risk during this period, it results in heightened capital losses for banks, thereby amplifying overall levels of systemic risk.Based on the aforementioned research findings, this paper proposes that banks and regulatory authorities should actively monitor the scale and growth rate of non-core liabilities of banks and put forward stricter non-core liabilities management requirements for larger banks, so as to proactively prevent the risk accumulation resulting from the expansion of illiquid assets relying on non-core liabilities, thereby effectively averting systemic risks in the banking sector. In terms of bank liquidity risk management, counter-cyclical preventive policies should be adopted. When the scale of non-core liabilities expands excessively fast, restrictions can tighten the overall bank liquidity, limit the growth of non-core liabilities, and then reduce bank's risk accumulation. When the banking systemic risks increase, it is appropriate to relax bank liquidity in order to minimize the capital loss caused by the decline in liquidity and effectively alleviate the systemic risk.

Since 2015, Chinese local governments plan to issue replacement bonds to replace the financing platform debt that governments have to repay at maturity. By issuing local replacement bonds, local governments can reduce interest burden, optimize term structure, and free up more funds for key project construction. However, debt replacement is a double-edged sword, and the central government's debt relief can easily deepen moral hazard of local governments. Debt replacement reflects the central government's policy intention to bail out local government debt so that local governments have an expectation that when they encounter debt difficulties, the central government will provide assistance, thus relaxing budget constraints and leading to increased financing platform debt. Since 2015, the implicit debt of local governments has been replaced, added, and re-replaced. Does it show that the moral hazard of local government debt is difficult to eliminate？ Does debt replacement strengthen the rescue expectation of local governments, thereby having a negative impact on the moral hazard of local government debts？ What impact does financing platforms over-indebtedness have on the sustainability of local finance in the context of tight fiscal balance？To explore these issues, this paper first collates the financial data of local financing platforms from 2010 to 2019, uses two debt level indicators of asset-liability ratio and interest coverage, and uses relative estimation method and dummy variable method to measure the degree of over-indebtedness financing platforms. On this basis, with the help of the 2015-2018 prefecture-level replacement bond dataset manually collected by the author, empirical research is conducted on the impact of debt replacement on the over-indebtedness of financing platforms. The main conclusions are as follows: Firstly, the measurement result of financing platform over-indebtedness shows that the asset-liability ratio of financing platforms exceeds 7.20% of that of the general enterprises, and the interest coverage rate is only 61.43% of that of general enterprises. Since 2014, the over-indebtedness of financing platforms has shown an increasing trend. Secondly, research on the impact of debt replacement on the over-indebtedness of financing platforms has found that such replacement aggravates the moral hazard of local governments, especially the pressure of short-term debt repayment on local governments. Thirdly, heterogeneity analysis reveals that in areas with low levels of economic development, insufficient and inefficient new issuance of special local government bonds, debt replacement exacerbates the moral hazard of local government debts. Local government guarantee resources can reduce the financing costs of financing platforms and alleviate the pressure of short-term debt repayment, but can not inhibit the expansion of financing platform debt. Lastly, the extended analysis shows that debt replacement has an indirect negative impact on the fiscal sustainability of local government.Compared with the previous literature, the potential marginal contribution of this paper lies in: First, the scientific measurement of the level of over-indebtedness of local financing platforms makes up for the lack of research on the over-indebtedness of financing platforms and the moral hazard of local governments in current literature. Second, by using the replacement bond data collected and sorted out from 241 cities from 2015 to 2018 through public application channels, the relationship between debt replacement and local government moral hazard is empirically studied at the municipal level for the first time. The third is to conduct various robustness tests and heterogeneity analysis, using instrumental variable to address endogeneity problems, and rendering the empirical results more reliable and richer. In addition, the empirical evidence further proposes the economic consequences of debt replacement on the moral hazard of local governments, providing insights for improving fiscal sustainability and enhancing economic resilience.Based on the above research conclusions, this paper puts forward the following policy recommendations: Firstly, while preventing and resolving systemic risks of local government bonds, local governments moral risks should be taken into consideration. Secondly, tackle problems at their source from both short term and long term. For example, governments need to promote the market-oriented transformation of financing platforms and innovate debt eliminating method; strengthen the coordinated supervision of local government bonds and financing platform debt; improve the performance appraisal system of officials; strictly monitor local construction projects and optimize the structure of government debt.

