A key role of financial institutions is to serve the real economy. However, in practice, loose monetary policies have failed to translate into effective credit easing. After the central bank injected liquidity into the banking system, due to the constraints of both the supply side and the demand side, the liquidity was hoarded in the banking system. A major cause of this liquidity hoarding lies in public pessimistic expectations, making expectation management crucial for addressing this issue. This leads to a critical practical question: Can central bank expectations management effectively alleviate bank liquidity hoarding？
To answer the question, this paper employs machine learning methods to construct a sentiment index for the forward-looking content of the China Monetary Policy Report, which serves as a measure of central bank's expected management policy. Meanwhile, this paper uses unbalanced panel data of banks from 2009 to 2022 to empirically test whether the central bank's expectation management can alleviate banks' liquidity hoarding. This paper also conducts a series of robustness tests, including the instrumental variable method, text content splitting, alternative sentiment measurement method, and alternative sample.
The empirical results show: First, proactive forward-looking text sentiment alleviates liquidity hoarding among banks by reducing credit yield uncertainty and enhancing risk tolerance. Second, this sentiment significantly suppresses liquidity hoarding in banks with moderate liquidity levels (35%-75% percentile interval), while showing limited effect on those hoarding high or low liquidity. Third, the suppressive impact varies across bank sizes: it is notably effective for city commercial banks and rural commercial banks, but less pronounced in state-owned banks, joint-stock banks, and small rural financial institutions. Fourth, banks' innovation capacity enhances the suppressive effect, which becomes more pronounced when regulatory measures and innovation efforts reinforce each other. Finally, forward-looking text sentiment demonstrates stronger liquidity hoarding suppressive effects during economic upturns.
Based on the empirical results, this paper proposes the following policy recommendations. First, optimize the forward guidance tone of the central bank to alleviate liquidity hoarding in the banking system. China is in the stage of gradual economic recovery, but the expectations of market entities such as banks remain weak. It is recommended that the central bank should emphasize confidence in achieving potential growth targets when releasing the Monetary Policy Report. Simultaneously, it should clearly communicate its commitment to maintaining reasonable liquidity through observable indicators such as target ranges for market interest rates. Second, implement differentiated expectation management strategies. Strengthen the forward guidance of small and medium-sized banks, including differentiated rediscount quotas and assessment standards. Promoting these banks to release liquidity can accurately meet the financing needs of small, medium and micro enterprises. Third, establish an expectation management mechanism aligned with economic cycles. During downturns, the emotional tone conveyed in the Monetary Policy Report has limited effectiveness in curbing liquidity hoarding. It is recommended that the central bank further strengthen expectation management through other means, such as increasing the frequency of briefings and press conferences, and setting up a policy feedback section on the official website of the People's Bank of China. Fourth, banks should be encouraged to enhance their innovation capabilities. In order to give full play to the expected management effect of the central bank, banks need to strengthen their innovation capabilities. Only when banks can carry out credit supply and post-loan management more accurately can they realize the incentive compatibility between high-quality development of banks and the expected management goals of the central bank. Finally, regulatory policies should be coordinated with expected management policies. Regulators should establish a more comprehensive information disclosure mechanism to enhance market transparency and banks' trust in forward-looking guidance.

Despite many countries have slowed down climate actions in response to the global economic downturn, the long-term trend of low-carbon transition will not change and is becoming increasingly urgent. Addressing financial risks stemming from the increasingly pressing transition process is a crucial issue for China's dual carbon targets.
In this paper, we introduce multiple production sectors, environmental externalities, and financial frictions into an Environmental Dynamic Stochastic General Equilibrium model (E-DSGE). Based on this analytical framework, we first conduct scenario simulations of China's actual low-carbon transition process to explore the underlying transition risk. We further evaluate the effectiveness of the central bank's macroprudential policy and asset purchase policy in preventing and mitigating transition risk.
This paper finds that: First, the temporary slowdown of climate policy not only prevents the economic downturn from evolving into a severe recession, but also reduces the potential aggregate losses during the Carbon Peak Stage (2021-2030). Second, a significant increase of climate policy intensity will cause a sharp depreciation of fossil financial assets, impair banks' balance sheet and threaten macroeconomic and financial stability, which is likely to trigger transition risk. The insufficient motivation of fossil energy firms in reducing carbon emission intensity will drive up carbon price and magnify transition risk. Third, ex-ante macroprudential policy can prevent transition risk by reducing banks' exposure to fossil assets. Ex-post asset purchase policy can mitigate transition risk by injecting liquidity into the financial market. The combination of ex-ante and ex-post policies can significantly stabilize the fluctuations of output and banks' net asset and improve social welfare, effectively mitigating transition risk.
