The business cycle can influence corporate leverage through various channels. It not only affects firms' financial needs, but also alters their financing environments and the speed of their adjustment to target capital structures. However, most of the empirical literature addressing the relationship between the business cycle and corporate leverage overlooks the potential indirect effects, and tends to draw conclusions about leverage dynamics merely from the coefficients of recession dummies or macroeconomic variables in empirical models. This practice is criticized by Halling et al. (2016), who regard it as a ceteris paribus approach that captures only the marginal effect of the business cycle on corporate leverage.
Based on a dynamic partial adjustment model of capital structure, this paper moves away from the ceteris paribus approach and presents a comprehensive empirical analysis of actual corporate leverage dynamics over the business cycle. Following Halling et al. (2016), we identify the direct effect of the business cycle by observing the estimated coefficient of the recession dummy and capture its indirect effects through variation in explanatory variables and model parameters such as the following: (1) changing firm characteristics; (2) changing relationships between firm characteristics and leverage; and (3) changes in the speed of adjustment to the firm's target capital structure.
We then quantify the impact of the business cycle on corporate leverage using the 1996-2013 annual data from the Chinese Industrial Enterprises Database. Our results indicate that the direct effect of the business cycle on corporate leverage is pro-cyclical, as previous studies suggest, while the indirect effects consistently and robustly contribute to the counter-cyclical behavior of corporate leverage across all empirical specifications. Due to these counter-movements, the overall effect of the business cycle on leverage dynamics is statistically significant but economically trivial. In other words, the actual firm leverage exhibits a weak pro-cyclical characteristic.
We also categorize the firms according to their ownership and examine whether the impact of the business cycle differs between kinds of ownership. The leverage ratio of state-owned enterprises (SOEs) experiences even less cyclicality than that of private enterprises. This partially explains the time-varying divergence in leverage ratios observed in China between SOEs and private enterprises. The leverage ratio of private enterprises fluctuates as the economic environment changes, while the less financially constrained SOEs can maintain a more stable leverage ratio. The differences in their sensitivity to the business cycle cause variation along the time dimension.
Our paper contributes to and broadens the literature on business cycles and leverage dynamics. By decomposing leverage dynamics into different sources, we document that both the direct and indirect effects of the business cycle play important roles in causing leverage variations. We therefore quantify the overall influence of the business cycle on corporate leverage and provide new evidence for the cyclicality debate in leverage dynamics. Unlike many previous studies, which rely on data from listed companies, the dataset we use eliminates the bias caused by public offering. Our paper offers a more thorough investigation of the relationship between the business cycle and corporate leverage, and it improves our understanding of the mechanisms of leverage dynamics.
Most importantly, our study's empirical findings provide preliminary micro-foundations for reflecting on the division and coordination of the two-pillar framework. Countercyclical monetary policy works against the ongoing boom or recession trend and aims at eliminating the fluctuations associated with the business cycle. Therefore, the weak pro-cyclical characteristic of firm leverage suggests that countercyclical monetary policy will not automatically stabilize corporate leverage. Other policy tools, such as macro-prudential policies, are indispensable to keep leverage levels stable and prevent systemic risk. China needs to improve the two-pillar regulatory framework further to strike a balance between stabilizing growth and preventing risks.

Most economies that have undergone industrialization have found that the age structure of the population and the industrial structure have also changed. This change in age structure is known as the aging problem, and it is the demographic result of a lower fertility rate and longer life expectancy. The change in the industrial structure is known as “Kuznets facts,” a set of trends that includes a rising share of services, a falling share of agriculture, and an inverted-U shaped share of manufacturing. The development of China's economy during the reform era has exhibited these trends, but with some critical problems. First, China's population is rapidly aging, but China is still a middle-income country. Thus, the onset of the aging problem before China becomes a high-income country may hinder further development. Second, although the share of services has grown steadily in China, it is still relatively low, and its structure should be improved. In fact, the processes of population aging and structural change are not taking place independently. Based on cross-country data from recent decades, this paper finds that the relationship between population aging and the share of services depends on economic development. As per-capita income rises, the relationship changes from negative to positive.