The share of labor income reflects the extent to which workers share the fruits of economic development and the fairness of income distribution. However, China's share of labor income experienced a continuous decline from 1990 to the first decade of the 21st century. Moreover, compared with some developed countries, China's share of labor income remains at a relatively low level. Therefore, to achieve China's goal of common prosperity, it is necessary to clearly understand the key factors affecting the share of labor income, and to identify the paths for increasing labor remuneration and its proportion in primary distribution for workers.In previous studies, scholars have examined the relationship between the development of financial system and the labor income share of enterprises from the perspective of financing constraints. They believed that accelerating financial development can help to mitigate financing constraints for enterprises and increase their share of labor income. However, these studies neglect the fact that the remission of financing constraints brought about by financial development will lead to an asymmetric differentiation in the rate of increase in the input scale of production factors, which will affect the relative factor endowment of enterprises. At this point, even though the labor factors and their absolute income level of the enterprise may show an upward trend, its share in the overall factor income is still decreasing. Moreover, the spatial distribution of financial resources is not completely homogeneous, and there are differences in the financial environment and supply of financial resources faced by different micro enterprises. This is also a problem that has been overlooked in previous research.Therefore, this paper focuses on examining the impact of financial geographic expansion, represented by the spatial expansion of bank branches, on the labor income share of enterprises. This paper discusses the mechanism of financial geographical expansion affecting the labor income share of enterprises from the perspective of relative factor endowment changes, and empirically tests the effect of financial geographical expansion on the labor income share of enterprises by identifying the distribution of various bank branches on specific spatial scales around China's micro-industrial enterprises. Research has found that the number of bank branches within 5km and 10km of an enterprise has a significant negative impact on the labor income share of the enterprise, that is, the expansion of financial geography is not conducive to the improvement of labor income share, and this effect has a significant spatial attenuation feature. The expansion of financial geography has increased the capital-labor ratio of enterprises, which has a negative impact on the share of labor income. Furthermore, the geographical expansion of policy banks and foreign banks has no significant effect on the labor income share of enterprises. The geographical expansion of state-owned and joint-stock commercial banks and urban commercial banks has inhibited the increase of labor income share of enterprises. The expansion of financial geography has significantly suppressed the increase in labor income share of private enterprises, small and medium-sized enterprises, and capital-intensive enterprises, and the impact on state-owned enterprises, large enterprises, and labor-intensive enterprises is not significant.The conclusion of this paper has important practical significance for us to further scientifically examine the micro-effects of China's financial geographic expansion, optimize the policy orientation of financial system development, and guide enterprises to accelerate the transformation and upgrading of factors. On the one hand, although our research has found that financial geographic expansion has a negative impact on the increase of labor income share of enterprises, this does not mean that financial expansion is superfluous but that the development of the financial system should be scientifically guided. In recent years, with the deepening of the financial supply-side structural reform, China's financial expansion has entered a stable development track, and the expansion speed of various bank branches and outlets has significantly decreased. This to certain extent indicates that the current financial development in China needs to focus on reserve optimization, and financial institutions should pay more attention to the rational and efficient allocation of financial resources in the process of serving the real economy. They should not only focus on the expansion or contraction of scale, but also allocate more high-quality resources to enterprises with higher efficiency and higher technical level, so as to fully release the function of financial services to the real economy. On the other hand, one of the reasons why financial geographical expansion suppresses the share of labor income in enterprises is that they have adopted more capital to replace labor and the deeper reason is that the marginal output of labor factors in enterprises is relatively low. Therefore, the future increase in China's share of labor income requires a strong increase in the proportion of skilled labor in enterprises, optimization of the allocation of capital and labor factors, more reliance on skilled labor to promote development, and acceleration of skill-oriented technological progress. In particular, the increase of the labor income share also needs the guidance of high-quality transformation of private enterprises and small and medium-sized enterprises, improving their factor structure and technological innovation, and reducing the erosion of profit on wages.

