The RMB was included in the Special Drawing Rights (SDR) currency basket on October 1, 2016, following the Dollar, Pound, Yen, and Euro. However, the U.S. has increased protectionist trade policies and tariff barriers since 2018. On March 22, the U.S. announced a large-scale tariff on Chinese imports. The exchange market's CNY faces a turbulent environment, and China's economy is experiencing only moderate growth. As a result, the RMB is showing a weak trend and increased pressure. Fluctuations in the CNY have become the market's primary concern. Therefore, the volatility spillover between the CNY and other international markets, volatility clustering, and the degree of RMB must be explored to prevent and avoid volatile risk with the CNY.
The volatility spillover effect stipulates that an economy's exchange market is more likely to spill over into other economies' exchange markets when its currency has a higher degree. In addition, other economies show a volatility clustering trend. The comparison between the RMB market and other major currency markets shows the degree of RMB in global economic patterns. Therefore, we use the SDR currency basket's exchange market to identify the relationship between volatility spillover and volatility clustering in real time and identify the international degree of RMB.
A nonlinear model with structural changes is best suited to describe the characteristics of the exchange market's volatility, given the various time and political characteristics of major global currencies' co-movement. The Markov switching model can depict the structural change in time series data and internalize the structural change into regime change. The model can describe the regime state in different stages and the nonlinear transition of a regime state in each stage. It is suitable for measuring the stage-switching of volatility spillover between exchange rate markets and the dynamic volatility clustering paths. Therefore, we construct a nonlinear model of Markov switching bivariate ARCH (MSBIARCH). We enumerate all possible time-varying dynamic causal relationships between the two variables based on the model and exchange rate yield data of the CNY, USD, GBP, JPY, and EUR exchange markets. Four regional states are also defined according to the four time-varying dynamic causalities to screen the exchange markets' volatility spillover and volatility clustering in real-time.
The results show that exchange markets transmit fluctuations via “economic fundamentals”, “market sentiment”, and “market expectations”. In general, the volatility spillover between CNY and USD exchange markets moves in both directions, while the volatility spillover between CNY and GBP, JPY, and EUR exchange markets moves in one direction. However, over time, the exchange markets' regimes change, thus changing the characteristics of the volatility spillover and clustering situation. Furthermore, the volatility spillover among exchange markets usually occurs in periods with extreme economic events, irregular events, and policy promulgation events, matching when volatility clustering begins to occur. Finally, the volatility spillover of international exchange markets leads to the volatility clustering of CNY exchange market, while the volatility spillover of the CNY exchange market strengthens the volatility clustering of the international exchange markets. Thus, the international degree of RMB has room for improvement, which means that fluctuations in the international exchange market are more likely to affect the CNY market. China should improve the exchange market's efficiency while being vigilant against contagion from the international exchange markets, especially during extreme economic events, irregular events, and policy promulgation events.
The paper contributes to the literature in four ways. First, we identify the international degree of RMB in the SDR currency basket based on the volatility spillover relationships and volatility clustering trends of different exchange markets. Second, we examine the volatility spillover relationship between different exchange markets over time using data on extreme economic events, irregular events, and policy promulgation events. The volatility clustering trends over time and political periods are also considered. Third, we theoretically analyze the characteristics of volatility clustering under the volatility spillover effect from the perspectives of economic fundamentals and market psychology and discuss the correlation between volatility spillover and volatility clustering. Fourth, for the first time a nonlinear MSBIARCH model based on the latest MSC model is constructed and designed, which provides a reference for model selection in a time-varying estimation framework and new applications for high-frequency time series data.

Since 2008, China's national savings rate has shown a fluctuating and declining trend, which should be taken seriously. High savings rates have some negative effects, but lower savings rates are not always better. During the past 40 years of the reform and opening up, a high savings rate has been the cornerstone of China's economic development. Without a certain savings rate, it is difficult to support the growth of bank credit and investment. In addition, a high savings rate serves as a margin of safety should China's overall debt ratio increase. If the savings rate continues to decline, it will inevitably cause a debt repayment burden and increase the vulnerability of the financial system. Although China's savings rate remains high, it is important for the smooth transformation of China's economy to understand the reasons for the decline in the savings rate, especially whether the decline is sustainable, and to propose forward-looking policies.
