In China, land is not only an important factor of production, but also a major source of income for local governments. As a result, changes in the price of land can have significant macroeconomic effects. Local governments can manage their lands to raise money for local construction, and thus promote local economic development. However, some local governments are overly reliant on land revenue and form a community of interest with real estate developers, which not only pushes up land prices, but also restricts public decision-making and ultimately hinders local economic development. At the same time, changes in land prices are highly correlated with fluctuations in the macroeconomy. The rapid growth of China's economy has often been accompanied by high land prices, and the economy is usually in a downward trend when the price of land falls.
The cost of land is also an important component of the price of housing, which is a strong determinant of people's livelihoods. Given the important role that land plays in China's economy, it is unlikely that a modern financial system and stable real estate market can be achieved without a major reform of the land market. Hence, the factors and mechanisms that drive the fluctuations in the land prices under the land finance system need to be identified to provide theoretical and practical measures for improving people's livelihoods, promoting the reform of the fiscal and tax systems, and implementing a long-term housing mechanism.
In this paper, we introduce the land finance and implicit government guarantee financing mechanism into a new Keynesian DSGE model that includes a financial accelerator, and investigate the characteristics, factors, and mechanism driving the fluctuation in land prices under the land finance system. Specifically, our model includes families, entrepreneurs, the central bank, and the government as variables. In the model, infrastructure is included as an essential production input, and the government is the main supplier of infrastructure. The revenue for infrastructure investment is not only derived from tax revenue, but also from land sales, land mortgage loans, and implicit guarantee financing with government credit, which are the main characteristics of the local government investment and financing in China. We then use quarterly macro-economic data on China's economy from 2004 to 2016 to calibrate and estimate the model using Bayesian estimation.
The main results of this paper are as follows. First, in terms of the historical variance, the land price fluctuations in China from 2004 to 2016 were greatly affected by the land demand, land supply, and monetary policy shocks. Second, the variance decomposition shows that in the short term (within one quarter), the land prices were mainly affected by the land supply, with the land supply shock explaining 49.87% of the land price fluctuations, followed by the monetary policy shock (24.52%) and the land demand shock (23.43%). However, in the long term, the land demand shock becomes the decisive factor in determining the land prices, explaining almost 42.11% of the land price fluctuation. Third, we further investigate the relationship between the land prices and macroeconomic fluctuations, and examine the amplification mechanism of land finance. We find that a positive land demand shock pushes up the land prices and causes macroeconomic fluctuations through the mortgage constraint mechanism.
This paper makes the following contributions to the literature. First, we consider the important impact of monetary policy on the land market using a sticky new Keynesian DSGE model. Second, we include the characteristics of China's land finance in the model, and depict the investment and financing characteristics of the “land sales for income, land pledges for loans” by China's local governments. Third, this paper also describes the characteristics of the implicit guarantee financing scheme with government credit, which together with the local government borrowing based on land pledges, constitutes the implicit debt of the local governments.

With access to the WTO, Chinese firms have more opportunities to export and invest because of lower import tariffs. At the same time, trade liberalization leads to higher pressure from import competition. How does such import competition affect firms' cash savings ratios？ Answering this question would not only help in understanding firms' cash savings behavior after admission to the WTO but also have real-world benefits in terms of activating the monetary stock and stimulating the real economy. However, the literature pays little attention to this issue.
Theoretically, firms' cash savings ratios are affected by import competition through two channels. On one hand, firms will increase their cash savings, referred to as precautionary savings, to defend against the risks of import competition. On the other hand, more imports will increase competition for investment opportunities, especially when investment projects are similar between firms. If predatory investment happens, firms will lose investment opportunities; this weakens the motive to keep cash, and thus cash savings will decrease. However, the effect of trade liberalization on cash savings will depend on firm size. Large firms will keep more cash to execute the predatory pricing or entry barrier strategy. Meanwhile, the exit risk for less productive firms will increase under a more competitive market. Thus, less productive firms will keep more cash to manage operating risks.
This paper discusses the effect of trade liberalization on manufacturing firms' cash savings ratios and, using a difference-in-differences method, explores the mechanisms and heterogeneous effects based on the quasi-natural experiment of China's admission to the WTO. The firm-level variables are mainly from the Annual Survey of Industrial Firms (ASIF) conducted by the National Bureau of Statistics of China from 1998 to 2007, and firm trade regime information is taken from China Customs Data over the period 2000-2007. The dataset of Chinese import tariffs is downloaded from the Trade Analysis Information System (TRAINS) and WTO website. Average tariffs are selected to measure the industry tariff level in this paper.