In October 2023, the Central Financial Work Conference emphasized the need to unswervingly take the road of financial development with Chinese characteristics and accelerate the construction of modern financial system. As an innovative exploration of the “Financial Fund Capitalization” and the “Industrial Policies Financialization”, government guidance fund is profoundly affecting regional direct financing market and the innovation activities of local firms. As an important part of the capital market, private equity investment is of great significance to enrich direct financing channels, and an important carrier of innovative capital formation. Unlike Western developed countries, which are generally dominated by market investors, in China, governments at all levels are deeply involved in the private equity fund market, giving birth to government guidance funds with distinct Chinese characteristics. Local governments have become an indispensable participant in the market, profoundly influencing the regional equity investment market and corporate investment decisions. However, the existing research on the government guidance fund mostly lags behind the practical investment. At the same time, as the special representation of the industrial policies financialization, it is particularly necessary to explore the micro-economic effects that may be caused by the disruptive innovation of the way of using financial funds.In view of this, this paper empirically examines the effect of the establishment and development of urban government industry guidance fund on the innovation development of local firms by manually collecting the data of the establishment of urban industrial guidance fund in each city during the period of 2010-2021 and matching them with the innovation data of Shanghai and Shenzhen A-share listed enterprises. The results show that a one standard deviation increase in the scale of the urban industry guidance fund leads to a 5.94% increase in the innovation investment of local firms compared with the average level. This conclusion is still valid after a series of robustness tests. The mechanism analysis shows that the capital agglomeration induced by the government industry guidance fund will influence the innovation behavior of local firms through the channels of financing effect, information effect, and competition effect. Heterogeneity analysis reveals that the innovation promotion effect of government industry guidance fund is significantly greater among growing firms, capital-intensive firms and high-tech firms. In addition, we further compare and analyze the differences of the impact of government industry guidance funds and industrial policies on micro-enterprises innovation, and the results show that the micro-innovation effect of industry guidance funds is significantly larger than that of industrial policies. This paper provides diversified policy insights for local governments to participate in regional financial markets to help micro-enterprise innovation and development: Firstly, local governments should actively adopt market-oriented operation and professional management to screen high-quality investment enterprises and key industries, improve the accuracy of financial funds, and appropriately adopt a combined toolkit of industrial policies and industry guidance funds. Through the diversified combination of subsidies and investment, local governments could achieve the maximum return of financial capital innovation, and promote the precise development of local government policies. Secondly, local governments can pass positive policy signals to the capital market through the appropriate use of the credibility and signaling role of financial funds, help local firms to reduce the cost of equity financing by combining equity investment with other investment modes, guiding and encouraging professional investment institutions to participate in the corporate governance, and provide diversified and practical value-added services.Overall, this paper may have the following marginal contributions: First, this study clarifies the economic effects of capital agglomeration caused by guidance funds, and explores the potential channels of industry guidance funds to promote the development and innovation of local firms from the perspective of more specific equity financing, information governance, and market competition. Second, based on the starting point of capital agglomeration caused by the development of government industry guidance fund, this paper clarifies the positive externalities of the enrichment of regional direct financing channels on the innovative development of local firms. Combined with the perspective of “Industrial Policies Financialization”, this paper compares and analyzes the micro-economic impact difference between the government industry guidance fund and traditional industrial policy, and re-examines the realistic role of the industry guidance fund, and provides a reference for the follow-up study on how the guiding fund and industrial policy release the kinetic energy of regional industrial development.

China's economic and social development has entered the high-quality development stage of accelerating greening and low carbonization. To ensure sustainable economic growth and speed up the construction of an economic system that is green, low-carbon, and cyclic developing, enterprises must proactively adopt green and low-carbon mode of production, harmonize efforts to reduce pollution and carbon emissions, and comprehensively improve the greening level. Porter's hypothesis holds that rational environmental regulation policies can effectively promote enterprise green technology innovation, thereby improving production efficiency and competitiveness, and ultimately fostering economic growth. This study explores how government environmental impact assessment (EIA) influence green technology innovation through the “administration plus market” two-wheel drive perspective using A-share listed companies in China from 2003 to 2021 as the research sample. The EIA approval data were acquired through Python technology from CNInfo and the Public Environmental Data Center, which encompass project EIA approval announcements and environmental assessment reports released by listed companies. The data on enterprise green technology innovation were sourced from the State Intellectual Property Office (SIPO) of China. We manually collected and collated company green patent citation data and green patent application data based on the “International Patent Classification Green List” provided by the World Intellectual Property Organization (WIPO).Given this, this study concentrates on investigating the impact and operational mechanism of government environmental impact assessment (EIA) on corporate green technology innovation. The research findings are as follows: (1) Government EIA can significantly promote the corporate green technology innovation. This is primarily evidenced by the increased environmental governance investment and the enhancement of green technology innovation during project construction or modifications, since companies need to meet the EIA approval requirements for green production and pollution control. (2) Mechanism test reveals that, in terms of administrative supervision, enterprise EIA reports can timely disclose the prevention measures and innovative means adopted in environmental aspects during the construction of enterprise projects. The government EIA provides