After several decades of a “scale-type extensive growth” development pattern, China's economic development has reached a new normal in which the main policy objectives are to guide the transformation and upgrading of enterprises and the rational allocation of financial resources, and to resolve the contradictions in the economic structure. In this context, China's central bank has created innovative operating tools for its monetary policy, such as the targeted RRR cuts. This paper empirically tests the “inclusive” effect of the targeted RRR cuts and further explores their relationship with bank competition.We divide the orientation sector into agriculture-related enterprises and small and micro enterprises. Based on the macro data and enterprise credit data in Wind, the enterprise microdata in CSMAR, and the monetary policy data in the People's Bank of China for the 2011 to 2017 period, we use the propensity score matching (PSM) method to select the control group and the DID method to check whether implementation of the RRR cuts influenced the credit resources of the so-called “vulnerable sectors” such as agriculture and small and micro enterprises, thus achieving the intended “inclusive” effect. Furthermore, on account of the mechanism of the target RRR cuts, this paper introduces time and regional dimensions for bank competition into the empirical model, and then analyzes the impact of bank competition on the “inclusive” effect of the targeted RRR cuts. To exclude the interference of other policies, we choose the second half of 2011 as the policy implementation time point, and conduct a counterfactual test. The result is not significant, which indirectly indicates the robustness of the previous empirical results. In addition, we conduct a rigorous robustness test by changing the sample. For the sample of agriculture-related enterprises, we select agricultural enterprises from the A-shares, and find matching non-agricultural enterprises among the New OTC Market listed enterprises to obtain 27 agricultural-related samples. For small and micro-enterprise samples, we randomly select 78 large enterprises from China's A-shares and the New OTC Market as the control group. The results of the robustness test are not significant, thus confirming the conclusions of our main research. Our results show that China's targeted RRR cuts have an “inclusive” effect by promoting agricultural enterprises and small and micro enterprises to obtain credit resources. Moreover, bank competition can positively enhance the “inclusive” effect of targeted RRR cuts to some extent. The impact of bank competition is more obvious in the time dimension, but has no regulatory effect in the regional dimension. Therefore, it is beneficial to appropriately increase the use of targeted RRR cuts and promote the development of the banking industry to adjust the economic structure and develop “inclusive finance.” Our analysis contributes to the literature by empirically testing the “inclusive” effect of the targeted RRR cuts using firm micro data by means of the propensity score matching and difference-in-differences methods. This firm-level study with the latest data on China's A-shares and the New OTC Market also makes up for the lack of micro-data support in the existing research. Finally, we introduce bank competition according to the mechanism of targeted RRR cuts, not only as a test of the relationship between bank competition and policy control, but also to further explore the factors influencing the “inclusive” effect of the targeted RRR cuts. Subsequent research could be extended in the following ways. First, research on the bank-level data would be useful, especially the relationship between the targeted RRR cuts and bank risk-taking based on credit channels and risk-taking channels. Second, starting with the signal transmission channel, researchers could analyze whether, when approaching the implementation standards of the targeted RRR cuts, the bank will significantly adjust its credit structure in accordance with the policy. Third, from the perspective of competition and concentration of the banking industry, banking market structures could be examined to find the best match for the monetary policy operation. Fourth, further study of the relationship between targeted RRR cuts and industrial restructuring is needed, and analysis of the dynamic adjustment between the targeted RRR cuts, “inclusive finance,” corporate credit, and investment.