Cash savings are calculated by eliminating inventory and account receivables from a firm's liquid assets, in line with the definition of cash and cash equivalents in the China Accounting Standards. To test for measurement errors in the cash savings index, we first merge the ASIF from 1998 to 2013 with Wind data of listed companies by firm name. Then, we compare the difference between the cash savings ratio measured in this paper and those published by the listed companies. We find that the cash savings ratio calculated in this paper is acceptable.
This paper contributes to the literature in three respects. First, this paper is the first to study whether trade liberalization affects firms' cash savings, and we find that Chinese firms exhibit different cash saving behavior compared to firms in developed countries. Second, instead of focusing on listed companies, this paper uses ASIF data to avoid undervaluing the average cash savings of manufacturing companies. Third, this paper explores the mechanisms in detail to identify whether the main source of cash savings variation comes from changes in the precautionary savings motive or from changes in investment opportunities.
First, we find that China's trade liberalization did not increase manufacturing firms' cash savings ratios but rather significantly reduced them as a result of decreasing investment. This finding is different from the conclusions for developed countries. Second, the effect of trade liberalization on firms' cash savings depends on the extent of market competition: lower tariffs will significantly reduce firm cash savings in competitive industries and highly concentrated areas. Third, import competition will erode the investment opportunities of domestic firms, especially small ones, thereby reducing their cash savings. The conclusions remain valid after a series of tests. These findings suggest that unlike in developed countries, the competition effect of China's trade liberalization has a negative impact on firm investment in the short term. How to deal with this unfavorable situation remains a substantial challenge for local manufacturing firms.
Relaxing market access and opening up the service sectors are important tasks in the new pattern of China's overall opening up, as emphasized at the 19^th National Congress of the Communist Party. In a subsequent study, we will explore another important issue related to China's opening up, that is, how the liberalization of service sectors, especially the financial sector, affects firms' cash savings and saving strategy.

Studies of the impact of economic policy uncertainty on macroeconomics and micro-firms have ignored the role of insurance demand, which is closely related to uncertainty. Insurance demand should be considered in studies of the impact of policy uncertainty on different types of insurance. Existing research also ignores the different extent to which individuals are affected by economic policy uncertainty. Regional culture may influence individuals' reactions to external policy shocks, making the impact of uncertainty on economic activities variable. Therefore, it is unclear how economic policy uncertainty affects insurance demand or how regional culture mediates the impact of economic policy uncertainty on insurance demand. These are the key issues of this study.
The study first uses the background risk theory of Guiso and Jappelli (1998) to reveal the mechanism through which economic policy uncertainty impacts insurance demand and further analyzes whether regional culture influences the impact of economic policy uncertainty on insurance demand. Second, using monthly panel data of 30 regions in China from 2007 to 2017, the study examines the impact of economic policy uncertainty on total insurance demand, personal insurance demand, and property insurance demand, focusing on the different impacts of economic policy uncertainty on the three types of personal insurance. Third, using the 30-region cultural dimension data measured by Zhao Xiangyang et al. (2015), this study examines the moderating effects of uncertainty avoidance, performance orientation, societal collectivism, assertiveness, and power distance on the impact of economic policy uncertainty on insurance demand. There are three key findings. First, increasing economic policy uncertainty has a significantly positive impact on regional insurance demand. Second, the impact of economic policy uncertainty on insurance demand is restricted by cultural differences. Third, when economic policy uncertainty rises, people tend to avoid risks by purchasing personal insurance, especially life and health insurance with social security and savings functions. Property insurance demand is less influenced by economic policy uncertainty.
The main contributions of this study are as follows. First, we find that the impact of economic policy uncertainty on China's insurance market is robust. This study not only clarifies the mechanism through which economic policy uncertainty affects insurance demand, it also empirically tests the impact of economic policy uncertainty on the demand for different types of insurance. Second, traditional background risk theory emphasizes that background risks, including uncertainty, have an impact on insurance demand, but ignores the potential regulatory effect of regional culture on the impact of background risk on insurance demand. This study expands the theoretical model by incorporating regional culture into the research framework, and analyzes the mechanism through which regional culture moderates the effect of background risk on insurance demand. Furthermore, this study finds that regional culture has a moderating effect on the impact of economic policy uncertainty on insurance demand in China.