We propose the following policy suggestions: First, establish a transition risk assessment and monitoring system. On the one hand, encourage firms to strengthen the disclosure of carbon emission information, assess transition risk in time and take effective management measures. On the other hand, require financial institutions to actively conduct climate stress tests and enhance their ability to identify and control transition risk. Second, urge carbon-emitting firms to adopt efficient and clean production technologies and reduce the carbon emission intensity, promoting the orderly low-carbon transition. Third, construct a policy toolbox to deal with transition risk. Incorporate transition risk factors into the macroprudential regulatory framework.Levy taxes on banks‘holding of brown assets, provide subsidies for their holding of green assets, and gradually mitigate banks’ exposure to brown assets. Establish an early warning mechanism for the depreciation of carbon-related assets. Once the sharp depreciation of carbon-related assets threatens macroeconomic and financial stability, the central bank should intervene in time and provide targeted liquidity support through asset purchase. In addition, strengthen policy coordination. Macroprudential policy and asset purchase policy should work together to maintain the stability of the financial system and support the smooth transition.
This paper may have the following academic contributions: First, we construct an environmental dynamic stochastic general equilibrium model that includes multiple production sectors, environmental externalities, and financial frictions, providing a theoretical framework to evaluate central banks' policy actions related to low-carbon transition. Second, in the theoretical model and scenario simulation, we depict the realistic process of China's low-carbon transition, which slows down in the early stage and becomes urgent in the later stage. By comparing the realistic scenario with the ideal scenario where policy implementation is not disturbed by the economic cycle, as well as the non-ideal scenario where fossil energy firms do not actively reduce carbon emission intensity, we highlight the importance and necessity of managing transition risk. Third, from the perspectives of ex-ante risk prevention and ex-post risk mitigation, we analyze the effects of macroprudential policy and asset purchase policy targeting differentiated financial assets. We further discuss the performance of the combination of these two policies. This research provides insights into the policy design of a stable low-carbon economic transition.

Promoting consumption to boost domestic demand is an important focal point for fostering a new development pattern and driving China's economic growth. However, current domestic demand shortfalls remain a prominent issue, and the role of consumption in fueling economic growth urgently needs further enhancement. Based on the 2024 Central Economic Work Conference designating “comprehensively expanding domestic demand” as the primary task for 2025 economic work, how to effectively unleash residents' consumption potential has become a critical issue in economic development. As a key policy tool for adjusting residents' disposable income, Individual Income Tax (IIT) directly influences consumption behavior. China's new round of IIT reform in 2018 has provided a new pathway for releasing consumption potential, which marked a major transition from a classified tax system to a classified-comprehensive tax system and introduced special additional deductions for the first time. However, existing studies predominantly focus on its income distribution effects, with insufficient exploration of its consumption-stimulating effects. In the context of low consumption willingness and to expand domestic demand, three key questions arise: Can the new round of IIT reform effectively stimulate consumption？ What are the differential impacts of policy clauses on consumption？ How does its effect vary across different groups？
Based on the microdata from the China Family Panel Studies (CFPS) in 2018 and 2022, this paper calculates the changes in households' tax payable using residents' income data, and identifies two types of households: those affected solely by adjustments to the standard of expense deductions and tax rate brackets, and those affected simultaneously by comprehensive taxation and special additional deductions. By applying a first-difference model, this study comprehensively quantifies the impact of the new round of IIT reform on total household consumption and tax sensitivity, with a focus on analyzing how comprehensive taxation and special additional deductions drive consumption potential. Finally, heterogeneity analysis is conducted across two dimensions: enhancing the effectiveness of IIT reform policies and evaluating the synergistic effects of policy combinations.
Our study yields three key insights: First, the IIT reform has significantly boosted household consumption, with the consumption growth of households affected by comprehensive taxation and special additional deductions being more pronounced. Second, residents exhibit notable tax sensitivity, though such sensitivity diminishes as the intensity of tax shocks increases. Third, the effect of the IIT reform is heterogeneous: it exerts a more pronounced influence on household consumption among small families, those with higher education levels, households under strong liquidity constraints, and regions with developed e-commerce and industrial agglomeration. This effect is primarily reflected in increased household expenditures on housing, transportation and communication, preventive health care, and education and training, thereby contributing to the upgrading of residents' consumption structure.
Based on the above research findings, the following policy recommendations are proposed: First, target areas of substantial family burdens and consumption potential, further improve IIT policies by promoting the shift of the declaration model from individual to household, appropriately expanding the scope and standards for deductions related to housing, children's education, elderly care, etc., and fully unleashing family consumption potential. Second, strengthen the effectiveness of policy transmission, enhance policy implementation efficiency by accurately interpreting tax reform content through official channels and leverage big data platforms to achieve precise matching of tax incentives, improving policy implementation effects. Third, establish a multi-dimensional coordination mechanism: through integrated measures such as providing consumption subsidies, offering financial support, developing the platform economy, and actively harnessing the industrial agglomeration effect, convert the disposable income released by tax reform into effective demand.
