Since the implementation of the reform and opening up policies, China has experienced unprecedented economic growth. To a large degree, this economic miracle has been driven by the political and financial incentives used by the central and local governments to promote regional economic development. To guide economic development at the district level, each year local governments set clear economic growth targets and launch various supportive policies and guiding plans. Although research has shown that the targets can promote economic growth, few studies have specifically examined how local governments manage their growth targets. In this study, we focus on the mechanisms underlying the relationship between government targets and real economic growth. As investment has always been the main driving force of China's economic growth, we empirically test whether the economic growth targets affect investment. We also explore the heterogeneity of this effect and illustrate the logic behind it.
   Based on modern economic theory and the related literature, we propose three hypotheses. The first concerns the basic relationship between economic growth targets and investment. Economic growth targets are key indicators for assessing the performance of local officials. To meet the assessment criteria, local government officials introduce measures to achieve the set goals. As investment can have a rapid effect on economic growth, it has become a priority for policy makers. Therefore, we hypothesize that the economic growth targets are positively related to investment. The second hypothesis concerns the temporal heterogeneity of the effect that the economic growth targets have on investment. As the Chinese economy recently shifted from a period of high-speed growth to one of high-quality development, we predict that the positive correlation between the economic growth targets and investment will become weaker over time as local governments adapt to the new trend of economic growth. The third hypothesis concerns the regional heterogeneity of the effect of the economic growth targets on investment. Although investment can help meet the set targets, whether it is effective depends on the strength of the local economy. Thus, we predict that investment will play a more important role in achieving economic growth targets in the eastern provinces than the central and western provinces.
   Using China's prefecture-level data on the economic growth targets during 2001-2016, we empirically find that the growth targets have a significant positive effect on investment, which is consistent with our theoretical hypothesis. Specifically, a 1% increase in the economic growth targets between 2001 and 2016 leads to an approximately 0.44% increase in regional investment. This finding is robust when using different indicators to measure investment and the economic growth targets, and different regression samples and estimation methods. We then study the heterogeneity of the effect of investment on the economic growth targets. The interaction item of economic growth targets and time shows that investment becomes a less important means of achieving the growth targets in the prefecture-level cities after 2011. Finally, we examine the regional differences in the relationship between the economic growth targets and investment, and find that compared with the central and western provinces, the eastern provinces are more likely and better able to use investment as a means of achieving the growth targets. These heterogeneous results suggest that the effect of the local governments' economic growth targets on investment depends on the external environment, shedding light on how to achieve high-quality development.
   The main contributions of our study are as follows. First, a large body of related research has highlighted the effect of investment on economic growth. In contrast with these studies, we focus on the effect of economic growth targets on investment. Second, although a large body of literature has explored the economic effects of government institutions and policies, few studies have focused on the local governments' economic planning. We focus on the local governments' economic growth targets, and examine the actual economic effects of the growth targets. Our study contributes to the growing body of public economic and political economic literature on the relationship between planning and the market. Finally, although some recent studies have paid attention to the effect of government targets on economic growth, they have not examined the mechanism by which the targets influence economic performance. Our in-depth empirical analysis based on economic growth theory contributes to the academic and practical understanding of this topic.

The government considers fiscal expenditure as a key measure when making adjustments to resource allocation, income distribution, and macroeconomic policy. One of the main macroeconomic regulation and control methods advocated by Keynes is fiscal expenditure policy, which affects output by affecting aggregate demand. Furthermore, beginning with Arrow and Kruz (1970), who divided fiscal expenditure into productive and consumer expenditures and explored the impact of fiscal expenditure structure on economic growth and social welfare, a large body of literature has analyzed fiscal expenditure structure from both theoretical and empirical perspectives.
   In China, the proportion of local fiscal expenditure is much higher than that of central government expenditure, with the proportion of the former continuing to rise in recent years. A prominent feature of China's local fiscal expenditure structure is that local governments prefer productive fiscal expenditures but ignore non-productive fiscal expenditures. However, the literature ignores the importance of tax-sharing rates in the local fiscal expenditure structure. A local government's fiscal expenditure is derived from its own tax revenue and transfer payments by superiors. The local government's own tax revenue largely depends on the tax-sharing rate between the lower and upper levels of government. How tax revenues are divided between these levels of government will affect local government spending decisions. Because the local fiscal expenditure structure is closely related to local economic development and tax increases, any change in the tax-sharing rate will undoubtedly change the local government's spending behaviors.