An important aim of China's financial system reform is to develop direct finance and construct multiple-layer financial markets. The interest rate markets, including the Treasury bond spot market and interest rate derivative markets, play the role of determining the risk free interest rate in the economy. Because the risk free rate is essential for the valuation of all financial assets, the interest rate market provides the foundation for a sophisticated financial system. However, a malfunctioning interest rate market would create disorder in all of the other major financial markets. Given the central role of the interest rate markets, this paper examines the efficiency of these markets in terms of the timely incorporation of new information into the price. This paper focuses on three markets: the Treasury spot market, the Treasury futures market, and the interest rate swaps market. The prices in these three markets reflect the expectations on the future short-term risk-free rate formed in each individual market. If all of these markets are efficient, the prices should move together and simultaneously reflect new information. However, if there is friction in any of these markets, we would expect to detect heterogeneous price movements across the markets.We use the information share model and three-dimensional vector auto-regressive conditional heteroscedasticity model (VAR-MGARCH) to examine the information flow among different markets. This paper uses the 10-year futures contract prices, 5-year interest rate swap prices, and 10-year treasury bond spot prices as our research sample. These are the most liquid financial assets in their respective markets and therefore can best represent the information efficiency of these markets. Our data sample is of trading-day frerguehcy from March 20, 2015 to December 28, 2018. The sample contains 925 trading days in total.Using the information share model, we find that the interest rate swaps market and the futures market both lead the spot market in terms of price discovery. However, the interest rate swaps moderately outperform the futures market in the full sample. By dividing our sample into two subsamples according to time, we find that the information advantage of the derivatives markets over the spot market strengthens in the more recent period. Moreover, of the two derivatives markets, the futures market appears to grow faster than the swaps market. Although the swaps market dominates the futures market in terms of price discovery in the earlier period, the futures market becomes more advantageous in the more recent period.To corroborate our results, we further exploit the VAR model and the Granger causality test. The results show that the interest rate swap price directs both the futures price and the spot price of Treasury bonds in one direction, and the futures price also directs the spot price in one direction. These findings demonstrate that information flows from the derivatives markets to the spot market. Finally, we also use the VAR-MGARCH model to explore the transmission mechanism of the conditional variances among the markets. We find strong volatility interactions among the spot, futures, and interest rate swaps markets.The information advantage of the derivatives markets can be attributed not only to the higher leverage and easier short selling, but also to the investor structure. The major investors in China's Treasury bond spot market are big domestic commercial banks and insurance companies. These large institutional investors usually invest in Treasury bonds to meet their regulatory requirements or optimize their balance sheet structure, rather than to generate high trading profits. In contrast, the major players in the futures and interest rate swaps markets are mainly brokerage firms, investment banks, hedge funds, and sophisticated individual investors who actively explore the trading opportunities.Because the large institutional investors in the Treasury spot market do not trade actively, their information on the interest rate may not be incorporated into the spot market's prices immediately, which would weaken the price discovery process in this market. In the derivatives markets, the investors' hare much incentives to generate profits through active tradings, which strengthens the price discovery process in these markets.

Formal institutions can promote financial development and economic growth by reducing contract execution costs. However, once informal institutions such as trust are lacking, the implementation cost of a contract may be too high. Economists and sociologists have long acknowledged the importance of trust, but empirical studies on trust in financial markets have only emerged in recent years (Zingales, 2015). The literature focuses only on trust in the stock market (Li, 2006), bank credit market (Zhang and Li, 2012), and firm supply chains (Liu et al., 2009), while its impact on the bond market has not yet been studied. Yet the issue of trust in the bond market is crucial. First, compared with the bank credit market, the problem of information asymmetry in the bond market is difficult to alleviate effectively, especially when the credibility of credit rating agencies in China is questioned. Moreover, as the bond market has relatively low requirements for formal institutions relative to the stock market, the role of trust becomes even more important. Second, trust is a “public good” at the regional level. In recent years, many bond defaults in China have caused bond investors to distrust individual companies, and this distrust has spread to other companies in the same region. This paper takes all of the corporate bonds, enterprise bonds, and medium-term notes issued in China's bond market from 2008 to 2015 as the research sample, and uses the questionnaire survey conducted by Professor Zhang in 2000 through the “Chinese Entrepreneur Survey System” to obtain the level of trust in the provinces (Zhang and Ke, 2002). Relying on these data, we study the role of trust as an informal institution in the bond market. Bond issuance data and financial data are taken from the Wind database, the bond market index is from the China Bond Information Network, and the provincial macroeconomic data comes from the CSMAR database. Our results show that trust does help to improve the bond credit rating and reduce the bond credit spread, and this conclusion remains valid after applying different trust metrics, including possible omitted variables and instrumental variables. At the same time, this paper uses the data from The Supreme People's Court's “List of Defaulters” to construct indicators for the level of untrustworthiness in each province, and finds that an increase in untrustworthiness lowers the bond credit rating and increases the bond credit spread. Further, using path analysis, trust is found to affect bond financing both directly and indirectly by improving the quality of financial reporting. The results show that investors are not only subjectively more willing to believe in companies in high-trust areas, but that these companies are also objectively more credible. We also find that the positive effect of trust on bond ratings and pricing is more pronounced for state-owned enterprises, companies in areas with a developed financial industry, and companies that issue bonds more often. That is, the more repeated opportunities for interaction between investors and issuers, the greater the level of trust. The contributions of this paper are as follows. First, the existing research focuses on the impact of formal institutions on bond credit ratings and pricing, whereas this paper focuses on the crucial role of deep cultural factors such as trust in the bond market. Second, this paper seeks a new theoretical premise for the question of how trust develops—through repeated interaction opportunities. Studies have shown that informal institutions such as trust play an important role when investor protection is weaker or disclosure quality is lower (Aghion et al., 2010; Guiso et al., 2004; Pevzner et al., 2015). This paper identifies three variables related to repeated interactions and finds that when there are more opportunities for interaction, the role of trust is greater. It can be seen that the relationship between trust and the external environment is not simple. Our findings help to clarify the underlying reasons why trust plays a role in economic activity, and provide new evidence for the literature on the conditions under which trust can develop. The conclusions have important policy implications. The Chinese government takes formal institutions into account when promoting enterprises to reduce corporate financing costs. This paper shows that informal institutions such as trust are equally important to the development of China's bond market. It is even more important to strengthen the construction of trust as a regional public good when the crisis of distrust of individual companies spreads to other enterprises in the same region.