Many studies offer explanations for the increase in China's savings rate before 2008, among which the theory of distributive pattern, the theory of population structure, the theory of an imperfect economic system, the theory of cultural habits, and the theory of income inequality have great influence, but these theories do not explain the decline in China's savings rate after 2008. This paper tries to explain the declining trend of China's national savings rate since 2008 from the perspective of rising labor income. Data from flow of funds statements show that the rise in labor income has significantly affected China's national savings rate since 2008. As a result, we propose the labor income hypothesis to explain the evolution of the national savings rate. We hypothesize that the continued decline in the national savings rate since 2008 is driven by residents' increasing labor income. Specifically, due to the reduction in the surplus labor force and policy factors that are beneficial to workers, the certainty and predictability of rising labor income in China are increasingly strong, which enhances consumption and leads to a decline in the household savings rate. Increasing labor income means greater labor costs for enterprises, which leads to a decrease in their disposable income and a decrease in the corporate savings rate. An increase in labor expenses for enterprises leads to an increase in social welfare and public service expenditures by the government, which forces a decline in disposable income and government savings, thus leading to a decline in the government savings rate. Therefore, the decline in China's national savings rate is caused by the combined declines of the savings rates of residents, enterprises and the government caused by rising labor income, rather than by the sum of the savings rates of certain sectors.
To test this hypothesis, we conduct an empirical analysis with the minimum wage standard as the instrumental variable and using provincial panel data from 2008 to 2016. The results show that many variables mentioned in the literature fail to explain the changes in the savings rate since 2008. Some explanatory variables show a significant positive correlation with the savings rate, which is consistent with the expectations of the previously mentioned theories, but this positive correlation is not enough to increase the savings rate. For example, the coefficient of the government investment rate is significant and positive, indicating that the distribution pattern theory has some explanatory power for changes in the savings rate, but it is not sufficient to cause an increase in the government and national savings rates. In contrast, the continued rise in per capita labor income has a significant negative effect on the savings rate. In other words, increasing labor income offsets the positive effects of other factors on the savings rate and dominates the downward trend of the national savings rate, indicating that the labor income hypothesis has quite strong explanatory power for the savings rate.
Based on our theoretical hypothesis and empirical evidence, there is room for further decline in China's national savings rate. This has significant implications for the choice of macroeconomic policy. China is still a developing country, so to achieve our many economic and social goals, we need a high rate of economic growth, which objectively requires that a certain rate of investment be maintained. If the national savings rate continues to fall without a corresponding decline in the investment rate, there will be a negative gap between the savings and investment rates. According to the balance of payments, this will lead to a persistent trade deficit, which could lead to serious financial risks. To offset the pressure of economic growth brought by a decline in the savings rate, China's economic growth pattern should be transformed from investment-driven to consumption-driven, and the focus of policies to stabilize growth should be transformed from investment amount to investment efficiency.

The key for monetary policy to sustain real economic recovery is to improve the mechanism of monetary transmission to enhance liquidity in key areas and for weak links. Thus, allocative efficiency is more important than total supply. Typical symptoms of an inefficient transmission mechanism are the overallocation of resources to a virtual economy that squeezes out investment in the real economy or the coexistence of excess liquidity in the virtual economy and a liquidity shortage in the real economy. In addition, a liquidity imbalance in the real economy results in inefficiency. During the current transition from rapid growth to high-quality development, monetary policy is more targeted, so the heterogeneity of the micro transmission mechanisms of monetary policy are of concern to researchers.
This paper contributes to the literature by developing a quantile regression model with interactive effects based on data from Chinese A-share companies, and by conducting quantitative analysis on the effect of monetary policy and the virtual economy on firm financing, including internal and external financing. Empirical evidence suggests that during the 2009-2015 sample period, the economy faced a dilemma of “the richer the firm, the easier it is to get financed. The easier it is to get financed, the richer the firm,” also referred to as the “Matthew effect.” The Matthew effect was prominent in the effects of traditional monetary policy as the support given by releasing liquidity to poor firms did not reach half that of rich firms. At the same time, the virtual economy diverted liquidity in a way that strengthened the Matthew effect. The poorer the firm, the more likely it was to be negatively affected, with poor firms experiencing 3 times the diversion compared with rich firms.