   From the perspective of tax distribution system design, tax revenue division is the core of the intergovernmental fiscal system, and unreasonable tax-sharing methods will have an important impact on local government behaviors. Discussing the consequences of this tax-sharing approach, former Finance Minister Lou (2013) said, “It is not conducive to effectively curbing the local urge to pursue quantitative economic growth.” According to the endogenous growth theory of government expenditure (Barro, 1990), the structure of government expenditure will affect the scale and direction of investment in private capital. Therefore, it is intuitive that local governments will adjust the structure of fiscal expenditure because of changes in tax revenue.
   This paper theoretically and empirically studies the impact of tax sharing on the structure of local fiscal expenditure. Theoretically, we introduce tax-sharing factors within the framework of a local government competition model. An increase in the tax-sharing rate will directly cause local governments to increase productive public expenditures, exploit the output externalities of productive expenditures, increase output levels and tax revenues, and further maximize social welfare. On the empirical side, we use prefecture-level city data from 1996 to 2006 to analyze the impact of tax revenue on the structure of local fiscal expenditure. There is a strong difference in tax sharing between regions in China, which provides an excellent sample for studying the relationship between tax revenue sharing and the local fiscal expenditure structure. Although the tax-sharing rule between the central and local governments is uniform, that between provincial, municipal, and county governments varies across provinces. Empirical studies have found that as the tax-sharing rate of municipal governments increases, municipal fiscal expenditures will be more biased toward productive fiscal expenditures.
   The main contribution of this paper is to analyze the impact of local governments' preference for productive expenditures from the perspective of tax sharing. The theoretical model constructed in this paper helps uncover the mechanism of the effect of tax sharing on local government behaviors. The empirical analysis is helpful in explaining the changes in China's local fiscal expenditure structure. It also provides useful insight for policy makers on reforming tax distribution between central and local governments.

To optimize the leverage structure of the non-financial corporate sectors, it is necessary to fully understand the factors that led to the recent rapid rise in the leverage of non-financial sector firms. It is worth noting that the rapid increase in the leverage ratio of non-financial enterprises in the post-crisis period is not a phenomenon unique to China, but also a general problem in the world's major emerging market economies. According to the statistics of the Bank for International Settlements, the leverage ratio of the non-financial corporate sectors in emerging market countries rose from 56.1% in the fourth quarter of 2008 to 102.6% in the fourth quarter of 2017, an increase of approximately 46.5%, with an average annual growth of approximately 5.2 percentage points. At the same time, the debt-to-GDP ratio of the non-financial corporate sectors in developed economies only rose from 87% to 92.7%. In addition to the domestic factors that have been widely discussed, we wish to examine whether there is a common factor behind the general increase in the leverage ratios of the non-financial corporate sectors in emerging market countries.
   Following the global financial crisis, the U.S. and other developed countries introduced quantitative easing monetary policies to stimulate domestic economic growth. As the largest economy and the largest reserve currency country, the systemic importance and spillover effects of U.S. monetary policy are self-evident. For example, the implementation of quantitative easing in the U.S. resulted in currency appreciation, passive reduction in the domestic interest rates, rising asset prices, and an increased supply of credit in emerging market countries. These factors were conducive to increasing the scale of debt and financing opportunities, and reducing the financing costs of the non-financial companies in emerging market countries. This raises the question of whether the quantitative easing monetary policy in the U.S. leads to the rapid increase in the leverage ratio of non-financial firms in emerging market countries after the global financial crisis, and whether these factors are internally related. In view of the trend of the leverage of the non-financial corporate sectors in the emerging market countries and the movement of the shadow interest rates in the U.S., the rapid increase in the leverage of the non-financial corporate sectors can be seen to have coincided with the period when the shadow interest rates in the U.S. were negative. When the Fed first raised the interest rates after the financial crisis in December 2015, the federal funds rate range and shadow interest rates climbed, while the rapid upward trend in the non-financial corporate sector in emerging market countries leveled off or even showed a downward trend.