The literature disagrees on the role of risk disclosures in annual reports. There are three competing hypotheses about the role of risk disclosures. The neutrality hypothesis holds that risk disclosures in annual reports are of little significance to market participants. The convergence hypothesis suggests that risk disclosures provide homogeneous public information and reduce the cost of capital. The divergence hypothesis proposes that such risk disclosures provide heterogeneous information and increase the cost of capital. These contrasting hypotheses indicate that the perceived attributes of risk disclosures in annual reports differ, thus the economic implications for market participants may also be different. Most studies focus on the economic consequences of risk disclosure from the perspective of equity and bond investors rather than that of banks. However, banks may pay more attention to risk disclosures in annual reports, as they are useful for banks to comprehensively assess a firm's credit risk. Therefore, studying the impact of risk disclosures on bank loan interest rates can help in understanding the economic consequences of risk disclosure in annual reports from the bank's perspective. How banks interpret the risk disclosures in annual reports will be reflected in their loan interest rates. If the risk disclosure provides information with low heterogeneity, the information asymmetry should be lower. With transparent information, the bank can assess the credit risk more efficiently and effectively, decreasing the bank's risk perception level, such that the loan interest rate may also decrease. In contrast, if the risk disclosures provide heterogeneous information, it should be more difficult for banks to assess the credit risk. Accordingly, the level of perceived risk will increase, and loan interest rates will increase. Based on 4,339 “firm-year-loan” observations of interest rates from 2008–2017, this paper reports three main findings. (1) Consistent with the convergence hypothesis, annual report risk disclosure by Chinese firms reduces the bank loan interest rate. This finding still holds after we exclude the effects of disclosure momentum, industry disclosure level, bank-enterprise connections, and other endogenous problems. (2) Information quality and risk are incomplete mediators when risk disclosures affect bank loan interest rates; that is, annual report risk disclosures lower the bank loan interest rates through improving information transparency and reducing the bank's risk perception level. (3) The negative correlation between risk disclosures and bank loan interest rates is mainly concentrated in the tight monetary policy group, the non-state-owned enterprises group, and the better corporate governance group. This suggests that banks pay more attention to the risk disclosures of non-state-owned enterprises and firms with better corporate governance during periods of tight monetary policy.There are no studies in the literature on the determinants of loan interest rates from the perspective of risk disclosures in annual reports or on the economic consequences of risk disclosures from the perspective of loan interest rates, which may better reflect the substance of risk disclosures due to the strong ability of banks to interpret this information. This paper is the first to study the relationship between loan interest rates and annual report risk disclosures, thus enriching the literature on risk disclosures and bank loans. The findings show that risk disclosures in annual reports reduce loan interest rates by improving information transparency and reducing the bank's perception of risk. Our findings thus support the convergence hypothesis. This paper shows that in annual report risk disclosures Chinese firms do not provide information with high heterogeneity, which is inconsistent with the intention of the regulatory agency that mandatesthe disclosure of risk information. Therefore, the regulatory agency may need to adjust the regulations or strengthen the penalties to induce companies to disclose more risk information. In addition, the loan interest rate includes more information than the loan amount, but as disclosing loan-level interest rates is not common, regulatory authorities should further require this disclosure. Future research could examine the specific impact of risk disclosures on different types of loans.