a reference for environmental penalty through information transmission. Therefore, the government EIA has further strengthened the government's supervision of the enterprise's environmental governance through environmental penalties, forcing enterprises to carry out green technology innovation. In terms of market guiding, enterprises can obtain professional guidance on environmental governance from market EIA institutions, thereby improving their green investment levels. In terms of public concern, government EIA can significantly increase regional public participation, and then drive enterprises to enhance their green technology innovation. (3) Further studies shows that national government EIA can significantly improve the quality and novelty of green patents of enterprises, while the provincial and municipal government EIA can effectively reduce the green proximity of enterprises. At the same time, compared with other enterprises, the government EIA has a more obvious effect on promoting green technology innovation in heavily polluting enterprises and enterprises with no political connection.The paper's contributions can be summarized as follows: Firstly, government EIA, relying on the two wheels of “administration plus market”, offers preliminary evidence to the efficiency of environmental regulation. Based on the perspective of government EIA, this paper conducts in-depth research and draws new empirical evidence by integrating the innovative regulatory methods of administrative approvals and market guidance. Secondly, the government EIA can promote green technology innovation by providing administrative supervision institutions with a punishment basis, guiding enterprises to increase their incentives to invest in environmental governance, and reinforcing public supervising, which provides good insights into how governments can effectively guide micro-enterprises in their green transformation and promote green innovation of enterprises. Thirdly, from the perspective of “law and finance,” this paper further improves the legal protection mechanism of ecological environment protection. Government EIA effectively combines “government legal regulation” and “full market participation”, reflecting the institutional advantages of the organic synergy of market role and government efficiency: on the one hand, it continuously complements and improves the legal regulations for environmental governance of enterprise's construction projects, using the “visible hands” of the government to exert strong regulatory effects on enterprises and effectively encouraging green technology innovation. On the other hand, by leveraging market power, it offers professional guidance to the EIA report, aiding enterprises in clarifying the environmental impacts of construction projects and corresponding protection measures and technologies. This improves the efficiency of green innovation, stimulates the innovation power, and broadens the development paths for green economy among enterprises.The following is the summary of the policy implications of this paper: (1) Deepening the connection between government EIA and pollutant discharge permits. On the one hand, EIA, as a prevention measure of government environmental management, can coordinate multiple regulatory forces, synthesize on-the-spot investigation and program linkage and other methods, improve the transparency of corporate information on environmental governance, effectively grasp the possible environmental impacts of corporate project construction timely, and carry out a more comprehensive process supervision. On the other hand, the enterprise's pollutant discharge permit system focuses on the early-warning and management, which can strengthen the real-time monitoring of enterprise pollution discharge by EIA, refine the regulatory framework of pollutant discharge, and effectively play the external role of EIA supervision. The convergence of the two systems can further enhance the integration and exchange of various governance methods in China's ecological environment governance and improve the environment-related legal system. (2) It's essential to strengthen the degree of public participation in government EIA and ensure the openness and transparency of EIA information throughout the whole process. There still remains the problem of information asymmetry in China's government EIA process. Some approval processes are still not open and transparent. Therefore, it is necessary to further enhance the disclosure of enterprise pollution emission information in the government EIA process, encourage the public to actively participate in the protection and management of ecological environment, and guide all social strata in various regions to join hands, contribute ideas, and jointly commit to the green and long-term sustainable development of China's economy. (3) The clarification of the role of green technology innovation and coordination of the environmental governance responsibilities among multiple stakeholders are of great importance. High cost, long cycle, and difficulty of transformation of green innovation technologies have always been persistent challenges in the R & D process. China should cross-utilize multi-disciplinary knowledge, gather multiple EIA participants, learn from environmental science and informatics theory, apply computer science technology and thus deeply analyze the logical principles of green innovation technologies.

A robust foundational structure for the capital market is essential for its high-quality development. As China's capital market reform continues to deepen, the price limit reform (PLR) has undergone its most significant transformation in over two decades. Conducting a comprehensive assessment and evaluation of the pilot PLR program will not only help to reconcile the divergent academic views on the effectiveness of the circuit price limit, but provide more invaluable insights for further capital market reform. This holds great significance for strengthening the capital market's role in resource allocation.Using the relaxation of price limit (from 10% to 20%) on the Growth Enterprise Market (GEM) as a quasi-natural experiment, we conduct a detailed investigation on the policy effects of PLR. First, by analyizing the realization of daily return and the short-term reaction of stock prices after certain shocks, we find that after PLR, the proportion of daily returns reaching ±10% didn't increase but rather decreased, and price change after either positive or negative shocks became more stable, suggesting that PLR has an improvement effect on the market trading environment. Second, the empirical results based on the DID model show that PLR has significantly improved stock liquidity: specifically, under the 20% price limit, the price impact caused by each billion-yuan trading volume has decreased by about 0.73 percentage points, which is equivalent to nearly one-fifth of the average price impact. Third, we investigate the influence channel of PLR on stock liquidity from the perspective of investor behavior, and verify that PLR can alleviate investors' irrational behaviors and restrain speculative manipulations.Finally, we carry out exploratory investigations on the following two questions: First, how does price limit affect price discovery efficiency？ Second, will PLR increase market risk？ The former question is the focus of the academic debate about price limit, while the latter is the most common concern of investors. Our research results show that PLR effectively improved the market pricing efficiency, and did not increase market risk. On the contrary, it reduced market risks by reducing the negative impact on liquidity and restraining investors' irrational behavior and speculative manipulation. Based on the aforementioned findings, we conclude that the relaxation of price limit has exhibited outstanding efficacy during its trial run on the GEM. Analyses from various angles including stock price reaction, liquidity, investor behavior, market pricing efficiency, and liquidity risk thoroughly affirm the effectiveness, appropriateness, and indispensability of PLR. Furthermore, cross-sectional analyses underscore the broad-ranging and pervasive policy impact, providing theoretical underpinnings and decision-making insights for policy makers to advance PLR across the entire market.Our research makes the following contributions to the literatures. First, it reveals the market impact of PLR, providing new empirical evidence for evaluating the policy effects of the ongoing capital market reforms. Prior research primarily focused on the reforms of the issuance system (i.e., the registration-based IPO system), while the research into the trading system is insufficient. We also examine the implementation effects and mechanisms of PLR on market microstructures from the perspectives of stock, investors, and the market.Second, our research enriches the academic discussions on the conventional price limit (especially price limit amplitudes). Existing literature extensively studies the impacts of the price limits of IPO and the price limits of the first day of listing, but pays less attention to the conventional price limit. Moreover, unlike earlier studies focusing on the existence of price limits, we delve into the impact of price limit amplitudes, which carries more important implications for further capital market reform in China and also expands the existing relevant researches.Third, our research enhances the causal effect identification of the market impact of price limit, facilitating the development of unified conclusions. Academic debates surrounding price limit have persisted without consensus. PLR provides an exceptional quasi-natural experiment to elucidate this issue, allowing us to overcome potential biases in prior research and transcend limitations of short-term event studies. By exploiting these advantages, we can focus on the long-term effects of price limit and yield richer and more accurate research conclusions. Additionally, we consider price collar mechanisms, another trading system reform in the Chinese capital market, and compare its impact with that of PLR through policy analysis, statistical examination, and empirical testing, providing valuable complements to the research on the trading system reform in China.

The report to the 20th National Congress of the Communist Party of China proposed that high-quality development is the essential requirement of Chinese modernization and the priority of building a modern socialist country in all respects. On the one hand, endogenous growth theory suggests that total factor productivity is a sustainable source of healthy economic growth. Marxist theory of surplus value points out that living labor is the only source of value creation while workers' surplus labor is the only source of surplus value. Labor productivity has become the core measure of productivity development, and its improvement is usually considered to be the essence of economic growth. As China's population ages, the share of working-age population has decreased, lowering its demographic dividend. Thus, focusing on strengthening the development and utilization of human resources, stabilizing the labor force participation rate, and improving the efficiency in the utilization of human resources are important initiatives to shift the driving force of economic development from the demographic dividend to the talent dividend and support high-quality economic development in the future. Additionally, the new development philosophy also prioritizes sharing as a fundamental goal of high-quality development. The concept of creating shared value reflected by enhancing corporate investment in human capital and improving corporate labor productivity also contributes to high-quality development.The capital market is critical to the high-quality development of the real economy. As the key to comprehensively deepening capital market reform, the registration system is one of the major reforms to improve the systems and mechanisms for the market allocation of production factors. Existing literature has examined the impact of the registration system reform on IPO pricing efficiency, stock liquidity, and IPO quality. Several studies also focus on the spillover effects of the registration system reform on information environment of peer companies, investment of peer companies, and the market valuation of potential reverse merger targets. Given the importance of corporate labor productivity to achieve a stable and healthy economic development in China, it is worthwhile investigating whether and how the registration system reform could influence labor productivity of peer companies.Using the data of China's A-share listed firms from 2016 to 2021, this paper finds that registered IPOs have a positive impact on the labor productivity of peer companies. Meanwhile, the spillover effects are due to the feedback effects from registered IPOs' human capital and innovative information, which alleviate peers' agency problems and incentivize peers to increase research and development (R&D) expenditure. Further analyses indicate that the spillover effects are more significant in peers facing fiercer product-market competition, with lower levels of manager and employee stock ownership, especially for innovative industries.This paper makes three theoretical contributions. First, this study contributes to the literature on the economic impact of the registration system reform. Instead of exploring the effect of the registration system reform on the registered IPOs themselves, a growing body of literature has examined the spillover effects of the registration system reform on their peer companies. However, such studies mainly provide evidence from the perspective of the information environment and corporate innovation. This paper extends to corporate labor productivity and thus supplements existing research on the spillover effects of the registration system reform. Second, this paper enriches the analytical framework for the spillover effects of information disclosure in the registration system reform. Specifically, this paper identifies information on human capital and innovation from the prospectus using textual and accounting measures. This helps us to examine the feedback effects of human capital information and innovative information on the labor productivity of registered IPOs' peer companies respectively. Therefore, by taking the perspectives of human capital information and quantitative data, the paper expands the analysis framework of the spillover effects of information disclosure in registration system reform. Thirdly, the study contributes to the literature on the influence factors of corporate labor productivity. The existing literature documents that external factors including Internet loan development, local public debt growth, business environment, and tax policy, as well as internal factors such as compensation incentive, capital