   To answer the above questions more rigorously, this paper examines the relationship between the U.S. monetary policy and the leverage of non-financial enterprises in emerging market countries using the annual data of non-financial enterprises in 28 emerging market countries from 2003 to 2015. Furthermore, this paper examines the heterogeneities in the relationship between different enterprises, industries, and countries to provide an international perspective on the policy choices that can be used to reduce their leverage of China's non-financial enterprises. The results show that there is a significant negative correlation between the U.S. shadow interest rates and the change in the leverage ratio of non-financial enterprises in emerging market countries. That is, the reduction in the U.S. shadow interest rates leads to a substantial increase in the leverage ratio of the non-financial enterprises in emerging market countries. This means that the U.S. monetary policy significantly boosted the leverage of the non-financial firms in emerging market economie. Moreover, this impact is more pronounced for sectors that are highly dependent on external financing, for firms with more financial constraints, and for firms in more financially open emerging market economie with less flexible exchange rate regimes. Finally, a country's deeper financial development helps alleviate the impact of the U.S. monetary policy on the changes in the leverage ratio of the local non-financial companies. Moreover, from a global perspective, for the emerging market countries in Asia, the degree of the change in the leverage of the domestic non-financial companies is significantly more affected by the U.S. monetary policy than that of the rest of the world on average. These findings also indicate that when regulating the leverage ratios of non-financial sector firms, emerging market countries should not only consider their own domestic factors, but also attach great importance to the monetary policy adjustments in the U.S..

Amid advances in information technology and financial innovation, internet finance practices are changing continuously, and new internet finance models are constantly emerging. Since 2013, the development of internet finance has created significant prosperity, leading to rapid changes in how people conduct financial activities and fundamentally altering the financial ecosystem. Commercial banks, the mainstay of the traditional financial sector, are facing increasingly fierce deposit competition. The 19^th National Congress of the Communist Party of China in October 2017 proposed “perfecting the financial supervision system and holding the bottom line of systemic financial risks.” The March 2018 meeting of the Central Committee of Finance and Economics emphasized that “preventing and defusing financial risks is related to national security, overall development, and people's property security.” These statements, coming against the backdrop of the rise of internet finance, identified the regulation of bank risk-taking as a central requirement. This raises several important questions: how does internet finance affect bank risk-taking through the channel of intensifying deposit competition？ Do the various models of internet finance have heterogeneous impacts on commercial banks？ Do different types of commercial banks have diverse responses to internet finance？ These are important practical and theoretical issues that need to be solved to prevent bank risks and deepen financial system reform.
   By constructing a bank circular city model that incorporates internet finance, this paper deduces the following transmission mechanism: internet finance → deposit structure/interest-paying costs → bank risk-taking. Then, based on an internet finance index (constructed via text mining) as the core explanatory variable and using a sample of 83 commercial banks in China from 2003 to 2016, a multiple mediation model is built for empirical testing. Furthermore, this paper uses system generalized moment estimation (SYSGMM), iterative seemingly uncorrelated estimation (SUR-i), and instrument variable (IV) technology to verify the existence and dual heterogeneity of the above effects.
   The main conclusions of this paper are as follows: 1) The development of internet finance has significantly increased the risk-taking level of banks through deposit structure deterioration and interest-paying cost increases; the relative contribution of deposit structure deterioration is about 50%, and that of interest-paying cost increases is about 35%. 2) Relative to internet channel construction, the paper finds that internet payment settlement, internet resource allocation, and internet wealth management have stronger negative impacts on banks' deposit structure and interest-paying costs. 3) Compared with state-owned, large-scale, low-liquidity, and low-capital-adequacy commercial banks, non-state-owned, small-scale, high-liquidity, and high-capital-adequacy commercial banks suffer more rapid losses of customer deposits and larger increases in average interest-paying costs when confronted with challenges from internet finance.
   This paper makes several contributions to the literature. First, based on the unique economic and financial environment of China, this paper constructs a bank circular city model that incorporates internet finance and deduces the internal transmission mechanism of internet finance → deposit structure/interest-paying costs → bank risk-taking. Second, by establishing a multiple mediation model, this paper for the first time verifies the mechanism of internet finance development's impact on bank risk-taking; it also evaluates the relative contribution of two aspects of this impact, deposit structure deterioration and interest-paying cost increases. Lastly, while earlier studies pay more attention to the overall impact of internet finance on commercial banks, this paper divides internet finance into four typical models according to financial function to explain the heterogeneous impacts of various models on commercial banks. In addition, using four dimensions of banks (property-rights type, asset scale, liquidity level, and capital strength), this paper examines the diverse responses of different types of commercial banks to internet finance.

Honesty can be considered an important lubricant in business relationships. Although modern institutions are designed to control cheating, in many situations, only intrinsic honesty keeps people from violating rules. A growing body of research on honesty and corporate finance has documented that honesty reduces firms' misconduct and improves their performance, and that firms that cheat in transactions might lose cooperative relationships, and even go bankrupt.