In the past 30 years, especially since joining the WTO, China has attracted substantial international direct investment from foreign-funded enterprises. According to the World Investment Prospects Survey Report 2010–2012 issued by the United Nations Trade and Development Organization, China topped the list of the world's 15 most attractive investment destinations. By 2015, China had accumulated 1.6 trillion U.S. dollars in actual foreign investment, accounting for about 8% of the global total for the same period, the second largest inflow of foreign investment to a single country after the U.S. How has this foreign entry affected the performance of indigenous firms？ Independent innovation is the engine and source of economic growth along with the adjustment and optimization of economic structures. This paper analyzes the impact of foreign entry on innovation by indigenous firms and also the underlying mechanisms, which are of great importance in systematically assessing China's use of FDI in recent years and the future adjustment of its foreign investment policy. The data used in this study are from the Annual Survey of Industrial Enterprises (ASIE) from 1998 to 2007 obtained from the National Bureau of Statistics. The survey covers all state-owned industrial enterprises and non-state-owned enterprises with “above-scale” income (i.e., main business income exceeding 5 million yuan). Based on the quasi-natural experiment of FDI liberalization arising from the revision of the “Industrial Guide for Foreign Investment” in 2002, this paper adopts the difference-in-differences (DID) method to investigate the impact of foreign entry on indigenous firm innovation and its underlying mechanisms. The results show that foreign entry not only helps to promote indigenous firm innovation but also increases the duration of innovation. In addition, we find that good intellectual property insurance tends to strengthen the positive impact of foreign entry on indigenous firm innovation, and this result is robust to alternative measures of both innovation and foreign entry. Last but not least, we explore the mechanisms via which foreign entry affects indigenous firm innovation, and find that “R&D ability improvement” and “financial constraint reduction” are the two important channels through which foreign entry promotes indigenous firm innovation. The results contain significant policy implications. According to the findings, foreign entry significantly promotes indigenous firm innovation, thus China ought to further formulate and improve relevant policies to attract FDI more vigorously. For instance, it is feasible to continuously improve the facilitation of foreign entry through innovative use of the foreign investment system and by conducting national treatment plus negative list management. Another important finding is that regional intellectual property protection not only promotes indigenous firm innovation directly, but also tends to strengthen the positive impact of foreign entry on indigenous firm innovation, thus China should further enhance and improve its regional intellectual property insurance. This paper makes the following contributions. First, most studies on the relation between foreign entry and indigenous firm innovation are based on aggregate data at the macro level, using traditional econometric methods for empirical research. However, this paper is based on micro data and adopts the difference-in-differences method which effectively overcomes endogeneity problems and provides a more accurate evaluation of the impact of foreign entry on indigenous firm innovation than previous studies. Second, this paper not only investigates the impact of foreign entry on indigenous firm innovation, but also analyzes the relation between the two from the perspective of the duration of innovation. Third, considering the significant regional differences in the degree of intellectual property protection in China, this paper integrates intellectual property protection into a unified analytical framework, and finds that good intellectual property insurance tends to strengthen the positive impact of foreign entry on indigenous firm innovation. This finding is important for future policymaking to more effectively utilize foreign capital to promote indigenous firm innovation. Last but not least, based on abundant samples from ASIE, this paper uses a mediation model to test in depth how foreign entry affects indigenous firm innovation.

Supply-side structural reform has become the main direction of China's current economic reform, and its primary task is de-capacity. The key to de-capacity is the elimination of zombie firms. Because state-owned enterprises (SOEs) usually incur greater resource misallocation, the proportion of zombie firms is higher among SOEs. Mixed ownership is the main focus of Chinese SOE reform, as studies have found that the introduction of non-state capital improves firm performance through better corporate governance mechanisms and the mitigation of resource misallocation. The question that concerns us here is whether mixed ownership can cure state-owned zombie firms, and if so, which type of mixed ownership is most conducive. This paper deepens the theoretical research on both zombie enterprises and mixed ownership reform for state-owned enterprises, and also improves the theory of resource misallocation from the perspective of mixed ownership, potentially solving the problems of long-term inefficiency among SOEs and the burgeoning of zombie firms in China.We first apply the international cutting-edge method to identify zombie enterprises. To be recognized as a zombie firm in the current year a company must meet the following four conditions: (1) the loan interest rate is lower than the normal market minimum interest rate; (2) earnings before interest and tax are lower than the payable interest in the current year; (3) the liability-asset ratio of the previous year exceeds 50% and the firm continues to borrow in the current year; and (4) the first three criteria have been met for the past two consecutive years.Next, we divide the firms with mixed ownership into three categories according to the proportion of state-owned shares: state-control firms, state-holding firms (firms with state capital but not controlled by the state), and privatized firms (firms with no state capital, a special type of mixed ownership). We then explore whether mixed ownership reform can help to cure zombie firms and which type of mixed ownership reform works best. Using a panel dataset of Chinese industrial enterprises from 1998 to 2013, we obtain some interesting results. First, mixed ownership reform is found to have a significant impact in improving zombie SOEs. Second, the