structure, social security input, and managerial efficiency, are significantly related to corporate labor productivity. Nevertheless, few studies explore the relationship between capital market development and corporate labor productivity. Based on the equity capital market, this paper reports that the registration system reform and its effect of information feedback are conducive to improving the labor productivity of registered IPOs' peers, which helps the market to understand the differentiated roles of different aspects of capital market development in corporate labor productivity.This paper also provides the following policy implications. First, against the backdrop of implementing across-the-board registration-based IPO system, it is necessary to continue making rules on the content and format of information disclosure of the prospectus and improving the quality of issuers' information disclosure, especially the authenticity, accuracy, and completeness of information disclosure of human capital and innovation. The enhanced information feedback could help the capital market to serve high-quality economic development. Second, governments should continue to encourage and promote firms to increase investment in human capital, improve corporate governance, and increase R&D investment to achieve sustained optimization of corporate labor productivity.

The report to the 20th National Congress of the Communist Party of China pointed out that it is necessary to strengthen and improve modern financial supervision and ensure that no systemic risks arise. However, in recent years, as a significant source of systemic financial risks, firm default on debt is one of the most destructive events in firm development. It's not only posing threats to the firms' healthy operations but also potentially triggering economic catastrophes that could evolve into systemic debt crises through economic interconnections, thereby endangering the stability and security of the whole financial system and socio-economic environment. Therefore, exploring what and how the risk of debt default is caused has become a critical issue in the new era. Furthermore, case studies show that corporate debt defaults are often closely related to firm's aggressive investment behavior across industries, exemplified by firms like Macrolink Holding, Guogou Investment, HNA Group, Founder Group, China Evergrande Group, LeEco, and CITIC Guoan Group. These firms engage in aggressive expansion and cross-sector competition, incurring substantial debts and persistent liquidity pressures, while short-term profitability fails to materialize, eroding their core competencies and innovative capabilities. This confluence of factors finally leads to a default crisis. Thus, the question of this paper focuses on how cross-sector competition affects the risk of debt default. However, this cannot be addressed solely through case studies but also requires rigorous empirical analyses.Our empirical analysis centers on data from China's A-share listed companies over the 2007-2020 period. We collect textual data from the Management's Discussion and Analysis section of firms' annual reports and obtain financial data from the China Stock Market and Accounting Research (CSMAR) Database and Chinese Research Data Services Platform (CNRDS) Database. A simple research approach utilizes traditional diversification metrics as core explanatory variables in empirical design, such as calculating the Herfindahl index or entropy index of sales income from the number of industries an enterprise operates in, as reported in annual financial statements. Nevertheless, measurement bias in this method warrants caution as traditional diversification metrics have several shortcomings. For example, industry breakdowns information in financial reports might not reflect the true extent of an enterprise's industrial diversification. Additionally, firms often change their reported sectors without real operational changes. Thereby, by employing machine learning and complex network methods to analyze unstructured textual data, this paper constructs a novel and firm-specific proxy to measure the behavior of firm's cross-sector competition, validates its informativeness and investigates the effect of firm's cross-sector competition on firm's likelihood of financial distress.Specifically, the results of our empirical analyses demonstrate that higher level of cross-sector competition results in higher risk of debt default. Our findings remained robust after a series of robustness checks. For example, we use a two-stage least squares model with historical instrumental variables to mitigate the endogeneity issues. The results confirm our main findings. In addition, the results of the mechanism analyses provide three possible channels through which cross-sector competition results in higher risk of debt default: increased pressure of debt repayment, inefficient allocation of resources, and erosion of innovative capacities. The main effect is concentrated in subsamples for which supply of credit resources is sufficient, the pressure of market attention is high, and the managers are overconfident and incompetent. Lastly, the rising debt default risk, induced by intense cross-sector competition, impairs the firms' productivity and value-creation capability. This study documents a previously under-identified adverse consequence of competition: its exacerbation of firm's default risk.This paper makes the following three contributions. First, by exploiting machine learning techniques to process unstructured text data and complex network methods, this study creates a more accurate firm-level variable than traditional methods to measure firm's cross-sector competition and validates its informational value. In contrast to extant literature, this measure provides a more direct, objective, and effective approach to quantify firm's competition in non-core industries. It features high accuracy and variability, significantly mitigating problems in existing literature. Also, it provides a robust data foundation for subsequent research and paves the way for future studies to integrate text analysis and network methods. Second, based on some case studies, this paper examines firm diversification strategies from the novel perspective of cross-sector competition. This paper systematically and deeply explores the impact of this competition on the risk of debt default for the first time. Furthermore, the paper discusses how firms' cross-sector competition exacerbates their debt default risk from the channels of debt pressure, allocation of resources, and innovative capacities. Thus, it not only complements the literature on product market competition but also on the factors affecting the risk of debt default. Thereby, this paper is of significant practical relevance and provides guidance, offering valuable insights for regulating healthy corporate development and maintaining the stability of the financial system. Finally, the literature enriches the heterogeneous analysis of the impact of firm's cross-sector competition on the risk of debt default from internal and external aspects, including credit provision, market pressures, and managerial characteristics. Thus, this study has clear policy implications on how to improve the efficiency of credit resource allocation in China, foster the healthy and stable operation of capital markets, and refine corporate governance and business management practices in the new era.