The findings have important theoretical and practical implications. First, the Chinese government should increase its investment in the social security system to enhance people's ability to withstand uncertainty. Furthermore, the government should disclose more information to establish a more open and transparent information transmission channel, which helps to reduce the negative impact of economic policy uncertainty on social behavior. Second, the implementation of China's economic policy adjustments should be based on a full understanding of the cultural characteristics of each region, so that the government can appropriately guide the cultivation of risk-aversion cultures. Third, the government should formulate incentives to adjust the structure of the insurance market and guide the expansion of the markets in property insurance and personal accident insurance. Furthermore, Chinese insurance companies should diversify the supply of insurance products, strengthen the market promotion and product design of property insurance and personal accident insurance, and promote the balanced growth of China's insurance market.

Population aging and the slowdown of economic growth are challenging the solvency of pension funds. To maintain a sustainable pension system and coordinate the solvency of the pension funds and benefits for retirees, it is necessary to optimize the current adjustment mechanism for pension payments. On the one hand, if the funds have insufficient solvency, pension systems will be unsustainable. On the other hand, if the solvency is increased by simply reducing the benefits, the retirees will be unable to maintain a basic standard of living.
We directly use solvency as an endogenous variable and add it to the pension adjustment model, so that the pension payments dynamically adjust to the changes in solvency. When a pension fund is insolvent, the growth rate of the pension payments is automatically reduced. Based on this idea, we construct four pension adjustment modes. The first mode is the current policy, the second mode only adjusts the growth rate of payments during the retirement period, the third mode only adjusts the contribution index during the working period, and the fourth mode adjusts both the growth rate of payments and the contribution index. The payments of the latter three modes are dynamically and automatically adjusted according to the change in solvency, and the modes operate as self-feedback systems that can correct the prediction bias.
Solvency is the key index in this paper, and is equal to the ratio of assets to liabilities of a pension fund over some future period. The index needs to be evaluated each year and is used to adjust the pension amounts. When the assets are less than the liabilities, the pension funds are insolvent. Thus, a reasonable level of solvency should be maintained. If the solvency is too high, the contributions will be used inefficiently, as a large proportion will not be used to pay pensions. Therefore, a reasonable adjustment strategy should strive to make the solvency index tend to 1, which will not only maintain the financial sustainability of the fund, but also provide retirees with the greatest degree of security.
To determine the assets, liabilities, and solvency of pension funds, we need to calculate the income and expenditure, which means we have to forecast the future values of some parameters, such as the GDP growth rate, birth rate, inflation rate, and life expectancy. The data for 2016 and before are drawn from the National Bureau of Statistics of China. After 2016, we use the “2017 Revision of World Population Prospects” published by the United Nations Population Office, which provides population forecasts for 2017-2100. We collect the GDP grow rate data for 2017-2100 from the Pardee Center for International Futures at Denver University.
As we do not know the exact future values of the parameters, we use the scenario analysis method to test the robustness of the model, which is widely used in the banking and insurance industry. We choose 18 scenarios after analyzing the economic, population, and policy variables. We then analyze, compare, and rank the effects of the four adjustment modes under each scenario, and test whether the ranking is robust. Finally, we identify the most advantageous mode.
The main conclusions are as follows. First, if the current pension adjustment mode is not optimized, the degree of insolvency will continue to increase under the trend of population aging and slowing economic growth. Second, compared with the current policies and existing models, our adjustment model can effectively alleviate the degree of insolvency and reduce the large fluctuations in the benefits for retirees. Third, adjusting the pension according to life cycle theory not only improves the solvency better than the other models, but also extends the time for paying retirees and improves their ability to deal with risks. Finally, when introducing policies such as delaying the retirement age, multiple factors need to be considered, such as the adjustment mode, growth rate of pensions, the birth rate, and the solvency of pension funds.
This paper makes the following contributions. First, we use solvency as an endogenous variable and add it to the “pay-as-you-go” pension system, whereas the current automatic balance mechanism (ABM) is applicable only to a fully funded pension system. Second, our model is a self-feedback system that can correct the prediction bias, which improves the robustness and operability of the model. If there is no forecast, the solvency of the pension fund cannot be calculated, whereas if there is no correction, the forecast deviation will continue to increase. Third, compared with other models, such as the ABM, our model can reduce the risk of excessive fluctuations of benefits and provide a more stable income for retirees, although it does require some public financial support. The dynamic effect of public financial support on the solvency of the pension fund is a topic for future research.

Problems caused by the credence goods (such as food, drugs and health care products) market have been plaguing China and the rest of the world for years. Asymmetric information on the quality of goods and services caused by moral hazard and adverse selection can lead to market failure of credence goods. To fix credence goods market failure, a common solution is government regulation. However, many economists advocate more market-based solutions (e.g. financial innovations such as compulsory liability insurance), but smoking gun evidence has been yet to come. A priori theories suggest that compulsory liability insurance has two opposite effects: reduced moral hazard by insurer's monitoring and induced moral hazard of the insured companies.