improvement is greater for privatized firms than for state-holding firms, which in turn fare better than state-control firms, forming a “pecking order” for mixed ownership reform. Third, the higher the monopoly and administrative level of SOEs, the weaker the effect of mixed ownership reform in curing zombie SOEs. Finally, we find that the main channel through which mixed ownership reform cures zombie firms is a reduction in the SOE's periodic expenses, such as management expenses. Due to the limitations of the data, this research may suffer from endogenous problems such as omitted variables through overlooking factors that affect the improvement of zombie firms and the mixed ownership reform strategy. This paper examines possible endogeneity issues. This paper makes three contributions to the literature. First, it enriches the research on zombie companies. Zombie firms can lead to resource misallocation and reduce economic efficiency, and thus are an important issue for both policymakers and scholars. Whereas the existing literature examines the causes or influences of zombie firms, this paper analyzes several strategies for treating zombie enterprises, points the way for their elimination, and provides a theoretical basis for further research on how to deal with zombie enterprises. Second, this paper develops the literature on SOE reform by indicating that mixed ownership can improve the efficiency of SOEs and, to an extent, cure zombie SOEs. Moreover, using a variety of mixed ownership types, this paper specifically reveals a “pecking order” in the reform of state-owned enterprises. Third, this paper extends the resource misallocation theory from the perspective of mixed ownership reform, finding that mixed ownership reform can cure zombie state-owned enterprises to an extent, thus reducing resource misallocation. Following this line of thought, we can further expand the research by exploring the actual contribution and channels of mixed ownership reform in improving resource misallocation.

Skill-biased technological change (SBTC) is the basic driver for developing an innovative economy and plays an important role in promoting technological innovation and economic transformation in developed countries. As China is presently in the process of transforming its development mode and growth momentum, the adoption of SBTC is urgently needed to transform its economy from high-speed growth to high-quality development. Utilizing the advantages of late development to acquire core technologies through outward foreign direct investment, (OFDI) has become the best choice for domestic enterprises. However, a significant phenomenon since local enterprises began going out is that every major transaction is accompanied by fierce controversy within the host country, especially in developed countries. The recent memorandum signed by President Trump restricting China's investment in the U.S. based on the “301 Survey” has once again propelled the home country's OFDI to the forefront of world attention. Thus, it is necessary to assess the effectiveness of China's going out policy from the perspective of SBTC. Does China's OFDI really lead to technological spillover from the high-tech sector in developed countries？ Is it reasonable to criticize and restrict overseas investment by local enterprises without a systematic assessment？ If not, we need to consider why large-scale OFDI has not significantly promoted the home country's SBTC and which conditions have limited the reverse technology spillover. Is it due to the foreign core technology blockade or to insufficient capacity for technology absorption and conversion in China？ The above questions form the focus of this paper. We first analyze potential factors that may affect the reverse technology spillover effect of China's OFDI on domestic SBTC, and then propose hypotheses for testing. Second, we use the method proposed by Coe and Helpman (1995) to measure the intensity of the reverse technology spillover from OFDI in 30 provinces in China. Finally, the effect of the reverse technology spillover on SBTC and the theoretical hypotheses are tested using the fixed effect model and the panel threshold model, respectively. The empirical results show that the reverse technology spillover effect of OFDI on SBTC in China is not positive, but that independent innovation significantly promotes the development of SBTC. The reasons include not only domestic overcapacity and insufficient capacity for technological absorption, but also the low-end lock in the GVC and the technology blockade from developed countries. This paper is novel in three respects. First, we find that OFDI's reverse technology spillover from developed countries is mainly low-skill biased. The SBTC that contributes to long-term structural adjustment and improved competitiveness is not substantially obtained from foreign high-tech fields, despite US allegations that China's overseas investments have stolen technology and intellectual property in the high-tech sector. Second, based on the reverse technology spillover channel under the open economy, we place both OFDI and SBTC in a unified analytical framework to clearly reveal the mechanism of OFDI's impact on SBTC, which enriches and improves the literature on globalization and technological innovation. Third, empirical tests show that OFDI's reverse technology spillover effect on SBTC is not only related to a willingness to create a technical blockade and the international division of labor, but also to domestic overcapacity and limited capacity for technological absorption, which provides unique and important empirical evidence for promoting SBTC. These findings have important implications for the policy of promoting SBTC in China. First, there is a need to increase R&D investment and improve the innovative capability of local enterprises. This is not only key to coping with the technological blockade by multinational firms and breaking the “low-end lock” of the GVC, but is also necessary to enhance the capacity of local enterprises to digest and absorb the changes. The second is to deepen supply-side structural reform and vigorously resolve excess capacity, which should involve not only the upgrading of industrial structures through supply structure optimization and resource reconfiguration, but also bringing resources to the field of innovation. The third is to increase the cultivation of human capital. With the development of skill-biased technological change, the demand for highly skilled labor will increase. To reduce the negative effects of a human capital shortage on the technological bias, the construction of a multi-level training system for those with technological talent must be speeded up.