This paper incorporates the age structure into a two-sector model with an income effect and a price effect, and studies the effect of aging on the rise of services. In the model, people of different ages have various preferences for goods and services. In particular, elasticities of income for goods or services and the elasticity of substitution between them can change with age. The paper shows that aging can change the share of services through the mechanisms of the income effect and the price effect. For the income effect mechanism, the direction of the effect of aging depends on the survival level of consumption for goods, and the magnitude depends on per-capita consumption. For the price effect mechanism, the direction of the effect of aging depends on the magnitude of the effect of relative price on the consumption composition for people of different ages. When per-capita income is low, the income effect dominates, so the effect of aging on the share of services is negative. However, as per-capita income grows, the income effect diminishes, while the price effect becomes the dominant mechanism, causing the effect of aging on services to change from negative to positive.
We calibrate the model with cross-country data from 1995-2010, and quantitatively evaluate the effect of aging on the share of services in different circumstances. We find that the effect of aging also depends on the degree of aging and the relative productivity between sectors. Moreover, when the elasticity of substitution between goods and services is low for young people and high for old people, or older people's survival level of consumption for goods is low, a rising degree of aging is likely to increase the share of services. The results are robust if we change the consumption rate of sectoral output or the labor mobility cost.
We derive two policy implications from the findings. First, our findings are helpful for evaluating the effect of aging on the share of services in different countries. The results not only explain the stylized fact that the effect of aging on services changes from negative to positive along with development, but also highlight the factors that influence the effect of aging in different countries. In developing countries like China, per-capita consumption is low, so aging before becoming a high-income country could hinder the rise of services. In developed countries, the effect of aging may differ, depending on its degree. Thus, to evaluate the effect of aging on industrial structure in different countries, it is necessary to pay attention to factors like the differences in the preferences of people of different ages, the level of per-capita consumption, and the degree of aging.
Second, we suggest that China's government should deal with the aging problem and develop services in the following ways. First, ensuring that per-capita income grows steadily and increasing the share of private consumption could diminish the negative effect of aging on services. Second, lowering the relative price of services by increasing the relative productivity of the service sector could also diminish the negative effect of aging on services. Third, decreasing the wage gap between sectors and removing institutional barriers in labor mobility could promote the development of services. Fourth, developing producer services to increase the value-added share of services in investment goods could attract more labor to produce investment goods in the service sector.

Tax reduction and fee reduction are key parts of fiscal policy that play important roles in stimulating economic vitality. The effect of tax reduction on firms' costs is closely related to the cost transmission rate. From the macro perspective, the producer price will drop if the cost of taxes and fees is partially transmitted. This will further reduce production cost and thus increase firns' profits. However, producer prices are also affected by many other factors, such as strong market demand. When demand is greater than supply, producer prices may rise. This leads to our research question: what is the price effect of the tax and fee reduction policy implemented in China (especially in 2019) and how does this policy influence consumers' welfare？ This paper evaluates the effects by constructing an input-output price model with a cost transmission rate. Indirect taxes and fees such as VAT, social security fees, and other production taxes are embedded in the input-output model. The paper focuses on the price and welfare effects of tax and fee reduction. It analyzes the advantages and disadvantages of different tax and fee reduction policies by designing different structural tax reduction scenarios.
Our results show that tax cuts and fee reductions decrease product price and production cost in all industries. The price reduction in the service sector is the highest. The higher the cost transmission rate, the larger the price reduction. When the cost transmission rate is 1/3, the estimated degree of reduction of PPI is the closest to the actual PPI change. Regarding the welfare effect, tax cuts and fee reductions decrease the consumer price and thus improve household welfare. The welfare improvement of a urban household is greater than that of a rural household. The welfare improvement discrepancy between urban households and rural households increases with the increasing cost transmission rate.
This paper's main marginal contributions are as follows. First, by introducing the cost transmission mechanism, this paper constructs an input-output price model with incomplete cost transmission of taxes and fees—Value-added tax, social security fees, and other indirect taxes. The traditional input-output price model assumes that price is completely forward transitive. In fact, most cases are imperfect competition markets. Second, this paper analyzes the impact of China's actual tax and fee reduction policy on PPI and welfare under different cost transitive scenarios. Based on the actual tax reduction rate data of various industries obtained from the tax bureau, the paper estimates tax collection and management ability and then simulates and analyzes the price and welfare effects of the actual tax reduction. Third, this paper constructs three scenarios of structural tax and fee reduction and their impacts on price and welfare. It follows the principles of tax rate simplification and tax rate reform to promote the effective allocation of resources. The paper therefore provides a reference point for further promoting tax system reform and macro policy-making.