Fortunately, China's policy innovations and reform experiments on compulsory food safety liability insurance was phased in China from 2011 to 2017 and is leading the world. In other countries such as the United States, food, drugs and other products are usually covered by product liability insurance, as food safety liability insurance is rarely separately set up. China's food safety compulsory liability insurance constitutes a rare and ideal natural experiment for two reasons. First, it has been phased in at different times in different provinces. This exogenous shock enables us to use the difference-in-difference method to identify the causal effects. Second, liability insurance is not all mandatory in western countries, which brings about mixed effects of moral hazard and adverse selection and makes it difficult to disentangle these two effects. In China, however, the compulsory nature of food safety liability insurance shuts down the adverse selection channel, enabling us to disentangle the moral hazard channel.
The paper exploits the natural experiment to identify the causal effects of liability insurance on credence goods market using the compulsory liability insurance on food program. Specifically, we examine whether insurance-based financial innovation helps solve credence goods market failure through reducing moral hazard problem. The paper finds that the liability insurance significantly reduces the probability of food safety accidents. After the implementation the compulsory liability insurance, the average number of outbreaks of food borne diseases in every 10,000 people has decreased by about 6. Both parallel trend test and direct test of insurers' monitoring effect further support the results. These results reveal that the mandatory financial innovation can be an effective tool for risk management.
The study shows that financial innovations are a powerful tool to solve social and economic problems. Financial innovations including liability insurance can be an effective alternative solution to credence goods market failure. On the one hand, insurance companies can solve the adverse selection problem by assessing the risk types of different insured enterprises. On the other hand, to stay competitive, insurers have the incentive to push the insured to reduce risk, thus mitigating the moral hazard problem. Compared with government regulation, market-based mechanisms can make better use of insurers' expertise in monitoring and screening. Insurance companies can use their market advantages to collect data for actuarial analysis and the estimation of premia according to expected losses. From the perspective of solving negative externalities, this is tantamount to tailor-made Pigou taxes, which requires agents to pay the same costs as their externalities to prevent socially harmful actions, namely, to internalize the externality. Interestingly, from the perspective of mechanism design, the solution is equivalent to the Lindahl equilibrium, where the agents pay the corresponding “taxes”. That is to say, compulsory liability insurance is an efficient implementation of Lindahl equilibrium in resolving credence goods market failure.
More interestingly, compulsory insurance is also consistent with the idea of second-best theory. The second-best theory implies that if there are many distortions in the economy, eliminating one or several of them (but not all distortions) may make things worse rather than better. On the contrary, adding one distortion may achieve Pareto improvement. In the case of compulsory insurance, government coercion is a distortion by itself, but in the presence of information asymmetry, it can lead to Pareto improvements when combined with market-based solutions.
Some problems remain for further study. For example, different credence goods and their markets may require different regulatory responses and financial innovations. These heterogeneities await further research in the future.

The rapid increase in housing prices is a popular phenomenon demonstrated by China's economy in recent years. Housing is one of the most important assets for a family, so a rapid housing price increase implies rapid change in family wealth, which has great impacts on individuals' decisions and attitudes. In traditional Chinese culture, the notion that a good marriage is better than a good job plays an important role in one's decision to marry. Some surveys show that this perspective remains popular in Chinese society. Much of the literature analyzes the effects of social circumstances and physical foundations on this notion from the view of female psychology and sociology, but few studies discuss the effects of economic factors.
For rational individuals, the trade-off decision between marriage and employment must involve the consideration of economic factors, such as the change in housing prices. Theoretically, the housing price level reflects a city's cost of living and income levels. The change in housing prices reflects expected uncertainty in the future, with higher changes in housing prices indicating greater expected uncertainty in the future. The rapid increase in housing prices implies not only the increase in nominal family wealth, but also the expected increase in housing expenditure. Therefore, the change in housing prices can affect the trade-off between marriage and employment through two channels. The first channel is the wealth effect. This channel implies that with the rapid increase in housing prices, the nominal wealth of individuals with housing increases. As the motivation to avoid the risk of future uncertainty by marriage decreases, the change in housing prices causes individuals to prefer employment to marriage. The second channel is the budgetary constraint effect. Specifically, the increase in housing prices implies a large future expenditure, which exerts great pressure on individuals with lower income and more liability. In this case, the change in housing prices causes individuals to prefer marriage to employment to avoid the risk of future uncertainty.