During the sample period, the loose monetary policy when the interest rate and reserve ratio were lowered resulted in advantaged firms being more active, whereas disadvantaged firms were irrelevant with regulating intension. Specifically, the interest rate cut for external financing by head enterprises was 2.10 times that for tail enterprises, and the reserve ratio cut on external financing for head enterprises was 2.83 times that for tail enterprises. The traditional untargeted open market operation vehicles benefited head enterprises 6.87 times more than they benefited tail enterprises in terms of external financing.
In our study, the diversion to the virtual economy from the real economy was reflected in internal financing. The overheated stock market not only squeezed out business operations but also widened the gap between advantaged and disadvantaged firms. Similarly, firms in worse operating condition were more likely to be squeezed out by the housing boom. The diversion of the stock market on the liquidity of tail enterprises was 2.69 times that of head enterprises, and the diversion of the real estate market on tail enterprises was 2.30 times that of head enterprises.
According to the literature on the credit channel, rising housing prices are beneficial for external financing because mortgage values also increase. Our regression results are consistent with this view. However, the Matthew effect and increases in external financing have long been neglected. Our empirical findings suggest that during the 2009-2015 sample period, rising housing prices benefited the external financing of head enterprises 5.01 times more than that of tail enterprises. Therefore, efforts to stimulate the real estate market to fuel economic growth may be effective in the short run, but in the long run, stimulating the real estate market works against sustainable development.
Our empirical findings have the following profound implications for economic policy: (1) Rather than adopting strong stimulus policies that have an economy-wide effect, we should continue to move forward with structural reform and inject liquidity into key areas via the flexible manipulation of innovative and targeted instruments to create a proper monetary and financial environment for high-quality development. (2) The study of digital currency is of significant importance to gain more precise control over the currency flow between sectors. Therefore, big data technology is useful for customizing and adjusting dynamic strategies to strengthen areas of weakness. (3) As serving the real economy is the duty and purpose of the financial sector, China should guard against financial bubbles, be cautious of real economy hollowing arising from an overheated virtual economy, and guide liquidity back to the real economy. Benign interaction between the virtual and real economies is the long-term solution for high-quality development.

The 2007 subprime crisis provides ample evidence of the inevitable consequences of systemic risk. The evidence has motivated researchers, academics, and regulators to recognize, measure, and prevent systemic risk. China's banking system occupies a very important place in its financial system. The banking system has a closer internal relationship and dependence structure than other financial sectors because of inter-bank borrowing, payment, and settlement. Therefore, studies that measure systemic risk in China's banking system, identify important and vulnerable systemic institutions, and prevent systemic financial risk are of great academic value and practical significance.
An accurate model of institutional dependence structures is required for measuring systemic risk. The model captures the spillover effect between institutions. Studies have shown that the financial system's dependence structure is asymmetric and nonlinear, and that interaction increases during financial crises. Many studies have proposed indicators to measure systemic risk, but they have some shortcomings. First, classic indicators such as MES and CoVaR focus primarily on the relations between pairs of institutions or an individual firm and the market index. Consequently, they miss the dependency of the whole system. Second, network models based on tail risk can measure how institutions interact with each other in the system, but this kind of model is based on binary relations. Third, few studies focus on the balance of systemic importance and systemic vulnerability.
We apply the time-varying factor copula model, which analyzes the banking system's idiosyncrasy and interconnectedness to 14 listed Chinese banks' return data from 2007 to 2019. This approach is suitable for high dimensions, and it can capture fat-tailed, time-varying, asymmetric, and nonlinear characteristics. It analyzes the dynamic dependence between the individual bank and the system according to dynamic factor loadings. The unified framework established by the joint distribution of the banking system, we propose indicators of systemic risk in China's banking system. First, the joint probability of distress (JPD) can be used as a measure for the probability that a majority of the financial institutions are in default. In addition, the Systemic Vulnerability Degree (SVD) and Systemic Importance Degree (SID) can identify systemically important institutions and systemically vulnerable institutions. The two categories account for the overall and local dependencies of the banking system. These indicators account for the individual bank's idiosyncrasy, local and overall dependence, and fat-tailed and asymmetric chrematistics of return data, capturing a range of information.