   Information asymmetry in economic transactions makes honesty more important, especially in situations such as banks' credit allocation, where firms have full information about their collateral but banks do not. The default risk faced by banks dramatically increases if firms are dishonest, which causes discrimination in banks' credit allocation. This study examines the role of honesty in banks' credit allocation. Specifically, we investigate whether different levels of regional honesty affect bank loans to public firms.
   There are two common methods for measuring honesty: surveys and text analysis. However, measurement bias arises in both of these methods. First, respondents are more likely to be honest in surveys. Second, the “honesty” advocated by enterprises can be easily imitated. In this study, we construct a new variable based on the data on deadbeat borrowers (“Laolai” in Chinese) disclosed by the Supreme People's Court of China. We argue that the deadbeat data are less biased than survey and text analysis data for two reasons. First, although survey responses have no cost, the behaviors of deadbeats—that is, refusing to implement court judgments—are real decisions with severe costs. Second, the banks allocating credit are also the main participants in lawsuits against deadbeats, therefore these lawsuits offer insights into regional honesty levels in banking relationships.
   We argue that public firms operating in dishonest environments will receive more credit from banks for two reasons. First, all of the firms operating in dishonest environments, public or private, are more likely to act dishonesty due to the low costs. Second, as public firms have more information transparency and external supervision, they can obtain more credit in a dishonest environment.
   We test this conjecture using a sample of all of the firms listed on the Shanghai and Shenzhen securities exchanges for the 2003 to 2014 period. The results support our hypothesis, showing that for each 1% decrease in regional honesty level there is a 1.83% increase in public firms' bank loans (over assets). To deal with the endogeneity issues, we control for possible omitted variables related to honesty at the regional level by using two instrument variables: “area of rice plantings in 1978” and “the number of temples within 200 km of public firms.” We construct a PSM-DID model based on firms' relocation events. Our conclusions remain robust.
   To provide direct evidence, we further investigate whether the relationship between regional honesty levels and public firms' bank loan varies among firms with different levels of transparency and supervision. We find that the relationship between honesty and credit is strengthened by firms' credibility, measured by higher transparency and more supervision. We also document that the percentage of deadbeats in lawsuits where the plaintiff is a bank strengthens the relationship between regional honesty and firms' loans. However, the effect of regional honesty on firms' bank loan is weaker during an industry crisis and in cities with better social credit systems. We also find that banks react to dishonest environments by shortening the loan maturity and increasing the amount of collateral required.
   Our study contributes to the literature in the following ways. First, we examine the role of honesty in the economy. Unlike previous studies of the impact of honesty on firms' behavior and performance, we study the role of honesty in banks' credit allocation. Second, we contribute to the literature on corporate financing. Our study provides new evidence that firms can facilitate their financing by improving information transparency and introducing external supervision, especially private and small enterprises.

A Ponzi scheme is a fraudulent investment operation that pays quick returns to initial contributors using the money from subsequent contributors rather than profit. Despite their frequent occurrence, there is little empirical evidence on how Ponzi schemes operate due to their characteristic of concealment. Therefore, this paper first highlights why investors partake in Ponzi schemes by examining data on the 889,000 investors in E-Zu-Bao (EZB hereafter).
   EZB was a typical Ponzi scheme that operated under the disguise of peer-to-peer (P2P) lending and in which millions of investors lost their wealth. P2P lending is a platform that matches lenders with borrowers through online services. In 2014 and 2015, EZB was one of the most popular lending platforms in China's P2P lending industry. However, the Beijing First Intermediate People's Court identified EZB as a Ponzi scheme. To examine how EZB operated, we examine a dataset of 3,142,300 investments, comprising RMB74.1 billion (more than USD10 billion) in total, contributed by the company's 889,089 investors.
   All of the regressions in this paper use ordinary least square models. In the regressions investigating the internal factors influencing why investors participate in the Ponzi scheme, the main dependent variables are the principals to be recovered and the main independent variables are the investment sequences. The principal to be recovered is measured as the total investment amount minus the received interest and the principal. To consider the external factors, we use a CCTV advertisement for an event study. The initial investment amounts of new investors and the principals to be recovered of the existing investors are used as dependent variables. The dummy time variables, which measure the interval between viewing the CCTV advertisement and investment, are independent variables.