This paper makes innovative marginal contributions from four dimensions. First, in terms of the research content, it conducts a timely analysis of the consumption effects of the new round of IIT reform, breaking through the limitation that existing literature mostly focuses on the consumption effects of early-stage tax reforms or the distribution effects of the new round of IIT reform. Second, in terms of the depth of research perspective, it decomposes the impacts of different policies in the new round of IIT reform on household consumption, thus providing a new entry point for subsequent studies on the effects of IIT reform. Third, in terms of the pertinence of policy recommendations, based on the conclusions of heterogeneity analysis, it provides theoretical support and empirical evidence for improving IIT policies and enhancing the implementation effect of tax reform policies. It also offers references for adopting supply-side measures to synergize with IIT policies in promoting consumption. Fourth, in terms of the methodological soundness, it accurately groups families through policy clauses to achieve a quantitative analysis of the consumption effects of different IIT reform regulations. By drawing on the core advantages of early classic literature and integrating cutting-edge methods from existing studies, it optimizes variable construction and data processing. The conclusions are more consistent with theoretical expectations and practical needs, offering reference value for further accurate analysis of the consumption effects of IIT reform in the future.

In August 2019, the People's Bank of China refined the formation mechanism of the Loan Prime Rate (LPR), integrated the two interest rate tracks into one, and opened up the transmission channel of monetary policy, which subsequently guided a decline in loan interest rates. To counteract the adverse economic effects of the COVID-19 epidemic at the end of 2019, China drove down the LPR. With the decrease in loan interest rates and the narrowing of commercial banks' interest spreads, it has also driven down deposit interest rates, and China has gradually entered the era of low interest rates. Can the persistent decline in interest rates, driven by the reform of LPR in this low interest environment, impact the maturity structure of banks' assets and liabilities, affect the “short-term debt for long-term use” behavior of enterprises,thereby alleviating enterprises' debt maturity mismatches？ Investigating these issues is crucial for understanding how market-oriented interest rate reforms influence the allocation of micro enterprise credit resources and contribute to fostering the high-quality development of real enterprises within a low interest rate environment.
This paper first determines whether there is a phenomenon of short-term debt for long-term use among Chinese listed companies spanning from 2009 to 2018, and selects the annual financial data of companies exhibiting this phenomenon from 2016 to 2023 as the research sample, sourced from the CSMAR and Wind databases. On this basis, this paper constructs a DID model using the LPR reform as an exogenous shock to analyze the impact and mechanism of eliminating dual-track loan interest rates on short-term debt for long-term use by enterprises. Furthermore, the paper delves into the potential factors contributing to the heterogeneity observed in the research findings, and extends its analysis to examine the economic consequences of eliminating dual-track loan interest rates on enterprises' business activities.
The main findings of this paper are as follows: Firstly, the elimination of dual-track loan interest rates significantly reduces the use of short-term debt for long-term purposes. The policy effect is more evident in non-state-owned enterprises, those with weak long-term financing capabilities, and enterprises lacking strong loan bargaining power. Secondly, after the LPR reform, as loan interest rates declined further, banks prefer to offer more long-term loans. Consequently, enterprises prioritize securing long-term loans to align with their long-term investments, thereby mitigating their operational liquidity risks and addressing the issue of debt maturity mismatches. Thirdly, the reform of LPR not only alleviates mismatched debt maturity within enterprises but also serves to further diminish the volatility of enterprise income, and enhance the level of enterprise performance.
This paper advances the following policy recommendations: Firstly, regulatory authorities should cooperate closely with the implementation of the policy,lead the loan interest rates to decline, so that enterprises can yeild more reasonable credit pricing. They should also continue to optimize the selection scope of LPR quoting banks, incorporate a broader array of representative banks. Secondly, financial regulatory authorities may encourage financial institutions to develop financial products that match the duration of projects, improve risk pricing mechanisms, and reduce information asymmetry between long-term investors and financiers through information disclosure and credit infrastructure enhancement, thereby providing targeted financial support for eligible long-term investment projects. Lastly, encourage banks to develop intermediary and specialty businesses and expand their customer base. Additionally, banks should optimize their customer structure, enhance service quality, and offer personalized financial products and services to engage in differentiated competition, thereby achieving transformation and development in a low interest rate environment.
The marginal contributions of this study are delineated as follows: Firstly, this paper empirically examines the impact of abolishing dual-track loan interest rates on micro enterprises, which offers significant theoretical insights and practical implications for assessing the efficacy of China's financial policy reforms. Secondly, this study elucidates the mechanism through which the decline in interest rates resulting from the LPR reform, ultimately influences the transmission of corporate debt maturity structure by extending the maturity structures of bank liabilities and assets, providing empirical evidence to address the corporate debt maturity structure issue. In the future, we can continue to take the LPR reform that guides the continuous decline in loan interest rates as the starting point, and explore the impact of low interest rates on financial markets and institutions, as well as policy responses and regulatory reform measures in a low interest rate environment.