In recent years, the scale of local government debt in China has expanded rapidly. According to the data released by the Ministry of Finance, by the end of 2017, local government debt liable for repayment reached 16.47 trillion yuan. Over-borrowing by local governments has become one of the main uncertainties affecting China's financial stability and sustainable economic development. To guard against systemic risk caused by excessive expansion of local debt, the central government has introduced a number of debt management measures in recent years. However, if the institutional factors causing local government expenditure and debt expansion are not eliminated, the excessive growth of local government debt will be difficult to solve. The most direct factor in the expansion of local government debt is undoubtedly the longstanding gap between revenue and expenditure in local finance. Previous studies on the formation mechanism of local government debt tend to emphasize an increasing “upward shift of financial power and downward shift of administrative affairs” in the intergovernmental fiscal relationship since the reform of the tax distribution system, leading to an increasing imbalance between local financial resources and public service demand. Local governments have had to be passively indebted to fulfill their public service functions. From 2000 to 2013, the proportion of central expenditure decreased from 34.7 to 14.6 percent, while local expenditure increased from 65.8 to 85.7 percent. Does the downward shift in the vertical intergovernmental expenditure responsibility lead to passive liability among local governments？ The literature focuses mainly on qualitative analysis or case studies, and lacks normative theoretical and empirical evidence. Local government debt is expanding, whether in the Eastern, Central, or Western region, and local government debt funds are invested mainly in infrastructure and municipal construction projects rather than in livelihood areas such as education and social security, where expenditure responsibility is fast increasing. This shows that the reform of the tax share system is not enough to explain the expansion of local debt. The competition between local governments to attract investment by preferential means of finance and taxation will usually aggravate the contradiction between local fiscal revenue and expenditure. The strategic interaction of local government debt financing caused by inter-regional “yardstick competition” needs to be empirically examined through the framework of a spatial econometric model.Based on the dual perspectives of downward fiscal expenditure responsibility and inter-government competition, we examine the impact of administrative and economic factors on the expansion of local government debt. The main contributions are as follows. First, by constructing a theoretical model of local government debt-raising behavior, this paper analyses the characteristics of an optimal debt financing strategy in representative areas when the higher government's expenditure responsibility falls and the finance in competitive areas is used for debt financing. Second, by summing up the data on bank loans and urban investment debt of public facilities construction in 279 prefecture-level cities in China, a more reliable dataset of local government debt is constructed. Empirical analysis of spatial econometric model is used to verify that the expansion of local government debt is the result of a downward shift in higher government's fiscal expenditure responsibility and the regional yardstick competition. The expenditure pressure on local government caused by a downward shift in intergovernmental expenditure responsibility is an important reason for the passive debt. The yardstick competition among local governments makes them follow an imitation strategy in debt borrowing. The main cause of the expansion of local government debt is heterogeneous for different regions, and the debt in Eastern China has risen mainly as a result of the fiscal tournament.This study suggests that the resolution of local government debt risk should not only standardize the division of fiscal expenditure responsibility, but also improve the performance appraisal system for local governments and strengthen the accountability mechanism for irregular debts. Future research needs to improve the data measurement of local government debt and the division of governmental powers, and construct a more general theoretical model for local government financial behavior based on the diversified evaluation index system for local government performance to provide a more scientific explanation for the change in the scale of local government debt and to identify the political and economic risks caused by local government debt.