Based on China's General Social Survey (CGSS) data of 2010 and 2015, we examine whether people prefer a good marriage to a good job due to the increase in housing prices. We use the notion of a good job or a good marriage as the trade-off between employment and marriage. The baseline regression of the probit model shows that the higher the increase in housing prices is, the more likely people are to prefer a good marriage. This finding remains robust when we change the dependent variable and the explanatory variable of housing level (we replace the housing price-income ratio with the urban real value of housing price level). Heterogeneous analyses show that females, unmarried females, married females, female migrants, urban females, and people with more daughters prefer marriage to employment when facing increased housing prices. This preference allows them to avoid the risk of future uncertainty. Finally, we test the mechanisms of the wealth effect and the budgetary constraint effect. We test the wealth effect by dividing the sample into three groups according to the number of housing properties owned and who has the property. We find that the rapid increase in housing prices increases the nominal wealth of females with more housing such that their sense of identification with the notion that a good marriage is better than a good job is lower. We test the budgetary constraint effect by designing the regression according to individual income level. The probit regression shows that the increase in housing prices leads females with lower incomes to increase their acceptance of the notion that a good marriage is better than a good job, as they would suffer stronger budgetary constraints in the face of rapidly increasing housing prices.
Although the notion that a good marriage is better than a good job is culturally rooted, economic factors such as housing prices can also affect it. Our main contribution is our analysis of the relationship between housing price and the notion of marriage and our discussion of the probable mechanisms of the wealth effect and the budgetary constraint effect. With the rapid rate of housing price increase in recent years, more and more young females are prioritizing a good marriage. This is expected to exert greater pressure on the labor market and lead to a lower rate of female labor participation. As the increase in housing price does not significantly increase the marriage preference of males, but increases males' preference for employment at the cost of delaying marriage, it may further decrease fertility in the future. Thus, this problem is worthy of further research.

Innovation is an extensively researched topic in the fields of economics and management. The relevant literature investigates the key factors affecting corporate innovation from the perspectives of intellectual property protection (Moser, 2005; Wu and Tang, 2016), government subsidies (Gorg and Strobl, 2007; Zhang et al., 2018), corporate governance (Manso, 2011; Shi and Wang, 2017), financing constraints (Brown et al., 2013; Zhang et al., 2017), and executive characteristics (Sunder et al., 2017). However, few studies have focused on the potential impact of implicit value norms, such as social culture, on the decision preferences of managers and their innovation strategy choices. Huntington and Harrison (2013) argue that culture is an important factor affecting society, politics, and the economy. The emerging literature on “culture and finance” shows that besides institutional and economic factors, informal institutional factors such as culture play a pivotal role in corporate decision-making (Li et al., 2013). Culture may play a critical role in shaping corporate decision-making in China in particular, as despite its less developed laws and institutions relative to those in developed countries, China has a long history and rich culture (Allen et al., 2005).
In Chinese society, Confucian culture is the most extensive and far-reaching informal institutional factor. As the core of Chinese traditional culture, Confucianism is the moral norm and an action guide generally respected by individuals and organizations (Ip, 2009). Du (2003) believes that Confucian culture not only has shaped the spirit of Chinese enterprises but also served as a spiritual pillar in the process of modernization, influencing all aspects of the social economy. Fu and Tsui (2003) argue that Confucianism is pervasive in the values of Chinese entrepreneurs and is reflected in corporate decision-making. This raises an important question: what impact does Confucian culture have on innovation within contemporary enterprises？
Using a sample of Chinese listed firms during the period 2007 to 2016, this paper systematically investigates the impact of Confucian culture on corporate innovation. We find that Confucianism is significantly positively associated with a firm's patent output, implying that Confucian culture has a significant promoting effect on corporate innovation. Channel analysis shows that Confucianism affects corporate innovation mainly by alleviating the corporate agency conflict, improving the level of human capital investment, and reducing the risk of patent infringement. Further, the positive effect of Confucianism on corporate innovation is more prominent for private enterprises and firms in areas with weaker intellectual property protection. Meanwhile, foreign cultural influence weakens the positive effect of Confucianism on corporate innovation. We also document that Confucianism helps improve the efficiency of patent technology transformation and thus enhances the marginal contribution of technological innovation to firm performance.