In recent years, the mergers and restructurings of small and medium-sized banks (SMBs) have become a key strategy for local governments to promote regional financial reforms by streamlining institutions and improving quality. This paper constructs a multiple-bank network to explore whether mergers and restructurings of SMBs can effectively mitigate systemic risks in the banking industry. It examines differences between various merger proposals, and determines whether there are optimal boundaries for their impact on systemic risk under different macroeconomic conditions and policy support.
This paper, drawing on case studies of mergers and restructurings in China, identifies common characteristics and formulates merger plans from a theoretical perspective. Using data from the balance sheets of nearly 900 banks between 2007 and 2023, it constructs a multi-network model to comprehensively analyze the impact of mergers and restructurings on systemic risk.
The study proceeds as follows. First, we develop a multi-network model grounded in bank balance sheet structures to analyze the combined systemic risk impact of three asset classes: interbank assets, jointly held assets, and bank loans. Secondly, this paper systematically examines the practices of mergers and restructurings in China from the perspectives of disposal needs, merger methods, and bank characteristics. The study finds that the mergers and restructurings of SMBs primarily focus on enhancing bank stability, though there are certain discrepancies in the impact of different modes. Four theoretical merger schemes, based on asset size, asset allocation, network structure, and loan areas, are designed and tested separately for their effectiveness in mitigating systemic risk. Thirdly, given that local governments have provided financial support for the amalgamation of SMBs in recent years by implementing tailored policies for each province, this paper presents an analysis of the impact of local government capital injections on bank mergers when assessing the effectiveness of merger and restructuring plans. In response to the practical problems of systemic risk prevention and resolution, such as how to determine the priority of rescue and the differentiated impacts of various shocks, this paper further conducts robustness tests and comprehensively evaluates the applicability of various merger and restructuring plans.
The findings of the research indicate that: Firstly, from the perspective of ex ante prevention, the merging of SMBs with similar scales, diverse configurations, close business connections, and similar loan regions has the potential to reduce systemic risks. Secondly, from the perspective of ex post resolution, within the constraints of limited capital injection, priority should be given to the rescue of banks with large asset scales, diverse configurations, and close connections with other institutions. In evaluating the cost of capital injections for the purpose of bank rescue, priority should be given to the strategic integration of large banking institutions with smaller, more regionally focused banks. Local government fiscal credit enhancement and capital injection measures contribute to enhancing the effectiveness of financial risk mitigation. Thirdly, when facing a wide range of relatively weak external shocks, the merger plan based on loan regions can play a certain role.
In light of the aforementioned research conclusions, the following policy recommendations are put forward in this paper: Firstly, in order to formulate appropriate merger plans, it is necessary to adhere to the principle of “one-bank-one-policy”, and comprehensively consider factors such as the macroeconomic environment, the strength of SMBs themselves, and the financial resources of local governments. Secondly, establishing an emergency response mechanism for banking risk events in crises is imperative. In light of the constrained financial resources, it is more efficient to prioritize the rescue of systemically important banks. It is still necessary to closely monitor the situation after the event and provide corresponding policy and financial support in a timely manner. Thirdly, the toolbox for the governance of systemic risks in the banking industry should be enriched. A comprehensive approach should be taken, utilizing methods such as capital supplementation and mergers and restructurings to classify and resolve risks, and integrating efforts to advance the risk disposal and transformation of local small and medium-sized financial institutions.

In the digital economy, data has emerged as a critical factor of production, fundamentally reshaping societal transaction costs and resource allocation efficiency, thereby significantly enhancing social productivity. The Chinese government has actively promoted the construction of the digital government, undertaking comprehensive digital transformation to reconfigure government service models, elevate service efficacy, and provide support for high-quality economic development.
The Information Benefiting People (IBP) pilot policy, implemented in 2014, represents China's earliest national-level digital government initiative. This policy adopted an “Expert guidance+fiscal subsidies+ex-post assessment” mechanism. It precisely identified the transformative requirements of the public service system, aiming to “benefit enterprises and convenience the public” by dismantling administrative barriers, facilitating cross-level and cross-department information sharing, and integrating dispersed public service resources. Pilot cities subsequently constructed digital government platforms based on these directives, substantially streamlining administrative procedures, strengthening government-enterprise communication, and enhancing the efficiency of societal operations, thereby effectively stimulating economic and social vitality.
This study employs a difference-in-differences (DID) methodology to investigate the impact of the IBP pilot policy on firms' total factor productivity (TFP), using a sample of A-share listed companies from 2011 to 2021. TFP is estimated using both the Levinsohn-Petrin (LP) and Olley-Pakes (OP) methods. The regression results indicate that the policy significantly augmented the TFP levels of enterprises in pilot regions.
The IBP pilot policy influenced corporate TFP through three primary channels. First, by promoting extensive information sharing and circulation, the IBP policy mitigated information asymmetry between banks and enterprises. This enhancement improved banks' capacity for credit demand assessment and risk management, thereby alleviating corporate financing constraints. Second, the IBP policy plays a heterogeneous role in reducing firms' non-productive costs. Following the policy's implementation, the fairness and transparency of administrative processes improved, and cumbersome bureaucratic procedures were substantially streamlined. Third, the IBP policy also diminished firms' perception of economic policy uncertainty. By lowering enterprises' information search costs, the policy enabled firms to more acutely perceive changes in the external policy environment.