We obtain the following policy implications from our research conclusions. First, tax reduction can effectively reduce the producer price index, reduce the cost burden of enterprises, and improve consumer welfare. China still faces many risks and challenges in its post-pandemic economic development. It is crucial to implement a tax and fee reduction policy and reduce the burden on enterprises. The state must put into place preferential policies for preventing and controlling the COVID-19 pandemic, resuming work and production, stabilizing foreign trade, and expanding domestic demand. Second, the design of tax and fee reduction policies should take into account that the industry sector's partial cost transmission rate might weaken the effect of policy implementation. We should estimate the industry sector's cost transmission rate, design the range and size of tax and fee reduction, and truly reduce enterprises' burden. Third, structural tax and fee reduction policies are conducive to better policy effects. Finally, this paper contains some shortcomings which are worthy of further investigation. For instance, the paper gives the same value to the cost transmission rate for all industries, due to the limited availability of data. The cost transmission rate of course differs between industries, so we can further explore how to estimate different industries' cost transmission rates. This will improve our input-output price model with a cost transmission rate. This paper can also be extended to the general equilibrium model with an input-output structure.

The RMB exchange rate has shown continuous appreciation since June 2020 due to China's effective COVID-19 prevention and control measures and stable economic recovery. However, exports have also shown rapid growth. The traditional macroeconomic hypothesis that exchange rate appreciation inhibits exports has therefore been challenged. The weak correlation between exchange rates and exports has attracted widespread attention in recent years (Yang, 2013; Ahmed et al., 2015). The main reason for this phenomenon is that, against the background of global value chains, countries have supply-side relations through the intermediate goods trade. The traditional real effective exchange rate, based on Armington's demand theory, considers only demand-side relations between countries. This exchange rate can no longer accurately reflect the relationship between a country's price competitiveness and its exports: it is misleading in both direction and quantity (Bems and Johnson, 2012).
Bems and Johnson (2012, 2015, 2017) build a new model that measures the real effective exchange rate based on the input-output relationship in the global value chains. Ni (2018) extends this model to bilateral exports. This method provides an accurate measure of the changes in the competitiveness of bilateral export prices. We further apply this indicator to make a theoretical measurement and provide a structural decomposition of the real effective exchange rate elasticity of global value chains of bilateral exports. By introducing a third country's exchange rate effect and supply-side linkages, we can correct the quantitative and directional errors that ensue when the traditional exchange rate is used as a measure of relative price competitiveness to explain the relationship with exports.
This paper provides two main contributions. First, the research shifts from the revision of traditional exchange rate indicators to the exchange rate elasticity of bilateral exports. This is based on the models of Bems and Johnson (2012, 2015, 2017), Patel et al. (2014), and Ni(2018). It fully considers the supply-side linkages and exchange rate effects of a third country under global value chains. From the perspective of model construction, we measure and analyze the real effective exchange rate elasticity of global value chains of bilateral exports. We do this to explain key phenomena described by recent research, such as the irrelevance of exports and exchange rates, the weakening influence of exchange rate on exports, and even cases in which depreciation reduces exports. Second, we decompose the real effective exchange rate elasticity of global value chains of bilateral exports into three components. The three components caused by relative price changes are as follows: changes in the final product structure, changes in the structure of intermediate products, and changes in the structure of intermediate inputs and value-added substitution. This decomposition aids understanding of the structural factors behind the change in elasticity.
We use World Input-Output (WIOD) table data from 2000 to 2014 provided by the WIOD database for calculation. Our conclusions are as follows. First, the absolute value of the real effective exchange rate elasticity of the global value chains of China's exports to major trading partners is between 0.729 and 0.883. The role of exchange rates in weakening exports is less serious than that of traditional exchange rates, and there is no evidence that depreciation reduces exports. The traditional exchange rate does have large errors in both direction and quantity when describing changes in bilateral relative price competitiveness and export relations. Second, the further decomposition of the real effective exchange rate elasticity of global value chains of bilateral exports shows that the contribution of intermediate product structure changes caused by relative price changes to the total elasticity of China's exports to major trading partners has continuously increased. This has occurred alongside China's increasing participation and status in global value chains. We also find in the decomposition that the structural contributions of some countries and regions, such as Japan and the U.S., display similar values and changes.
It is therefore necessary to measure the real effective exchange rate elasticity of global value chains of bilateral exports to accurately assess the export trade situation, enhance the efficiency of export trade policy formulation, and correct errors in the traditional exchange rate elasticity measurement. We should pay attention to the changes in the structure of intermediate products for China's exports. In the short term, trade can be transferred by looking for alternative trading partners to calm export fluctuation when a shock occurs. In the long term, the issue still needs to be solved through structural adjustment and policy communication.