This paper contributes to the literature in several ways. First, our study breaks through the traditional institutional theoretical framework and investigates the impact of Confucian culture on corporate innovation from the perspective of informal institutions. This not only deepens understanding of the cultural soil on which innovation depends but also enriches the literature on corporate innovation. Second, the literature on Confucian ethical values mainly focuses on the fields of philosophy and sociology and adopts normative research methods. This paper uses an empirical method to reveal the positive role of Confucian culture in promoting contemporary enterprise innovation. This expands the research paradigm and deepens theoretical understanding of the economic consequences of Confucian culture at the firm level. Third, current research on “culture and finance” mostly focuses on Western culture and uses cross-national samples to compare the impact of national cultural characteristics on corporate behavior. We apply a sample of Chinese listed firms to examine the impact of Confucianism on corporate innovation. This approach ensures that institutional differences between countries do not interfere with the empirical results, and it also contributes empirical evidence from an Eastern culture to extend the international literature on culture and finance. Finally, our study is the first to theoretically explain and provide empirical evidence for Confucianism's positive effect on corporate innovation. This corrects the passive cognitive bias toward Confucianism while also providing a theoretical basis and policy reference for giving full play to the positive role of Chinese traditional culture in achieving innovation-driven strategies and high-quality development goals.

Large fluctuations in international oil prices not only exacerbate global economic uncertainty but also make it difficult to study the impact of crude oil prices on the economy. Researchers usually study this relationship using end-of-month closing price data. However, the price volatility caused by the financialization of crude oil markets imparts a substantial amount of noise—i.e., information unrelated to economic fundamentals—to crude oil prices, with the result that closing prices on adjacent trading days diverge significantly. It is unlikely that short-term changes in crude oil prices will affect economic fundamentals, and there is no evidence that such short-term fluctuations will affect the stock market. Therefore, considering only end-of-month closing price data will inevitably lead to large errors in analysis results and even erroneous conclusions.
Information noise will distort the price of crude oil, causing it to deviate from the normal supply and demand price. Therefore, researchers must try to eliminate the impact of noise when using crude oil prices to analyze economy. To this end, we propose a simple and feasible method, the moving average method, with which we expect to reduce the impact of noise to some extent. The empirical results show that the oil price trend factor based on the moving average method has significantly improved predictive power for the stock market compared to the simple oil price factor.
Why is the oil price trend factor based on the moving average method significantly better at predicting the stock market？ We believe there are several reasons. First, short-term fluctuations in international crude oil prices contain noise unrelated to economic fundamentals, but the moving average method can weaken the influence of noise to some extent. Second, due to an insufficient investor response (Hong and Stein, 1999), it takes time for oil price information to fully reflect the stock market (Driesprong et al., 2008). Unlike the simple oil price factor, which contains price information only for a particular day, the trend factor based on the moving average method contains price information for the preceding period and thus has a stronger forecasting effect on the stock market. Third, the trend factor can better grasp unfolding price trends and influence investor expectations.
Based on the moving average method, this paper extracts the oil price trend factor from international crude oil prices to study the impact of oil price fluctuations on the stock markets of 35 “Belt and Road” countries. The study finds that the moving average method can effectively reduce information noise in oil prices. The stock market forecasting effect of the oil price trend factor based on the moving average method exists both inside and outside the sample. This paper also examines the stock markets of oil-producing countries and those of non-oil-producing countries. It confirms that the stock market impact of oil price fluctuations is asymmetric betweenoil-producing and non-oil-producing countries in two aspects. First, a rise in crude oil prices is conducive to the stock markets of oil-producing countries but not to those of non-oil-producing countries. Second, stock markets of oil-producing countries are more sensitive to fluctuations in crude oil prices. In addition, the paper finds that the stock market forecasting ability of international oil prices is time-varying. When the economy is in a down cycle, international oil prices are more predictive of the stock market.
The main contribution of this paper is that it proposes and confirms a simple, feasible method of reducing oil price information noise, namely the moving average method. Second, this paper provides new and powerful evidence on the impact of oil prices on the stock market. Whether the price of oil can predict the stock market is still controversial (Chen et al., 1986; Huang et al., 1996; Jones and Kaul, 1996; Driesprong et al., 2008). After reducing noise with the oil price trend factor, this paper finds that there still exists an impact of international oil prices on the stock market.