Furthermore, the study reveals that the impact of the IBP pilot policy on corporate TFP exhibits significant heterogeneity. Specifically, the TFP-enhancing effect of the IBP pilot policy was more pronounced for enterprises with weak bank-enterprise relationships and for those located in cities characterized by higher levels of informatization,and traditional government-business relations.
The marginal contributions of this paper are threefold. First, by focusing on the “Information Benefiting People” pilot policy, this study empirically substantiates the TFP-enhancing effect of government information sharing and cross-departmental business collaboration, providing critical empirical support for consensus on the economic value of digital government. Second, transcending conventional research frameworks centered on institutional environments and enterprise characteristics, this paper systematically demonstrates how digital government construction, as a core element of modern governance, drives corporate TFP growth through optimized public services, thereby offering a novel perspective in productivity research. Lastly, this study innovatively disentangles the underlying mechanisms, confirming its TFP-enhancing effects through three pathways: alleviating financing constraints, reducing non-productive costs, and weakening the perception of economic policy uncertainty. It further identifies heterogeneous effects based on the strength of bank-enterprise relationships and government-business interaction modes, providing theoretical underpinnings for understanding how digital government optimizes resource allocation and stimulates market innovation, consequently deepening the comprehension of pathways to high-quality economic development.
The conclusions of this study not only enrich the theoretical understanding of digital government from the perspective of the IBP pilot policy but also bear significant practical implications. Governments should persistently augment their efforts in digital transformation, accelerating the promotion and implementation of digital government projects, such as the IBP, to comprehensively elevate the efficiency and quality of government services. This, in turn, will effectively reduce corporate operational costs, fostering a more conducive operating environment for enterprises.

Information asymmetry remains a key obstacle to financing for small and medium-sized enterprises (SMEs), especially those in the technology sector. It also presents a major challenge to improving the efficiency of credit allocation. In recent years, government-led information empowerment has emerged as an important tool to reduce the information asymmetry between banks and firms. By enhancing the disclosure of firm-related information, such as business registrations and tax records, government agencies help banks better assess the operational performance of loan-seeking enterprises. While prior research has recognized the benefits of information empowerment in credit markets, it has largely focused on mirror-type information — that is, data directly reflecting observable facts about firms. In contrast, certification-type information—which reflects government assessments based on objective data—has received far less attention. This paper explores whether certification-type information can guide credit allocation and investigates the mechanisms behind its effects.
Drawing on the theory of information asymmetry, this paper first explains how certification-type information helps bridge information gaps between banks and firms. According to signaling theory, third parties with informational advantages can send credible signals to less-informed parties, thereby reducing asymmetries and improving the efficiency of resource allocation. When banks lack direct insights into firm quality, they may rely on government endorsements to identify high-quality borrowers. In this context, certification-type information serves as a quality signal to the market, helping banks distinguish high-quality firms, reducing information asymmetry, and increasing firms' attractiveness as loan recipients. Specifically, when information asymmetry is severe and credit rationing occurs, certification-type signals can ease the rationing and improve firms' access to credit. In less asymmetric situations, such signals may prompt banks to expand credit scale and lower interest rates for certified firms.
This study uses the specialized, high-end and innovation-driven SMEs whitelist issued by a province in eastern China as a proxy for certification-type information. Leveraging 1.8 million bank-firm matched loan records from the province, a difference-in-differences model is employed to evaluate the credit-guiding effect of the whitelist and its underlying mechanism. Results show that following the release of the whitelist, banks increased lending to listed firms by 6% relative to non-listed firms—demonstrating a notable guiding effect. This effect appears on both the extensive margin—encouraging new credit relationships between previously unconnected banks and firms—and the intensive margin—leading banks to increase credit to existing clients. Further analysis reveals that the primary channel through which the whitelist operates is by improving banks' ability to assess pre-loan risk and reducing adverse selection. However, its effectiveness in curbing moral hazard is limited due to weak punishing consequences for firms that fail to meet ongoing criteria.
These findings offer important policy implications for improving the efficiency of credit allocation. First, government-driven information empowerment can help correct market failures and reduce friction, with certification-type information effectively channeling financial resources toward sectors aligned with high-quality development goals. Second, the success of such whitelists depends on the government's capacity for evaluation and access to reliable data—making it essential to enhance the rigor, professionalism, and credibility of the certification process. Third, dynamic management of the whitelist should be strengthened. A dual-track system combining a “whitelist” with a “negative list”, supported by annual reviews and real-time adjustments, would improve post-certification constraining function and governance.