Zingales (2015) believes that financial research is undergoing a cultural revolution. Firms are the best experimental objects for evaluating the influence of culture on the individual entity, not only because a firm is able to reshape its cultural orientation, allowing its cultural characteristics to vary over time, but also because the large number of firms constitutes a sufficient sample size for research. These advantages suggest that corporate culture will be the main focus of research on this cultural revolution. Corporate culture, described as the values and norms defined and shaped by firms for their own employees, is an important strategic asset. The main purpose of corporate culture is to drive employees to form behavior patterns that are beneficial to their firm. Among the vast range of characteristics of corporate culture, collaboration is highly related to innovation, mainly because firms that emphasize collaboration cooperate more willingly with external research institutes in R&D activities. Meanwhile, an emphasis on collaboration within a firm not only helps to establish information sharing among employees and promote private information sharing, but also improves cohesion and teamwork among R&D staff. However, there are also some obvious negative effects of a collaboration culture. Both sides have the incentive to be free riders. Furthermore, information sharing during collaboration may lead to technology leakages. A collaborative culture also represents a collective tendency to emphasize teamwork, which may leave little space for the development of an individual's unique talents. Moreover, as employee turnover is limited in such firms, employees gradually lose their sense of career uncertainty and slacken their work, which negatively affects innovation.The goal of this paper is to apply textual analysis to further our understanding of the effect of a collaboration culture on firm innovation. We establish a word bag of synonyms of “collaboration” and create two indicators to measure a firm's collaboration culture. One indicator is based on whether collaboration or its synonyms are included in the vision, mission, or core values presented on the firm's website; the other is defined as the frequency of occurrence of the word collaboration and its synonyms divided by the total number of words in the MD&A sections of the annual report. We use these two indicators as proxies to measure the collaboration culture of listed firms and investigate its impact on corporate innovation. We find that a collaboration culture is positively correlated with the firm's innovation output and innovation efficiency. This result remains robust even after adding further control variables, selecting rice acreage as an instrumental variable, and performing a PSM-DID analysis with the abnormal replacement of the CEO. Furthermore, our results suggest that improved cohesion between employees and the promotion of collaboration between university and industry are two dominant mechanisms that enhance corporate innovation. We also find this positive effect to be more pronounced in industries with a higher degree of competition and in regions with higher social trust or a greater concentration of interconnected industries. Our paper makes two contributions to the literature. First, it enriches the limited literature on corporate culture by measuring the collaboration culture of each firm through textual analysis and then exploring its impact on corporate innovation. Our paper not only provides a new methodology for assessing corporate culture among large samples, but also reveals the mechanisms by which a collaboration culture affects corporate innovation. Thus, it sheds light on the importance of cultural capital and provides empirical evidence for the national strategy of building a culturally strong country. Second, our paper contributes to the literature on corporate innovation. Although both national and regional factors have been proven to influence innovation, along with micro-level factors such as corporate governance and litigation risk, we know little about how corporate culture affects innovation. Our findings not only enrich the literature by focusing on this relationship, but also provide practical references for the construction of firms and the development of a corporate culture that accords with innovation.

In China, reward-based crowdfunding on the Internet is developing fast and was valued at 18.8 billion RMB in 2017. However, academic research on reward-based crowdfunding focuses mainly on static cross-sectional data, including the factors that affect the success of crowdfunding, the role of geographical distance, social capital and social networks in crowdfunding, etc. A few scholars undertake dynamic research, such as Burtch et al. (2012) and Kuppuswamy and Bayus (2013, 2015), who study the changes and reasons for support in reward-based crowdfunding over time. Overall, however, dynamic research is still in its infancy. This paper focuses on reward-based crowdfunding in China, learns from Kuppuswamy and Bayus (2013, 2015), and draws on the theories of social responsibility diffusion and the target gradient effect to explore the dynamic impact of decisions by other supporters (real-time social information) on the decision-making of potential supporters. We systematically collect real-time big data in the process of crowdfunding and explore the impact of real-time social information.We use Web crawler software for big data, Octopus collection software, to collect real-time information at a fixed time every day on the three reward-based crowdfunding platforms in China—Jingdong, Taobao, and Zhongchou —for around 130 days from October 2015 to February 2016. Then we use data mining and collation to build up a database to record such data as the amount of support and number of people in each crowdfunding project, including both the new additions every day and the total, the number of people focusing on the project, whether the project is promoted on the website homepage, whether the project has reached its crowdfunding target, the total number of crowdfunding projects in process on the website, and the support for the most popular project on the website. Based on a total sample of 3,949 reward-based crowdfunding projects, we find that real-time social information, measured as the total amount of support and people, has a dynamic impact on the decisions of potential supporters. First, social responsibility diffusion plays an important role in reward-based crowdfunding. At the beginning, when potential supporters find that others have provided enough help and they believe the remaining amount required will be met by others, the social responsibility or compassion of potential supporters will either diminish or spread. Therefore, the regression coefficient of the amount of support added daily and the cumulative support reflecting the real-time social information is significantly positive but shows a significant downward trend over time. At the end, under the “all or nothing” rule of crowdfunding, the social responsibility and compassion of potential supporters recovers and the regression coefficient returns to a significant positive and rising trend toward the cut-off date. However, in China we find that the diffusion effect of social responsibility is stronger in the initial stage, and, although the waning effect is relatively weak at the end, it is much more obvious in projects that have not yet reached the target level near the deadline.Nevertheless, the target gradient effect cannot be ignored in reward-based crowdfunding. The supportive decisions of others positively affect peoples judgments about the value of the shared goal, and there is thus significant acceleration in support as the crowdfunding project approaches its financing objective. This paper supports the results of Kuppuswamy and Bayus (2013, 2015) on Kickstarter. However, they use dummy variables or the absolute amount of support to examine the absolute time effect. Based on dynamic panel data, this paper uses the percentage of support and the number added every day as the dependent variable, and examines the effect under real-time information (the cumulative amount of support). We also find that the weakening effect is much more obvious in projects that have not yet reached the target level near the deadline. Our result is more persuasive. Our findings provide a reference for initiators of reward-based crowdfunding. They should pay close attention to the diffusion of social responsibility in the initial stage of the competition. During the middle stage, initiators should secure more than half of the required financing as fast as possible. In the end stage of crowdfunding, the sponsor should be concerned to reawaken the sense of responsibility or compassion among potential supporters to achieve the financing target.