Most previous studies approach the relationship between enterprises and government from the perspective of macro government intervention or the government backgrounds of managers or shareholders. This, however, ignores the distinction between the government and political parties and the influence of party organizations in enterprises. Given that the role of the party directly depends on party organizations, we must explore the influence of such organizations on firms' behavior. During the 18^th and 19^th National Congresses of the Communist Party of China(NCCPC), Xi Jinping repeatedly stressed the importance of party organizations in corporate governance. At the National Conference on Party Construction in Non-public Enterprises, Xi emphasized that the key to building a corporate governance mechanism with Chinese characteristics lies in embedding party organizations into the corporate governance structure. Unfortunately, there is little empirical research on the economic consequences of such embedding in privately owned firms. Consequently, we focus on the influence of party organizations in privately owned firms in the corporate donations setting.
As mentioned, we take the social donation behavior of privately owned firms as the research setting. We choose the social donation setting (an important aspect of corporate social responsibility) to study the role of party organizations in privately owned firms for two reasons. First, corporate social donation behavior is consistent with the Party's beliefs and mission. Second, with the development of privately owned firms in China, charitable donations from privately owned firms have gradually become an important part of China's social public welfare. Since 2007, the donation rate of privately owned firms has been more than 50%. Therefore, the social donation of privately owned firms offers an ideal setting in which to test the economic consequences of the influence of party organizations in such firms.
The effect of party organizations on privately owned firms is largely ignored by the literature. We manually collect data on party organizations in privately owned listed companies for the period 2004-2015 to examine the real effect of party organizations on the donations of these firms. We find that donations are significantly positively related to party organizations in these firms, and the positive effect is still significant after donation data are adjusted to the industry or province level. The positive effect is more pronounced in privately owned firms that have more solid party organizations or managers that pay more attention to them, and during (NCCPC) periods. In addition, the results are robust after controlling for potential endogeneity. Finally, we find that province-level donations are significantly higher in provinces where the impact of party organizations is stronger.
The main contributions of this paper are as follows. First, we provide new perspectives and evidence for research on political parties and political party organizations. Previous studies mainly explore how party organizations in state-owned enterprises affect corporate governance and corporate performance. Due to the difficulty of data collection and other reasons, few empirical studies address the economic consequences of party organizations in privately owned firms. Second, we expand the cross-disciplinary study of government-enterprise relationships and corporate behavior. We study the relationship between government and enterprises from the perspective of party organization embeddedness; this topic spans the fields of sociology, politics, management, and economics and thus extends the literature on the relationship between government and enterprises. Finally, this paper has strong immediate significance. The results show that party organizations embedded in privately owned firms help them fulfill their social responsibilities. This is consistent with the mission of the Central Committee of the Communist Party of China to strengthen party organizations in privately owned firms. The findings also offer useful insights on the experience of party organizations' construction in privately owned firms, which can serve as a reference for the reforms, such as strengthening the construction of grass-roots organizations.

In the economic context of widespread entrepreneurship and innovation, venture capital (VC) has become an important source of capital for innovation entrepreneurship in China. In mature Western capital markets, VC, as a specialized financial intermediary, monitors and certifies enterprises; therefore, VC investment can signal the value of venture enterprises and reduce information asymmetry. However, in recent years, there have been many negative examples of VC in China, which involved grandstanding and post-IPO deterioration of financial performance. These phenomena are related to the stage of VC development in China. Although the first financial institution in China specializing in VC investment was established in 1985, the development of VC has been slow due to the lack of a general exit mechanism in the early period. After the opening of the Shenzhen SME board in 2004 and the implementation of stock split reform in 2005, more and more VC has become available, and it has grown rapidly with economic development and inventive policies. Due to their limited experience, many VC firms in China lack professional skills. They are eager for a quick exit and instant benefits. Furthermore, under the strict restrictions on IPOs in China, entrepreneurs and limited partners may value VC firms' government background or political connections more than their professional ability, which contributes to the short-term behaviors of VC firms.
Such phenomena are common in the early stage of an industry's development. However, to ensure the sustainable development of the VC industry, an effective reputation mechanism is necessary. The professional quality of VC can be improved gradually, if there is a market mechanism to screen the quality of the VC firms, thereby developing superior firms and weeding out inferior firms. This study examines whether the reputation mechanism works in China's VC industry. There are few studies of this problem, and the conclusions are inconsistent. Some find that a VC firm's reputation improves its portfolio companies' financing environment, productivity, and merger performance; but others find that a VC firm's reputation has no significant influence on the initial return of IPOs, and is even positively correlated with earnings management at the time of the IPO. Most studies have used VC exit history to measure firm reputation. Such measures mainly reflect the progress of reputation building, but do not capture events that damage reputations. In addition, most studies have focused on the influence of firms' reputation before or at the time of the IPOs, not the reputation mechanism in the secondary securities market.