In November 2020, the defaults of AAA bonds issued by two state-owned enterprises (SOEs), Brilliance Automotive and Henan Yong Coal Group, broke the ‘rigidity' of AAA-rated SOE bonds. The default of highly rated bonds not only harms the issuing enterprises, but also may have a negative spillover effect on the industry and regional bond issuance.Defaults on high-grade bonds have led to a negative impact on the reputation of the rating industry, which will inevitably affect investors' trust in the rating results. For issuers, a direct effect of the negative impact is that, as investors doubt the credibility of the rating industry, when the credibility of external rating information decreases, investors will rely more on internal information to make decisions and will pay more attention to changes in corporate solvency. Therefore, once the reputation of the credit rating industry is negatively impacted, enterprises with ratings will also be further scrutinized by investors, which in turn will affect their financing costs and choice of financing channels. In the face of these adverse effects, will rated firms take relevant measures to reduce the negative impact of the rating industry's reputation shock on their firms？ This paper defines the behavioral change of rated enterprises as the “spillover effect of the reputation shock of credit rating industry”.In terms of the economic consequences of the rating industry's reputational shock, we focus on firms' earnings management behavior. Specifically, this paper constructs a DID model using the Dagong Global penalty event as a natural experiment of the rating industry reputation shock, and selects the quarterly data of A-share listed companies from 2017-2019 as the research sample to examine the post-shock changes in the level of earnings management of rated firms in response to the negative shock to the reputation of the rating industry. The empirical results find that, firstly, the earnings management activities of rated firms increase significantly after the Dagong Global penalty event, and the conclusion still holds after a series of robustness tests. At the same time, the increase in the level of earnings management is mainly shown as a short-term effect due to the pressure of earnings management costs. Secondly, the cross-sectional analysis shows that the positive relationship between rating reputation shocks and earnings management is more significant in the group where firms have large ex-ante financing constraints. Thirdly, this paper also finds that when the rating industry reputation is negatively impacted, firms obtain more bank and bond market credit resources by engaging in more earnings management, while their engagement is also exposed to the risk of deteriorating future performance and increased risk. Finally, the negative impact on the rating industry's reputation caused by the punishment of Dagong Global has also led to an improvement in the quality of ratings in the credit rating industry.The research contribution of this paper is threefold: First, existing research has extensively analyzed the functions of credit ratings, such as the fact that changes in credit ratings convey valuable information to the market. For the first time, this paper uses the exogenous event of the punishment of Dagong Global to test how the negative impact on the reputation of the rating industry affects firms' financial decision-making. Second, previous studies have mainly analyzed the influencing factors of earnings management from the perspectives of government regulation, listed company performance appraisal, corporate governance, minimum wage level, and small-and medium-sized shareholders' behaviors, and this paper focuses on analyzing the impact of the negative impact of the reputation of the credit rating industry on the firms' earnings management behavior, therefore enriches the literature on the influence factors of surplus management from the bond market perspective. Third, there aren't many assessments of the effects of regulatory policies in the bond market, and some of the existing studies have focused on qualitative discussions of issues in the reform of the regulatory system, emphasizing that the current regulatory fragmentation is not conducive to the development of the bond market. This paper also provides evidence for the empirical assessment of the effectiveness of bond market regulatory policies, especially rating industry policies, in the bond market.With the high level of opening up of the credit rating market to the outside world, foreign rating agencies enter China. Future research could specifically analyze the improvement in the quality of ratings made by local rating agencies with the entry of foreign rating agencies.