   We believe that trust is the main reason why investors participate in a Ponzi scheme. First, through their research, investors gradually built trust in the platform, which is consistent with the idea that trust can come from repeated gaming (Kreps and Wilson, 1982; Durlauf and Fafchamps, 2005). The empirical results show that the more the investors invested, the greater the principal that needed to be recovered. In the process of gaming on the platform, investors established trust due to the positive feedback they gained from the platform. Second, the peer effect is also likely to have influenced investors' trust in the platform. Tho ni and Gachter (2015) believe that the peer effect is important for building trust in dynamic gaming. With the extension of the survival time of EZB, investors increased their investments at a faster rate. Investors are also influenced by the investment decisions of peer investors. Therefore, as the number of investors increased, investors deepened their trust in the platform. External trust endorsement is also an important factor. We find that the initial investment amounts of new investors and the principal to be recovered by existing investors both significantly increased after the CCTV advertisement was broadcast. The endorsement of the CCTV advertisement led investors to believe that the platform was reliable, and thus increased their trust in the platform.
   In this paper, we add to the literature by studying a Ponzi scheme from an internal perspective. The literature on trust has focused on its influence and the factors that lead to the emergence of social trust (La Porta et al., 1997; Guiso et al., 2004; Guiso et al., 2009; Gurun et al., 2018). In contrast, this paper concentrates on the reasons why investors trusted EZB. Moreover, the majority of the research on Ponzi schemes has been theory oriented, and limited empirical research has been conducted as a result of a lack of data. Deason et al. (2015) concentrate on the cross-sectional characteristics of Ponzi schemes, whereas Gurun et al. (2018) focus on the externalities of Ponzi schemes. To the best of our knowledge, this paper is the first to study the internal features of a Ponzi scheme, and our findings contribute to our understanding of how such schemes operate.
   In addition to the theoretical contributions, this paper provides some insights for regulators. First, financial supervision departments should focus more on screening for cases of fraud and providing warnings. Second, investors trusted in the EZB platform as a result of their own investment experience and the endorsement of external parties. Thus, the authorities should improve their supervision of the advertising broadcast on TV stations. The relevant departments should also clarify the social and economic attributes of different TV channels and seek to balance their propaganda and management functions.

The sensitivity of corporate investment to the cost of capital is a micro-foundation prerequisite for the effectiveness of price-based monetary policy tools. Traditionally, it was thought that Chinese state-owned enterprises' investment displayed low capital cost sensitivity, as these firms' non-marketization functions and soft budget constraints blocked the interest rate transmission mechanism. In recent years, with quantitative monetary policy tools facing increasing limitations, the People's Bank of China has been actively trying to transform from a quantity-based to a price-based monetary policy framework. However, amid widespread corporate governance reform, interest rate marketization, and rapid financial innovation, the micro-foundation of China's monetary policy has undergone great changes. Therefore, it is necessary to estimate the capital cost sensitivity of corporate investment to test the transmission effectiveness of price-based monetary policy instruments.
   Based on the new classical investment model, this paper uses the generalized method of moments (GMM) dynamic panel method to estimate the capital cost sensitivity of Chinese listed companies' investment from 2004 to 2017, and it focuses on the impact of financial constraints on the capital cost sensitivity of corporate investment. The empirical results are as follows. First, the weighted capital cost sensitivity of firms' investment in China is significantly negative, and the long-term elasticity coefficients vary from-0.16 to-0.27, which shows that the transmission of price-based monetary policy tools is gradually getting better. Second, firms' investment is mainly sensitive to the cost of debt, while the coefficients of the cost of equity are insignificant and unstable. Third, contrary to the traditional view, the capital cost sensitivity of non-state-owned companies is significantly lower than that of state-owned ones, which can be explained by the stronger financial constraints faced by non-state-owned companies. This paper provides some supportive empirical evidence for the transformation of China's monetary policy framework.
   The evidence in this paper that runs contrary to the traditional view is consistent with other recent studies on Chinese companies' investment behavior. Deng and Zeng (2014) and Yu et al. (2014) find that investment efficiency in recent years is significantly lower for non-state-owned enterprises than for state-owned ones. As a result of financial institutions' lower risk appetite (caused by slowing economic conditions) and frequent monetary policy shocks, the gap in financial constraints between state-owned enterprises and non-state-owned ones has widened. As non-state-owned enterprises' credit resources were gradually squeezed out, serious financial constraints led to declining investment efficiency for these firms.