In this study, we exploit the VC reputation mechanism in the secondary securities market by studying the effect of reputation damage to VC firms on their portfolio companies. Specifically, we examine whether investigations of VC-backed listed firms by regulatory bodies lead to price declines in other firms backed by the same VC firm (related companies). Our research setting offers two advantages. First, we observe the reputation damage to VC firms. When the portfolio companies that went public are investigated by regulatory bodies, the quality of the VC firms' monitoring is challenged and their reputation is affected. Second, by observing the immediate market reactions to regulatory investigations, we exclude the influence of other factors and can posit a causal link between the reputation of the VC firms and the contagion effect.
Using a sample of CSRC regulatory events from the 2007 to 2015 period, we find the market reaction of investigated VC-backed companies is-8% around the announcements of investigation events, and the related companies' market reaction is-1.2% around the events. We also find that investors impose a larger penalty on the stock prices of the related companies backed by VC firms that have higher reputations or are more intensively involved in the operations of the investigated firms.
Our study makes several contributions. First, our research provides evidence that the reputation mechanism affects VC in China. Our results indicate that a VC firm's reputation influences the valuation of its portfolio companies even after they go public; therefore, entrepreneurs and limited partners should pay more attention to VC firms' professional abilities. Second, existing research has found that negative events in one firm can induce share price declines in other firms related by industry, supply chain, auditor and so on. We identify another stock price contagion channel: the VC firm. Third, our paper sheds light on the consequences of Chinese SEC regulation. The results show that regulatory investigations influence not only the investigated companies, but also some related financial intermediaries and companies.

The research on short sales predominantly focuses on two areas. The first is the effect of short selling on the stability, liquidity, pricing efficiency, and price discovery of stock markets. The second is the effect of short selling on corporate financial decisions, such as capital structure, investment policy, earnings management, and firm innovations. The general findings indicate that short sales can reduce price bubbles, promote market stability, and improve pricing efficiency. They can also serve as an effective external corporate governance mechanism that improves the efficiency of corporate finance and investment, reduces earnings management, and enhances innovation expenditures and outputs. However, issues such as the source of short sellers' information and whether short selling leads to insider trading remain the subject of intense debate.
Using 2010 to 2015 data for all Chinese A shares, this article provides one of the first studies on the sources of short sellers' information advantage and how short selling affects stock market returns. In particular, it analyzes short selling behavior before and after major corporate announcements, including insider sales of restricted shares, annual reports, lawsuits, analyst upgrades or downgrades, suspension and resumption of trading, and stock dividends. This article sheds light on whether short sellers are involved in insider trading and what factors affect their involvement.
This article tests five hypotheses. First, stocks with a higher percentage of short sales have lower expected returns, indicating that short sellers are informed traders. Second, short sellers significantly increase (decrease) trading before the announcement of important negative (positive) corporate news. Third, short sellers are more likely to engage in insider trading in firms with lower market capitalization and fewer analyst recommendations because these firms suffer more information asymmetry. Fourth, short sellers are more likely to engage in insider trading in firms with more private equity holdings. Five, short sellers are more likely to engage in insider trading in regions where law enforcement is relatively weak.
This article finds that stocks with higher excess short-selling ratios have lower future returns, indicating that short sellers are not liquidity traders. In fact, short sellers possess information advantages and should be classified as informed traders.In addition, short sellers have very accurate market timing capabilities in that they are able to increase the amount of short selling significantly before major announcements of bad news and to reduce the amount of short selling significantly before major announcements of good news. This suggests that the information advantage of short sellers as informed traders is derived from insider information. Furthermore, short sellers are more likely to engage in insider trading if the degree of information asymmetry between internal and external investors is large or if local law enforcement is weak. Overall, the results suggest that to curb short sellers from participating in insider trading, securities regulators should pay close attention to unusual changes in the volume of short sales immediately before and after companies' major news announcements. At the same time, securities regulators should continue to reform rules on information disclosure, strengthen analyst coverage, and improve the implementation of laws and regulations.
This article makes three major contributions. First, it is one of the first to examine whether short sellers in Chinese A-share markets possess an information advantage, the source of the advantage, and the effect of the advantage on expected stock returns. Second, whereas studies on short sale activities usually focus on one type of corporate announcement, this article investigates six types, namely insider sales of restricted shares, annual reports, lawsuits, analyst upgrades or downgrades, suspension and resumption of trading, and stock dividends. This article finds strong evidence that short sellers engage in insider trading. Third, this article analyzes the factors that affect short sellers' engagement in insider trading, shedding new light on how securities regulators can monitor trading behavior in stock markets.