Under the backdrop of a global economic downturn, tax incentive policies can help firms alleviate financial pressure and sustain production capacity, thus nurturing the potential for fiscal revenue and economic growth. However, under the influence of multiple factors, fiscal operations are in a “tight balance”, and tax incentives further exacerbate fiscal revenue and expenditure contradictions, also leading to policy inequality issues among firms, causing deadweight losses. Therefore, it is necessary to analyze the cost-effectiveness of tax incentives from the perspectives of fiscal revenue and expenditure and socio-economic development, so as to advance policy optimization. The tax expenditure system requires the scale of tax incentives to be measured from the perspective of deviation from the baseline tax system and to conduct cost-benefit analysis, which highly aligns with current realities, but related research and practices are in slow progress. Existing literature mainly focuses on the concept and content analysis of tax expenditures and their theoretical and institutional exploration in China, yet little literature focuses on the crucial step of cost-benefit analysis in tax expenditure management. This paper selects the representative policy of additional deductions for R&D expenses in corporate income tax, calculates the direct tax benefits and costs of its implementation from the perspective of tax expenditures, and evaluates its effectiveness.In the benefit analysis, the difference-in-differences model is adopted, data from publicly listed companies is used to measure the impact of the reform on corporate performance, and a series of robustness tests are conducted. Tax revenue is calculated based on regression coefficients. In cost assessment, the revenue forgone method is used to measure the tax costs with reference to the calculation approach commonly used internationally and the “Guide to China's Tax Expenditure Calculation Method” jointly compiled by the Ministry of Finance and Tsinghua University. The results show that this policy increases the return on total assets of enterprises by 1%, and it remains robust while considering the impact of competitive reforms such as “Business Tax to VAT”, VAT rate reform and accelerated depreciation of fixed assets, and after solving potential endogeneity issues. The resulting increase in corporate profits drives an increase in tax revenue of 44.05 billion yuan, while the reform also results in a tax reduction of 17.525 billion yuan and a cost-benefit ratio at the fiscal level of 251.36%. Moreover, to improve the representativity of the sample, regression analysis was conducted using tax survey data, which yields a cost-benefit ratio of 165.07%. Using the ratio of total profit to total assets as the dependent variable to overcome potential errors in baseline regression, a cost-benefit ratio of 248.84% is obtained. The estimate from baseline regression is the average effect during the observation period, and considering the subsequent impact on revenue and costs, a cost-benefit ratio of 214.5% is obtained. Subsequently, the broader cost-benefit situation from the socio-economic development level is discussed, including the economic and social benefits brought by the increase in R&D investment brought by the reform, deadweight losses caused by horizontal and vertical inequality due to different tax treatments, and compliance costs caused by the policy, arguing the effectiveness of the policy in a broader sense. Based on these conclusions, at the fiscal level and in a broader sense alike, the R&D additional deduction policy is cost-effective, and the continuity and implementation strength of this policy should be ensured in the next step, enhancing economic innovation vitality while promoting the healthy development of the fiscal and tax system. In terms of tax expenditure system construction, efforts should be made to improve policy benefit assessment capabilities. It is essential to select key policies among numerous tax expenditure policies, design reasonable assessment models, conduct quantitative analysis of benefits, and precisely evaluate cost-effectiveness. The increasingly rich tax data and micro-econometric methods provide a foundation for this.The core goal of this paper is to analyze the impact of representative policies on fiscal revenue and expenditure from tax expenditures and to explore pathways for cost-benefit assessment of tax incentive policies. Such studies are still relatively rare. The marginal contribution of this paper lies in the fact that it is the first to specify the costs and benefits of tax expenditures in absolute numbers, obtaining the cost-benefit ratio of the policy and achieving cost-benefit assessment at the fiscal and tax level. This reflects three values. Firstly, it can measure the real impact of tax expenditure policies on fiscal revenue, helping to more intuitively understand the effectiveness of the policy, thereby promoting policy optimization. Secondly, achieving performance evaluation based on cost-benefit analysis is an important part of implementing budget performance management, and the exploration of this paper's policy cost-benefit assessment can provide clues for improving the theoretical framework of China's budget performance management. Thirdly, for a long time, benefit assessment has been a difficulty in tax expenditure practice, and this paper's attempt to quantitatively assess policy benefits has referential value for further promoting the institutionalization of tax expenditure systems. Meanwhile, this paper also has room for further expansion. On one hand, to avoid estimation bias in cost-benefit estimation, it is necessary to capture the behavioral responses of micro-entities to changes in tax policies in the calculation. On the other hand, to achieve a comprehensive estimation of the policy, there is a need to further precisely estimate the generalized benefits and costs.