   The main contributions of this paper are as follows. First, two important factors affecting the capital cost sensitivity of corporate investment, namely the internal agency (business objectives and soft budget constraints) problem and financial constraints, are analyzed, and the special influence of financial constraints is emphasized. Second, this paper extends the research of Xu and Chen (2012), who use data from all above-scale industrial enterprises in China from 1999 to 2007, and it yields some results different from the literature. Third, this paper examines the impact of financial constraints on the capital cost sensitivity of corporate investment and finds that stronger financial constraints faced by non-state-owned listed companies explain their low capital cost sensitivity of investment.
   It is worth noting that the estimation result applies to public firms in China. For a large number of non-listed companies (especially small and medium-sized enterprises) with low information transparency and weak corporate governance, or various government financing platforms, more data and further work are needed to examine the capital cost sensitivity of their investment.

China's “extensive growth” development model has led to increasingly serious environmental problems and constrained the sustainable development of the economy. The numerous incidents of severe environmental pollution have also had significant negative impacts on society. Accordingly, the environmental issues associated with economic development have been receiving increasing public and government attention. In addition to being important participants in the economy, enterprises are one of the main sources of environmental pollution. Therefore, it is of great practical significance to understand the economic consequences and mechanisms of environmental pollution at the micro-enterprise level. Although numerous studies have examined this issue, so far no consensus has been reached (Cormier et al. 1993; Karpoff et al. 2005). Moreover, many institutions in China, such as those relating to the environmental responsibilities of companies, government supervision, and the enforcement of laws, differ from those in Western countries (Dasgupta et al. 2001). Therefore, it is of significant theoretical and academic value to explore the economic consequences and mechanisms of the environmental pollution in China.
   Using a sample of 71 reports of incidents of environmental pollution by listed companies in China from 2005 to 2015, this paper finds that the firm value of listed companies declines significantly after the reports of incidents of environmental pollution are published. Specifically, the market value of the listed companies falls by an average of 1.51% on the day the incidents of environmental pollution are reported. Further analysis also shows that listed companies are more likely to be subject to environmental supervision and government sanction after incidents of environmental pollution are reported, and have greater difficulty obtaining bank debt financing. The changes in the levels of government environmental supervision and debt financing are also significantly related to the cumulative abnormal returns of corporate stocks during the reporting window of pollution incidents. This suggests that investors rationally anticipate the adverse consequences of incidents of environmental pollution and respond negatively to the news. In addition, the increased government supervision after the reporting of pollution incidents is more evident in areas with high needs for public environmental protection, and after the tightening of the government environmental protection policies in 2010. Moreover, the reduction in debt financing is more likely to occur after the tightening of the government environmental protection policies in 2010.
   The results of this paper have several policy implications in relation to the control of environmental pollution in China. First, the government should further enhance the public awareness of the need for environmental protection. To enhance the supervisory role of the public and the media, the government should also vigorously encourage the media to report environmental problems in a timely and objective manner. Second, the relevant government departments should further use administrative and financial means to strengthen the supervision and restraint of the environmental pollution from enterprises. Third, government departments should adhere to the principles of fairness and openness when enforcing environmental protection laws and credit resource allocation.
   This paper contributes to the literature in several ways. First, the paper proposes and empirically tests the unique mechanisms of the effects of incidents of environmental pollution on the firm value of listed companies, which are government supervision and access to debt financing. Second, this paper investigates the relationship between the reporting of environmental pollution and firm value over a long sample period and using a rigorous research design, and thus makes a useful addition to the literature on the relationship between the reporting of environmental pollution and firm value in China. Third, this paper presents an innovative analysis of the heterogeneity of the economic consequences of incidents of environmental pollution among different firms. We plan to explore other possible mechanisms of the effects of environmental pollution on firm value in future studies.

Since joining the WTO, the Chinese government has been committed to opening up the capital market. As a result of the government's efforts, various reforms of the A-share market have been carried out, such as the Shanghai-Hong Kong Stock Connect in 2014, the Shenzhen-Hong Kong Stock Connect in 2016, the Bond Connect in 2017, and the inclusion of A-shares in MSCI in 2018. Among these policies, the Shanghai-Hong Kong Stock Connect, a stock market interconnection mechanism program, has attracted the greatest attention from investors. However, few studies have examined the impact of the Chinese A-share market liberalization, especially its economic consequences. Previous studies of stock market liberalization and foreign ownership have focused on stock price volatility (Chen et al., 2013; Zhong and Lu, 2018; Zhong et al., 2018), dividend policy (Cao et al., 2017), financing costs (Gupta and Yuan, 2009), and operational efficiency (Guadalupe et al., 2012), and have ignored investment behavior. Research on this topic is challenging because of potential endogeneity problems due to lack of exogenous policy shocks.