This paper makes three key contributions. First, by utilizing large-scale, firm-level loan data, it provides a novel analysis of the economic impact of certification-type information from both the extensive and intensive margins, thereby enriching the literature on the role of government information in credit markets. Second, by examining the government whitelist as a representative form of certification-type information, it offers empirical evidence for a mechanism distinct from that of mirror-type information, helping to address a notable gap in existing research. Finally, the paper generates practical policy implications for strengthening macroeconomic governance and enhancing the efficiency of credit resource allocation.

Investment in risky financial assets is a critical topic in household finance, bearing significant implications for increasing household property income and fostering the healthy development of financial markets. The Third Plenary Session of the 20th CPC Central Committee emphasized the need to increase urban and rural residents' property income through multiple channels, and to advance the five major areas in the financial sector (technology finance, green finance, inclusive finance, pension finance and digital finance). However, household participation in China's risky financial markets has remained low. This limited participation not only constrains households' ability to accumulate wealth and diversify risks through financial investments but also highlights the urgency for financial innovation. In recent years, digital infrastructure has emerged as a vital driving force and strategic domain for socioeconomic development, profoundly reshaping the financial ecosystem, information environment, and social networks. These transformations may exert a systematic influence on household investment decisions. Thus, investigating how digital infrastructure impacts household investment in risky financial assets holds significant theoretical and practical value for understanding household financial behavior in the digital age and advancing the development of inclusive finance.
This paper aims to analyze whether and how digital infrastructure influences household investment in risky financial assets. We employ an approach that combines theoretical and empirical analyses. First, drawing on intertemporal asset allocation theory and institutional economics, we incorporate digital infrastructure into the framework of household utility maximization and introduce an institutional friction cost function. This function delineates the mechanism through which digital infrastructure influences household investment decisions via channels such as reducing market frictions, enhancing financial accessibility, alleviating information asymmetry, and improving financial literacy, while emphasizing the synergistic effect of technology penetration and the institutional environment on the demand for risky assets. Second, we utilize the Chinese government-led “Broadband China” policy (piloted in three batches from 2014 to 2016) to design a quasi-natural experiment. Using data from the China Household Finance Survey (CHFS) covering the period 2011-2019, we employ the difference-in-differences (DID) method and event study methodology to identify the causal effects of digital infrastructure. Additionally, we conduct robustness checks using methods including PSM-DID, instrumental variable approach, placebo tests, and exclusion of confounding factors. For the mechanism analysis, we also use both macro and micro data such as the The Peking University Digital Financial Inclusion Index of China and Baidu Index.
The main findings are as follows: First, digital infrastructure significantly enhances household allocation to risky financial assets. The policy increased the probability of households investing in risky financial assets by 3.5 percentage points (25% of the pre-policy mean), the investment amount by 41%, and the portfolio share by 1.6 percentage points (29% of the pre-policy mean). Crucially, the policy effect exhibits a time-progressive dynamic pattern, revealing the long-term cumulative nature of technological penetration and institutional arrangements. Second, compared to low-income, low-education, and rural households, high-income, high-education, and urban households exhibit significantly higher participation rates in risky financial markets. This finding provides micro-level evidence supporting the digital divide theory and indicates that resource endowment disparities profoundly shape the real-world effectiveness of technology-driven inclusive finance policies. Third, mechanism analysis demonstrates that digital infrastructure reshapes household investment behavior through multiple channels: promoting digital finance development (especially expanding coverage and deepening implementation), broadening information access channels, enhancing financial literacy, and strengthening social networks and social trust.
Policy implications are as follows: (1) Reinforce the strategic supporting role of digital infrastructure, advancing R&D and application of technologies deeply integrated with financial services to solidify the foundational ecosystem of digital finance. (2) Optimize the digital financial ecosystem by upgrading inclusive finance platforms and the credit reporting system to precisely respond to household needs (e.g., credit, wealth management) and enhance service inclusivity. (3) Bridge the digital dividend imbalance by employing targeted subsidies to promote the penetration of low-threshold financial services into rural areas, and implementing digital skills and financial literacy training programs to activate the investment capabilities of vulnerable groups. (4) Foster a secure financial environment by strengthening regulation of digital finance businesses and high-risk investments, preventing financial fraud, cultivating social trust, and guiding rational investment.

With the continuous breakthroughs and widespread application of new energy technologies, China has occupied a leading position in the global new energy industry competition, giving birth to a number of international giants in new energy equipment manufacturing. To promote the continuous innovation and further development of China's new energy technologies, fostering a favorable business and innovation ecosystem is crucial, ensuring stable and sustained returns for new energy innovation. Unlike traditional energy, new energy technologies such as photovoltaics, wind turbines, nuclear reactors, and new energy vehicles are highly reliant on critical metal materials. The geographically concentrated production and processing of critical metals, coupled with long delivery cycles, have caused significant price volatility, introducing uncertainty into the business ecosystem of new energy enterprises. This study examines how critical metal price volatility influences the innovation activities of new energy enterprises, aiming to provide practical insights for advancing China's low-carbon energy transition and high-quality development.