This study's research results in two findings. First, the relationship between banks and the banking system increases as risk increases. The joint probability of distress accurately identifies the 2008 subprime crisis, the 2013 “money shortage,” and the 2015 stock market crash. The JPD shows that macro-prudential assessment lowers systemic risk and the 2018-2019 trade friction between China and US increases the risk.
Second, big-five banks are most systemic stable and city commercial banks are most vulnerable in the sample period.The systemic importance indicator (SID) shows that big-five banks are most affected by spillover during the sample period, which implies that big-five banks are not only “too big to fail” but also “too connected to fail.”

The effect of air pollution on people's lives is becoming more and more serious. Haze pollution caused by PM2.5 damages the human respiratory and cardiovascular systems and increases the risk of disease. Therefore, it is important to improve governance efficiency to increase local air pollution control. In China, the “Province Managing County” and “Strong County Expansion” are important government reforms. Exploring whether they can improve the governance structure and promote air pollution control is important both theoretically and practically.
The Province Managing County and Strong County Expansion reforms were designed to optimize the structure of the government by simplifying its levels. Theoretically, as an important public service, air pollution control is also affected by these reforms. On the one hand, the improvement in regional financial capacity brought by the reforms can help local governments improve air pollution control. On the other hand, the intensified competition caused by the reforms could lead local governments to pay more attention to higher-level assessments and reduce their investment in air pollution control. That is, the improvement in financial resources might promote regional air pollution control, while the resulting intensified competition might negatively affect regional air pollution control.
To verify whether air pollution control is consistent with these theories, this paper examines the changes in the regional air pollution situation before and after the reforms using satellite inversion data to analyze the relationship between governance reform and local air pollution control. The results show that the Strong County Expansion significantly worsened local PM2.5 concentrations, whereas the Province Managing County reform significantly suppressed them. The exploration of the mechanisms of influence shows that the reform of Province Managing County is mainly reflected in the changes in air pollution control caused by the improvement of financial capacity, while the Strong County Expansion reform is mainly reflected in changes in air pollution control caused by changes in local government competition. Further analysis shows that the more local governments attach importance to environmental pollution control, the more the reforms are conducive to the improvement of regional air quality.
The main contributions of this paper are as follows: First, this paper uses satellite data instead of ground observation data. Satellite data provide a large sample size and a long coverage period, which solves the problem of the lack of PM2.5 data for most areas in China before 2012. Second, compared with the data used in the literature, this paper effectively avoids the problems of tampering and fabricating common with ground monitoring data. Third, based on the literature, research on environmental protection governance under these reforms is still limited. To enrich research related to the reforms, this paper uses relatively comprehensive data to analyze and discuss this topic, and conducts a preliminary analysis of regional pollution control problems after decentralization.
The research conclusions show that for environmental pollution prevention, decentralization is not a once-and-for-all strategy. The improvement of regional financial capacity is more important. Matching power and financial resources is a necessary condition for perfecting the public service supply. Whether the reforms can promote the treatment of regional air pollution also depends on the importance of a region to air pollution. From the perspective of government governance, county-level governments may not have the incentives or ability to adequately address air pollution control, as it is a public service with spatial spillover. The intervention and coordination of the superior government can solve this problem. However, after decentralization, local governments' blind expansion of productive expenditures to compete for economic growth has seriously hindered environmental pollution control. Reducing pure economic growth in assessments and including environmental protection indicators, such as the implementation of green GDP, might alleviate this problem.