   Fortunately, the implementation of the Shanghai-Hong Kong Stock Connect program provides a natural experiment, as it canceled trading restrictions on 568 stocks on the Shanghai stock market for Hong Kong investors. Using this quasi-natural experiment, our study examines the real effect of stock market liberalization from the perspective of corporate investment efficiency. The determinants of investment efficiency are a fundamental question in the corporate finance field (Myers and Majluf, 1984), and this study offers insights into the role of financial reforms in the efficiency of resource allocation in the real economy.
   Some previous studies suggest that, compared with domestic investors, foreign investors are more rational and have superior information (Kim and Verrecchia, 1994; Hartzell and Starks, 2003; Ferreira and Laux, 2007), which may improve corporate investment efficiency by reducing the degree of information asymmetry and strengthening supervision. Other studies show that foreign investors are also financial speculators and have disadvantages in terms of corporate information acquisition (Choe et al., 2005), which leads to some inefficient investment activities due to the short-sighted behavior of management. In the context of the continuous liberalization of the Chinese A-share market, this study examines whether foreign investors improve the investment efficiency of listed companies.
   Specifically, using the shock of Shanghai-Hong Kong Stock Connect as a quasi-natural experiment, we examine the impact of stock market liberalization on firms' investment efficiency. The results show casual and robust evidence that opening the stock market promotes the investment efficiency of eligible firms. The effect is strongest in firms with poor information environment quality and bad corporate governance. Further analyses show that an improvement in the information quality of earnings and an increase in analyst forecast accuracy are two important channels through which stock market liberalization affects investment efficiency. We also find that the performance of eligible firms significantly improves.
   Our study makes three contributions. First, an important aim of the Shanghai-Hong Kong Stock Connect is to improve the efficiency of resource allocation in mainland China's capital market, but it is still unclear how effective the program is. From the perspective of investment efficiency, this study provides rich evidence for the effectiveness of the Shanghai-Hong Kong Stock Connect and the subsequent opening of the capital market. Second, our study adds to the literature on stock market liberalization and investment efficiency. Unlike previous studies, this study alleviates the endogeneity problem by using the Connect program as a quasi-natural experiment. Third, our study has important practical implications. The role of foreign investors has always been a focus of policy makers interested in the liberalization of the Chinese capital market. Our results show that to attract foreign capital, it is crucial to improve the corporate information environment and resource allocation efficiency.

Information plays a key role in the efficiency of economy and finance. In the asset management industry, investment methods based on intrinsic value have become the mainstream approach of active institutional investors.Therefore, investors are increasingly focusing on uncovering information about listed companies.The Shenzhen Stock Exchange now forces listed companies to report on investor relationship management activities, such as communication behaviors. This further improves the information efficiency of the A-share market.
   In China's securities market, refinements to the information disclosure system and advances in commercial institutions provide new empirical data for studying the relationship between information acquisition and asset prices.Based on this background, this paper uses investor relationship information from the China Stock Market and Accounting Research (CSMAR) database between 2012 and 2016 to study the impact of buy-side visit behavior on sell-side analysts' predictions from the perspectives of information transmission and conflict of interest.
   Different from previous studies, the paper pays more attention to the information mechanism for the buy-side and the sell-side in visit activities rather than a single market subject. We can further refine the influence of buy-side visits by distinguishing between different types of visits,specifically individual visits and joint visits.We put forward two hypothesized effects: the information sharing effect and the conflict of interest effect. The empirical results show that buy-side individual visits can reduce the forecast bias of the brokerage industry, while joint visits cause a decline in average forecast accuracy; this confirms the existence of the two effects.
   In addition, we further study the internal transmission mechanisms of the two effects. For the information sharing effect, we find that the number of brokers tracking the enterprise after the fund visit increases significantly, indicating that the disclosure of such behavior and text records can cause more brokers to pay attention to listed companies. This provides information channels for brokerage analysis and forecasting. Regarding conflicts of interest, we find that when brokers provide site visit arrangements, research reports, and other services for funds to obtain trading commissions, the resulting benefits-based relationship has an impact on the accuracy of the information predicted by the sell side.