Starting from the input of factors in the new energy industry, this study uses patent application microdata from listed companies across seven Chinese new energy sectors—hydropower, nuclear energy, wind energy, solar energy, biomass and waste-incineration power generation, geothermal energy, and new energy vehicles—spanning the period 2007-2022. The study delves into how critical metal price volatility impacts new energy enterprise innovation. Using negative binomial regression, the analysis defines innovation output as the dependent variable, measured by patent applications. By combining keyword identification with large language models on patent abstracts, the study distinguishes new energy patents, traditional energy patents, and resource-saving patents related to critical metals. The core explanatory variable is critical metal price volatility. First, a monthly critical metal price index for each new energy sector is derived through weighted calculations based on metal usage density. Then, the annual standard deviation of monthly price returns constructs the critical metal price volatility index.
This study shows that critical metal price volatility significantly negatively affects new energy enterprises' patent applications. Compared with traditional energy patents, new energy patents are less affected and the impact is not significant. Notably, increased critical metal price volatility can motivate enterprises to develop resource-saving patents related to critical metals. Further exploration into the potential mechanisms at play uncovers two key aspects. On the one hand, the financing constraint effect and the precautionary saving effect are identified as the primary factors that lead to a reduction in enterprises' R&D investment in the face of critical metal price volatility. On the other hand, the roles of the government and the market provide insights into the direction of innovation. Government green incentives like environmental regulations, green finance development and new energy subsidies ease the negative impact of price volatility on new-energy-related patents. Meanwhile, enterprise competition prompts more resource-saving patents related to critical metals to reduce cost-fluctuation exposure and gain market advantages. Heterogeneous analysis reveals that as the new energy industry penetration rate rises, the impact of critical metal price volatility strengthens. Enterprises with high energy transition degrees and those in midstream and downstream of the industrial chain are more affected by such price volatility.
The research findings have significant policy implications. First, China should enhance its global influence over critical metal resources and vigorously pursue circular economy development to strengthen the supporting role of resource-saving technologies in new energy security. Second, the government needs to accelerate the innovation of metal futures and other derivative product markets. Third, new energy enterprises should actively manage the risks of critical metal price volatility by using metal derivatives for hedging or entering into long-term supply contracts with upstream and downstream enterprises. Fourth, the government should actively promote financial market system reforms and develop a greater variety of green financial products.
The marginal contributions of this study are mainly reflected in three aspects. First, this paper extends the research on factors influencing new energy innovation by focusing on critical metals, an important input factor in the new energy industry, adding a new perspective and data support. Second, the study broadens the boundary of the understanding of critical metals' importance in the new energy industry. Existing studies mostly focus on the macro-level constraints of critical metal resources on new energy development, while pay insufficient attention to their micro-level impacts on enterprises. This study shifts the focus to the micro-level of enterprises, elucidating the micro mechanisms of how critical metal price volatility differently affects innovation activities across energy types. Finally, this paper provides insights for both the government and new energy enterprises in promoting new energy industry development and formulating business strategies.

In recent decades, the rapid global expansion of institutional investors has spurred growth in common institutional ownership, leading to research on its economic consequences. While extant research has primarily focused on the “collusion effect” and “synergistic governance effect”, this study explores an underexplored aspect: whether common institutional ownership facilitates the diffusion of innovation information among firms.
Using patent citations as a proxy for innovation diffusion, we take the establishment of common institutional ownership linkages between a pair of firms as the research setting. Based on the data of China's A-share listed companies from 2007 to 2022, our difference-in-differences analysis shows that common institutional ownership increases patent citations among invested firms by an average of 7.77%, indicating a clear innovation information diffusion effect. Mechanism analysis suggests that this effect stems from institutional investors' capability and willingness to share information. Heterogenous tests demonstrate that the effect weakens when innovation information is more complex, institutional investors exert stronger influence in the industry, or intellectual property protection is weaker. Further research demonstrates that this diffusion effect enhances R&D investment, innovation output, and efficiency among invested firms.
This study contributes to the literature in two ways. First, it enriches research on the economic consequences of common institutional ownership. While prior work has extensively studied these consequences, few have explored their role in innovation information diffusion—with Kostovetsky and Manconi (2020) as a notable exception. Our findings validate and extend their results by (1) examining both “capability” and “willingness” mechanisms, (2) showing how diffusion varies with innovation complexity, investor characteristics, and intellectual property protection, and (3) linking diffusion to R&D investment, output, and efficiency. These insights complement studies analyzing common institutional ownership's impact on innovation through “duplicate costs”, “technology spillover effects”, and “market competition effects” (Li et al., 2023; López and Vives, 2019; Antón et al., 2024). Specifically, we demonstrate that common institutional ownership boosts R&D investment and innovation performance via information diffusion, clarifying a key mechanism in its influence on innovation.
Second, this study advances research on innovation information diffusion channels by introducing common institutional ownership as a direct pathway. Previous literature has focused on collaboration networks, director ties, or digital platforms, often inferring diffusion effects indirectly through innovation outcomes. In contrast, we establish common institutional ownership as an explicit diffusion channel, offering new insights into innovation information dynamics among Chinese listed firms.