Economic globalization and financial integration have increased, strengthening the network effect of global financial markets and the resonance of market risks. Researchers should no longer ignore risk contagion because it is an important component for understanding the financial markets. The stability of the stock market no longer depends on its individual volatility, as it is now vulnerable to spillover from other markets. Risk contagion in global stock markets is difficult to research because the close relationships between multiple market entities in the international stock market system complicate the data structure of risk contagion's (high-dimensional matrix-value time series). In addition, the risk management of the international stock market system will become more difficult as emerging stock markets gain international recognition. The financial regulators will face two problematic choices, “too big to fail” and “too interconnected to fail.” Therefore, researchers have begun to prioritize accurate measurement, efficient supervision, and real-time early warning signs of risk contagion in global stock markets. Researchers have also begun to study the potential core structure of risk contagion.
This study selects 21 stock markets from four geographical regions, Asia, Oceania, Europe, and the Americas, as its sample data. Firstly, we construct a high-dimensional matrix-value time series based on the generalized vector autoregressive model to investigate the dynamic network effect of risk contagion. The time series represents the size and direction of risk contagion among global stock markets. Secondly, considering the widespread existence of financial data outliers, we use the high-dimensional matrix-valued factor model's robust dimensionality reduction function to extract potential risk communities and identify the dynamic core structure of risk contagion between global stock markets. This provides efficient supervision. Thirdly, we use the vector autoregressive model's prediction function to identify the real-time early warning signs of risk contagion's core structure between global stock markets in the next six months.
The empirical results show a time-varying pattern of risk contagion among global stock markets. Although the patterns are time-dependent, three risk communities can always be identified as early warning signs. The contagion relationship between and within the three risk communities describes the dynamic core structure of risk contagion in global stock markets. The three risk communities have strong geographical attributes. This study's empirical conclusion will improve the concept of real-time hierarchical risk management, as the findings demonstrate that the risk management of the international stock market system must be divided into two steps: firstly, dynamic monitoring risk contagion among a small number of communities to identify the main path of risk contagion among global stock markets; secondly, use the regional characteristics of each risk community to implement real-time risk management. In addition, this study provides policy recommendations regarding the role of risk-contagion in emerging stock markets and the idea of “inter-regional and within-regional” risk governance.
The study makes the following contributions. Firstly, the high-dimensional matrix-valued factor model is introduced to the study of risk contagion in global stock markets. The study improves the model's robust estimation to effectively reveal risk contagion's dynamic core structure, expand the model's scope, and provide new opportunities for a follow-up study on financial risk contagion. Secondly, the paper utilizes the model proposed by Diebold and Yilmaz (2012) to analyze the time-varying volatility spillover effect of 21 developed and emerging stock markets from four geographical regions. The model and sample data provides a more comprehensive and clear understanding of geographical relationships and financial risk. Lastly, based on the identified dynamic core contagion relationship between a small number of risk communities and their market composition, the real-time hierarchical risk management concept proposed in this study can provide a useful reference and method of supervision for the real-time early warning signs of risk contagion in international stock markets.

At the beginning of 2018, six ministries and commissions, including the National Development and Reform Commission, required the disposal of zombie firms to resolve excess capacity. Further research on the internal formation mechanism of zombie firms and its removal is important for promoting the development of the real economy. What is the root cause of Chinese zombie firms？ Studies have found that zombie firms are created when banks cover up non-performing loans or government management. However, Chinese banks do not issue zombie credit to intentionally cover up non-performing loans. What is the mechanism that motivates commercial banks to issue zombie credit, external pressure or internal economic motives？ This paper analyzes the mechanism behind zombie firms, focusing on the effect of local fiscal deposits on bank credit distribution.
This paper constructs a theoretical model to analyze the mechanism behind the formation of Chinese zombie firms. The model shows that local fiscal deposits contribute to firms zombification by affecting bank credit allocation, resulting in over-investment by firms and less efficient business operations. This study uses the China Banking Regulatory Commission's website to acquire commercial bank branches' financial license data. The commercial bank's name, approved date of establishment, and other information are used to create provincial-level banking competition indicators. The theoretical hypothesis is tested empirically with data on fiscal deposits and China's industrial firms from 2005 to 2013.