   We also consider three external factors: market condition (bull or bear), investor sentiment, and emotion in visit records. In particular, we introduce the TF-IDF method to statistically analyze the representative vocabulary in the text. The empirical results are as follows: (1) Information efficiency is higher during bull markets,when investor sentiment is high; in a bear market, when investor sentiment is depressed, institutional investors are more dependent on brokers,leading to a more prominent conflict of interest effect. (2) When the survey minutes of listed companies have obvious emotional signals, fund visits can reduce the average error of brokers' predictions. Further, when the text shows a negative signal, the information formed by the fund visit is more obvious, and it becomes harder for the interest relationship to intervene in securities analysts' forecasts.
   The paper makes several important contributions. First, it splits the effect of buy-side (fund) visits on sell-side analyst predictions into two dimensions.Second, we open the “black box” of the internal information mechanism of corporate visits. It is particularly difficult to quantify interest relationships, as the institutions in a visit sample may involve more than one fund and broker. We first expand the data into a one-to-one relationship and then combine the calculation. Third, the paper extends the analytical approach to information in the text record by using the TF-IDF method.Finally, the CICSI index is more in line with China's national conditions than the BW index and therefore more suitable for studying the effect of investor sentiments.
   Overall, the paper puts forward a unique perspective to analyze the role of institutional investors in market information transmission, thus providing new evidence for research on information efficiency in the capital market. This paper also provides clear policy implications related to information disclosure.

The media play an important role as an information intermediary and monitor in the capital market. The media can earn a good reputation if their news reports reflect the truth, and the journalists behind the reports can also obtain better career prospects. However, false reports may damage the media's reputation and even hinder their normal operation. However, due to economic interests or a lack of professionalism, morals, and legal awareness, bias in media reporting is quite common.
   In this paper, we examine whether a media outlet's news reports prior to a firm's fraud exposure affect the outlet's reputation among investors (i.e., whether there is a reputational spillover effect). More specifically, we examine whether investors' perceptions of the outlet's reputation change immediately after a fraud is exposed and how they respond to news stories by the same outlet about other no-fraud firms. On one hand, if the media outlet releases positive reports about the fraudulent firm ex ante, rational investors should question its professionalism and/or independence, making its reports on other no-fraud firms less likely to be trusted in the near future (negative reputational spillover effect). On the other hand, the media outlet's negative reports may be regarded as a positive signal by investors, which can produce a positive reputational spillover effect.
   We obtain firm fraud information from the China Stock Market and Accounting Research (CSMAR) database and set the lockup period as the window [-14,-7] before fraud exposure. First, we identify the treatment media outlet that reports on the fraudulent firm during the lockup period. Next, we identify other no-fraud firms reported on by the same outlet in both windows [-7,0] and (0,7) around the exposure date. Then, for each no-fraud firm, we find all other media outlets that release reports in both windows but have no reports on the fraudulent firm and use them as the control group. Finally, all news reports on no-fraud firms in the window [-7,7] by the treatment media outlet and the control media outlets are identified and included in our sample.
   We then use a difference-in-difference-in-differences (DDD) method for estimation. The results show that a more positive (negative) tone in the media's pre-exposure news report leads investors to react less (more) strongly to its news reports on no-fraud firms soon afterwards, indicating a two-way reputational spillover effect. However, the effect is asymmetrical in that the positive spillover is significantly stronger than the negative spillover. Further results show that the effect depends on investors' subjective perception of the media outlet's prior reputation and its ability to interpret the relevant information. The effect is more pronounced in cases with lower media reputation prior to the fraud, more severe fraud, or higher shareholding percentage of institutional investors in the no-fraud firm.
   This paper provides empirical evidence on whether and how the media should maintain its reputation among investors. We demonstrate the importance of media objectivity to reputation accumulation and point out specific influencing factors that determine spillover effects. In addition, we find that the information content of media news reports is highly related to the outlet's most recent reporting quality, indicating that the information content of its news reports can change dynamically. Therefore, we also provide important guidance on how to use media news reports for making better investment decisions.
   We acknowledge that the quality of media reports is also closely related to the individual characteristics of journalists, and these characteristics may also matter for the spillover effect discussed in this paper. In addition, the media's reporting behavior may directly affect the careers of journalists and even the reputations of peer outlets. What's more, the exposure of false reporting behaviors may also exert a long-term deterrent effect on media reporting quality. These issues can be explored in the future to deepen our understanding of media reputational concerns.