Mutual fund investment behavior has a great impact on the stock price. The imperfections in China's capital market affect the stock return and return correlation, which may lead to large fluctuations in the capital market. Based on previous research on stock connection and stock price, we study how fund behavior affects the stock connection and stock price from the perspective of fund manager turnover. Specifically, new fund managers usually sell the stocks held by former fund managers and rebuild their own investment portfolios. The turnover of fund managers therefore breaks the stock connections in the original portfolios and reduces the correlation of stock returns, thus affecting stock prices. Based on the sample of mutual funds in China from 2008 to 2014, this paper studies the impact of fund manager turnover on the stock connection. The stock connection in the original portfolio will be weakened if the new fund manager sells the stocks of the original portfolio and rebuilds a new portfolio. The results of the study show that the stock connection in the original portfolio is reduced by 1.9 percent after fund manager turnover, and the effect is statistically and economically significant. Furthermore, the stock connection for stocks with higher common ownership are more affected by the influence of fund manager turnover. Furthermore, we study whether the change in stock connection caused by fund manager turnover affects the stock price. We construct a hedging strategy: buy the stocks with the highest fund common ownership in a non-turnover portfolio, and sell the stocks with the highest fund common ownership in a turnover portfolio. We find that the hedging strategy achieves significant excess return. The average daily excess return of hedging portfolios is 0.1 percent benchmarked against the CAPM model and the Fama-French three-factor model. The evidence shows that the stocks of the original portfolio experience lower returns after fund manager turnover. The excess return of the hedging strategy comes from the change in the stock connection caused by fund manager turnover. We continue to examine the joint impact of fund manager turnover and stock connection on the stock price. We process a regression analysis to study the effect of fund manager turnover, fund common ownership, and their interaction on the daily normal return and the risk-adjusted abnormal return. The results show that the regression coefficient of the interaction of fund manager turnover and fund common ownership is-0.009, which indicates that the daily return of the stocks with the highest correlation in the original portfolio is reduced by 0.9 percent after fund manager turnover. This paper makes several contributions to the literature. First, it extends the research on stock connection. Stock connection is an important topic in finance, but in empirical research it is always influenced by the endogeneity problem. The literature provides empirical evidence from the perspective of mutual fund flows, and this paper extends that research. We find that even without a change in fund flows, a change of fund behavior will affect the investment behavior of fund managers, and in turn affect the stock connection and stock price. Second, this paper extends the research on fund common ownership by providing evidence that fund common ownership may exacerbate stock price volatility. Previous studies have suggested that information sharing leads to stock connections, therefore fund common ownership exacerbates stock price volatility. However, there is little evidence to prove the micro-economic mechanism of this effect. From the perspective of exogenous shocks to fund common ownership, this paper provides evidence on how fund behavior affects the stock connection and stock price. Third, this paper extends the research on fund manager turnover. Previous research regards fund manager turnover as an independent event within a fund, focusing on the characteristics of fund manager turnover or the impact of fund manager turnover on the fund's investment behavior and performance. This paper argues that a change in fund manager has an impact not only within the fund, but also outside it. Therefore, we take fund manager turnover as an external shock, and study the impact of fund behavior on the stock connection and stock price. The evidence from the study shows that fund manager turnover will not only affect the stock price of the manager's own fund, but also the correlation and price of other stocks through fund common ownership.