The study found that greater proportions of fiscal deposits in local deposits increase the probability of firms zombification. The study also found that bank competition promotes firms zombification. The government's ability to negotiate with banks increases as the competition between regional banks increases. The banks affect the allocation of credit resources and accelerate firms zombification by competing over fiscal depositions. The study's mechanism test shows that fiscal deposits' credit distribution effect promotes over-investment in some firms. The over-investment results in worse operating performance, increasing the probability of firms zombification. The banks' competition intensifies the effect. Local governments are more inclined to influence bank credit decisions through fiscal deposits in areas with a low degree of marketization. The degree of competition among banks has a weak relationship with the zombification of large firms and state-owned firms. The degree of competition has a strong relationship with the zombification of small or non-state-owned firms that are often subject to credit discrimination. The banks begin to win over small or non-state-owned firms as the banks' competition intensifies, increasing the probability of the firms' zombification.
This paper provides two policy implications based on its empirical findings. First, the removal and prevention of zombie firms will require fewer government subsidies for inefficient firms, regulations for local fiscal deposit management, improvements to the fiscal deposit bidding system, and more efficient allocation of fiscal deposits. Second, the supervisory authority must take appropriate measures to guide banks toward reasonable competition, encourage local banks to expand financing channels, and jointly improve economic efficiency and high-quality economic development.
The paper offers the following contributions. First, this paper advances the literature on fiscal deposits by analyzing their role in firms zombification; second, this paper shows that bank competition intensifies zombification; finally, the findings are significant for the governance of zombie firms. The management of fiscal deposit accounts should be standardized when cleaning up zombie firms.

Interest rate liberalization has always been the focus of finance research in China. The development of commercial banks' wealth management products (WMP) is closely related to the process of interest rate liberalization. As substitutes for deposits, WMPs provide investors with yields that studies have called quasi-market-oriented deposit rates. However, most studies have only conducted cross-section analyses on the pricing mechanisms and the WMP’s characteristics. Few studies have considered the evolution mechanism behind the WMP’s yield over time (e.g., the effect of competition and game behavior on a bank's yield rate).This paper focuses on the evolution mechanism.
Generally, commercial banks first determine the upper and lower limits of the WMP’s yield based on the market environment and macro and micro factors. Then, combined this information with the yield rates of other competitors in the market, they compete or “play” with each other over yield rates to achieve profit maximization. The above competition mechanism is repeated by different banks and ultimately results in the WMP’s market-oriented yield rate. The formation mechanism behind market-oriented WMP yield rates and that of market-oriented future deposit rates share many similarities. Therefore, our research will advance the literature on the formation mechanism behind market-oriented future deposit rates and provide ways to improve the supervision and guidance of commercial banks.
This paper will focus on the effect of banks' competition and game behavior on WMP yields, as WMP yield is critical to the formation of the market-oriented yield rates. We establish the modified Hotelling model and divide banks into “winners” (the high-ranking banks on WMP yields) and “losers” (the low-ranking banks on WMP yields) based on the tournament theory dichotomy. Then, we analyze the behaviors of the winners and losers over the next period and explore the variation regularity of the competition mechanism's strength. On this basis, we use the WMP yield data from the Institute of Trust and Financial Management of SWUFE during 2005 to 2019 to examine the theoretical model and hypotheses. The empirical results show that WMP yield rate losers increase their yield rates more than winners in the next period. Thus, we can see the competition mechanism of the losers chasing the winners. We also find that the series of policies and regulations introduced by the CBRC reduced the banks' competitive behavior on WMP yield rates.
This paper provides the following contributions. First, it is the first study to use the modified Hotelling model to analyze the effect of banks' competition and game behavior on WMP yields. Second, this paper empirically studies the competition and game behaviors and the variation regularity to reveal the formation mechanism behind WMP’s market-oriented yield rates. Third, this paper empirically tests the implementation effect of relevant policies and regulations. The test's findings will help regulators evaluate policies and regulations, improve the method of financial supervision, and ensure the healthy development of the WMP market.
The regulators decided to liberalize the deposit interest rate's upper limitation in 2015, completing the liberalization of the deposit interest rate. However, deposit interest rates are still low because of benchmark interest rates for deposits and loans. The process of financial disintermediation can effectively propel the liberalization of deposit rates, as shown by the experiences of developed countries. Non-deposit financial products, such as WMPs, play an important role in the liberalization of interest rates. However, a surplus of financial products and services in the financial market that can replace deposits could weaken the function of the money supply and settlement medium for deposits.