Our findings have important theoretical implications. First, institutional investors emerge as active facilitators of innovation information diffusion, extending beyond their traditional roles like providing funds and stabilizing the market. This provides fresh perspectives on their shareholder activism and outcomes. Second, from an organizational linkage perspective, we uncover how common institutional ownership creates new pathways for innovation information diffusion. Third, our results enhance understanding of business ecosystems, revealing that firms not only interact with supply chain partners but also form knowledge-sharing linkages with otherwise unrelated firms through common institutional investors. Finally, our findings suggest that when studying the innovation information diffusion effects of other entities, researchers should consider both the capabilities and willingness of the entities to share information, as well as contextual factors like information complexity and intellectual property protection.
Our findings also yield practical and policy implications. First, policymakers could promote the development of common institutional ownership to enhance national innovation capacity. Second, policymakers could accelerate innovation diffusion and foster innovation by strengthening intellectual property protection. Finally, institutional investors need to enhance their industry-specific technical knowledge to transmit innovation information among portfolio companies more effectively.

This paper investigates the relationship between the purchase of Directors' and Officers' Liability Insurance (D&O insurance) and tunneling behavior by major shareholders in Chinese listed companies, focusing on the second type of agency problem, known as “tunneling”, which occurs in markets with a concentrated ownership structure. In such markets, major shareholders often have substantial control over the company, enabling them to engage in misappropriation of company resources that harm the interests of minority shareholders. The paper explores whether D&O insurance can serve as an effective mechanism to mitigate the opportunistic behavior of controlling shareholders and protect the interests of minority shareholders.
Tunneling behavior is a significant issue in emerging markets, where large shareholders, who often hold a controlling stake, may use various mechanisms such as related-party transactions and asset stripping to transfer wealth from the company to themselves. Previous studies have primarily focused on internal governance mechanisms, such as the role of independent directors and the supervisory board, to address this issue. However, this paper expands the literature by introducing D&O insurance as a potential solution to constrain tunneling behavior by improving corporate governance and strengthening external oversight.
Drawing on a dataset of Chinese A-share listed companies from 2013 to 2022, the study empirically examines the impact of purchasing D&O insurance on the level of tunneling behavior, measured by related-party transactions. The empirical results indicate that companies that purchase D&O insurance experience a 4.2% reduction in tunneling levels, suggesting that this insurance serves as an effective tool to reduce major shareholders' ability to exploit the company for personal gain. This finding aligns with the hypothesis that D&O insurance, by providing coverage for directors and officers against potential lawsuits, helps mitigate the risk of opportunistic behavior by controlling shareholders.
The paper further explores the mechanisms through which D&O insurance exerts its influence. The analysis reveals that D&O insurance leads to improvements in the quality of information disclosure and strengthens the internal control systems of the company. By enhancing transparency and accountability, D&O insurance reduces the likelihood of misconduct by directors and officers, including collusion with major shareholders to engage in tunneling behavior. This finding underscores the importance of D&O insurance as an external governance mechanism, complementing traditional internal governance practices.
In addition, the study investigates the heterogeneity of the effect of D&O insurance across different types of companies. It is found that the effectiveness of D&O insurance in curbing tunneling behavior is more pronounced in companies located in regions with well-established rule of law environment and higher levels of marketization. The impact is also more significant in non-state enterprises. These findings suggest that the context in which a company operates, including the legal and regulatory environment, plays a crucial role in determining the effectiveness of D&O insurance as a governance tool.
Another key aspect of the paper is the exploration of the impact of tunneling behavior on company performance. The study demonstrates that tunneling behavior has a negative effect on the financial performance of companies, particularly in terms of profitability and stock performance. However, the purchase of D&O insurance mitigates these negative effects by reducing the extent of tunneling and improving the overall governance structure of the company. This highlights the dual role of D&O insurance in both preventing tunneling and enhancing corporate performance.
This research contributes to the growing body of literature on corporate governance by providing a novel perspective on addressing tunneling behavior. The study offers empirical evidence supporting the idea that D&O insurance can serve as an effective tool in reducing the agency problem posed by major shareholders, thus improving governance practices in companies with concentrated ownership structures. Furthermore, the findings have important policy implications. They suggest that encouraging the adoption of D&O insurance in Chinese listed companies could help enhance corporate governance and protect the interests of minority shareholders, thereby fostering more sustainable and transparent business practices in the long term.
In conclusion, the paper enriches the understanding of how external governance mechanisms like D&O insurance can complement traditional internal governance mechanisms to mitigate agency problems, particularly in markets with concentrated ownership. The study's findings provide practical insights for regulators, policymakers, and corporate managers seeking to improve governance frameworks and reduce the prevalence of tunneling. The results suggest that promoting the use of D&O insurance could play a key role in strengthening corporate governance, protecting investors, and ultimately contributing to the stability and sustainability of the market.