Innovation allows firms to increase their value and cultivate new competitive advantages. In the Chinese financial system, banks are important institutions that provide firms with high-quality credit and services. They are responsible for supporting and sustaining a firm's transformation. However, due to financial repression, Chinese firms have begun rolling over loans to support long-term innovation. Studies have suggested that the use of short-term loans to support long-term investment has become a sub-optimal choice. However, in recent years, many Chinese firms have faced liquidity risks because banks have begun to refuse to rollover loans or to demand early repayment. Few studies have explored whether loan withdrawal or loan suspension affects a firm's innovation. Therefore, this paper explores the impact of loan rollover restrictions on the firm's innovation.
Loan rollover restrictions generally reduce the firm's access to short-term bank loans. At the same time, loan rollover restrictions increase banks' caution and sensitivity to risks, and the banks issue less long-term loans to avert risk. Therefore, loan rollover restrictions may inhibit the firm's innovation. This increase in caution causes banks to strengthen the firm's debt restraints, improving corporate governance. Thus, loan rollover restrictions resolve the agency problem in the firm's innovation process and improve the efficiency of capital allocation, which is conducive to innovation.
China passed the Guideline for Loan Risk Classification law in 2007, prohibiting the practice of “borrowing for repaying.” The law stipulates that when a firm borrows a new loan to repay the due loan, the new loan is classified as a bank's non-performing loan. The exogenous event provided this study with a good quasi-natural environment to research the impact of loan rollover restrictions on a firm's innovation. This study uses the difference-in-differences method to conduct its research. The regression results showed that loan rollover restrictions significantly inhibit a firm's innovation. The conclusion was still valid after a series of robustness tests. Further research found that the policy's effects vary greatly depending on the type of patent. Firms' invention patents were declined more often than non-invention patents.
This paper's main contributions are as follows: First, it advances the research on the economic consequences of loan rollover policy reform. Studies have not conducted detailed research on the policy reform's impact on the firm's innovation. This paper examines the impact of loan rollover restrictions on the innovation process, revealing the microeconomic consequences of loan rollover policy reform. Second, this paper advances the literature on corporate innovation. In recent years, studies have suggested that increased tolerance for corporate failures allows firms to be more innovative. This study adopts the bank's perspective to show that corporate innovation can only be improved by increasing the tolerance for corporate failures and non-performing loans and relaxing the loan rollover restrictions for high-performing companies. This finding is an extension of the initial hypothesis. Third, the study has important significance for financial system reform that could improve firms overall. This paper shows that loan rollover restrictions weaken the bank credit's positive effect on the firm's innovation. Therefore, the relevant departments need to broaden corporate financing channels and relax loan rollover restrictions for high-performing enterprises to avert the restriction's negative consequences and support the firm's innovation process.

Social connections have historically played an important role in China. Many studies have examined the impact of executives' social networks or the connections between board members and CEOs on the firm's decisions. However, few studies have focused on the social connections within the executive team or demonstrated how the internal network structure impacts economic outcome.
Top management team is responsible for the firm's operation and management. Therefore, studying the internal network connection of the team is crucial for understanding a company's decisions and behaviors. Social network theories have suggested that is teams whose members share a social background, such as alumni, form mutual trust and cooperation much easier, which benefits the overall exchange of information and resources. Studies on information asymmetry have pointed out that a lack of communication between team members negatively affects the quality of corporate decisions. The question remains whether the executives' internal social network affects the quality of a company's major decisions.
Following studies on social network and information asymmetry, we empirically examine the effect of social connections within executive teams on the performance of their firm's M&A. We chose M&A for two reasons. (1) Corporate M&A has a significant impact on the firm's value, and it requires a high level of communication among management teams. (2) M&A has suitable exogeneity for our research design.
We use the common work experience between executive team members as a proxy for internal social connections. We define network density as the number of real connections divided by the number of maximum possible connections between team members. Our results show that the executive team members with a higher network density communicate more effectively, thus leading to a higher M&A performance. Our main conclusions are robust after controlling for the endogenous issue, such as the potential omitted variables and selection bias issues. Further analysis suggest that the positive impact of executive network density on the M&A performance is more pronounced if the M&A involves greater risk, the firm's institutional environment is less developed, and the executive's tenure is shorter. Finally, we also find that firms with a higher executive network density have a better accounting and market performance after the M&A than other firms.
The contributions of this study are as follows. First, our study advances the literature by examining the impact of social connections within executive teams on corporate decisions. We incorporate the network structure theory and its application from sociological research into the literature of M&A decision-making. We explorethe mechanism by which executives influence firms' operation from the perspective of the internal social connections. Second, our finding supports studies that analyze the impact of top management team characteristics on the quality of the M&A. We propose that the exchange of information between top management members can affect the outcome of an M&A. Finally, our study has practical implications for companies hiring a new executive, as the new executive will impact the social network.
Due to time constraints, our study only focuses on the impact of the work-place social network on the firm's M&A. Future studies could explore different social networks among top management teams (e.g., alumni connections) and their impact on the firm's major decisions.

China is promoting capital market reform to achieve its goal of “standardization, transparency, opening up, vitality and resilience.” Capital market reform entails improving listed companies' governance status and information disclosure quality. Minor shareholders are important participants in China's capital market, but they rarely play an impactful role in corporate governance. They cannot “vote with their hands” or form effective constraints on management and major shareholders through shareholder meetings. Furthermore, they cannot effectively threaten a company by “voting with their feet” because they have little influence on market price.
The emergence of social media has decentralized the communication network and reduced the cost of communication for individuals. Stock forums are a social media platform that allows individuals to share their investment experiences and opinions on company operations. Stock forums have become an important platform for minor investors, enabling them to directly communicate with one another. This raises the question, does social media influence capital markets and improve corporate governance by allowing minor shareholders to comment on the actions of corporate managers？
Unlike traditional news media, stock forums are interactive multi-party platforms. They provide shareholders with direct access to a wide-ranging audience and act as timely, affordable, and accurate sources of information. Minor shareholders can directly express their opinions online, which are then read and spread by other minor shareholders of the respective company. Thus, the minor shareholder's voice is amplified, and the real-time mode of communication could cause public concern. Studies have found that stock forums can influence a firm's value and regulatory risk by triggering capital market feedback and regulatory attention. Considering that social media has empowered minor shareholders to impact corporate governance, the question this paper seeks to answer is whether corporate managers proactively respond to minor shareholders' online presence. In other words, does social media, such as stock forums, allow minor shareholders to express their opinions in ways that affect a company？
This paper collects data from stock forums on China's listed companies from 2012 to 2015 to test the governance effect of social media. The results show that a higher number of posts, readings, and comments on a stock forum positively affects the probability of management voluntary performance forecast, especially for the probability of disclosing bad news. Further, the research shows that “voting with your mouth,” or discussions on stock forums, could affect the stock price, attract regulatory attention, and influence media reports.
This paper contributes to the literature in several ways. First, few studies have considered how the media, especially social media, impact management's disclosure behavior as an external governance mechanism. This paper studies whether social media affects management's disclosure behavior and supplements the literature on management voluntary disclosure. Secondly, studies have considered traditional media's external governance role; however, they have focused on social media's impact on capital markets as a mechanism for information dissemination. Few studies have focused on the corporate governance role of stock forums. This paper enriches the research on social media's external governance role while focusing on management disclosure. Third, minor shareholders have difficulty in protecting their interests, whether by “voting with their hands” or “voting with their feet”, because large shareholders have a greater stake in the company. This paper proposes that social media can provide minor shareholders with a new governance approach, “voting with their mouth.” This is a new approach for minor shareholders to participate in corporate governance.
The Internet has greatly changed how information is disseminated in society. Researchers should examine how the change in dissemination affects the capital market's participants. This paper shows that stock forums provide minor investors with a platform to “vote with their mouth.” They allow minor investors to comment on and influence management's behavior, which helps protect their interests. This study has certain significance for better Internet regulation and capital market developments by demonstrating the comprehensive function of social media.