Since the reform and opening up, China's economy has made remarkable achievements, but it also faces problems such as gradually widening unbalanced development gap and insufficient coordination of regions. It has been widely recognized that the gap is affected by the allocation of financial resources and the regional coordinated development cannot do without the support of financial resources, which come from domestic commercial and fiscal financing, foreign investment and other funds in China. According to the neoclassical theory, the profit-seeking nature of capital will drive funds to flow to regions with high return on capital. However, the international capital flow does not always follow this model, so the famous “Lucas paradox” appears. Then what factors drive the inter-regional capital flow in China？ The theory of efficient allocation of resources indicates that under the same risk level, the profit-seeking and risk-avoiding characteristics of capital will prompt capital to flow to enterprises, industries and sections with high capital efficiency, while under the same capital efficiency level, it will drive capital to flow to those with low risks. This paper studies the driving factors of regional capital agglomeration considering both capital return and property rights protection, and accurately measures the degree of regional capital agglomeration according to the sources of capitals in China, which is practically important to realize the efficient market-oriented allocation of production factors, build a high-quality land spatial layout and promote regional coordinated development.
This paper constructs the capital agglomeration index based on the sources of capital, including bank loan, securities market financing, central project investment, transfer payment and foreign investment. By analyzing and counting the capital situation among provinces in China from 1985 to 2017, it is found that the inter-regional capital flows have changed greatly with the capital difference between the eastern and western regions gradually narrowed. As far as the source structure of funds is concerned, central projects and transfer payments are the main sources in the central and western regions, while loans and securities market financing in the eastern regions. Using the Fixed Effect model (FE) and the Instrumental Variable method (IV) of panel fixed effect to estimate the parameters, we find that there is a non-linear relationship between capital and return on capital, with U-shape in the eastern region and inverted U-shape in the non-eastern region, and a critical value condition for the occurrence of profit-seeking behavior of capital. The statistics of the critical value show that the returns on capital of most provinces in the eastern regions are on the right side of the lowest point, while those in the non-eastern region are on the right side of the highest point, indicating strong profit-seeking for the eastern capitals and weak for non-eastern capitals because of a high proportion of transfer payment in the central and western capitals. More capital is gathered in areas with good contracting institution while the property institution does not significantly promote capital agglomeration. The regional heterogeneity of the relationship between capital and property rights implies that the eastern region should pay attention to improving property rights institution, while the western region should focus on the improvement of contracting institution, so as to create a "wind vane" to attract capitals.
However, it must be realized that the higher rate of return on capital and the strong profit-seeking nature of capitals in the eastern region will drive the further flow of funds from the west to the east, which will widen the economic development gap in the long run. A large flow of funds to the east will aggravate the excessive financialization and cause funds to be diverted out of the real economy in the east,while serious financing constraints due to lack of funds will directly hinder western economic development. The local government should promote the reform of property right institution and the market allocation of factors according to the local actual situation, control the rate of return on capital within a certain range to absorb long-term stable financial support and make a better combination of efficient market and promising government for coordinated development of regions in China.

Since China resumed treasury bond issuance in 1981, there has been a rapid growth in both the market size and the variety of bond types. At the November of 2020, the Chinese bond market had a capitalization of about 115.7 trillion RMB and has become the world second largest bond market. The bond market plays an increasingly important role in the reform and opening-up of the finance system. A sound and healthy bond market requires active investors, while the moral hazard problem of the issuers and the information asymmetry between issuers and investors stand in the way.
Bond rating is an important mechanism in mitigating the information asymmetry between issuers and investors and protecting the rights of investors, and therefore plays an important role in investors' decision making. While most issuers in the Chinese bond market disclose rating from only one rating agency nowadays, some issuers choose to have multiple ratings (MR) from more than one rating agency, and publicly disclose these ratings in the statement of bond issuance.
There are three explanations for the existence of MR,such as informational production, rating shopping, and certification. Kronlund (2019) suggests that compared to single rating, MR is less likely to be the results of rating shopping, and the evidence shows that rating shopping is more likely to exist when issuers disclose single rating. This paper tries to provide evidence for the other two explanations, informational production and certification, while excluding the rating shopping explanation.
Using a sample of ratings from 2004 to 2018 in the Chinese bond market, this paper finds that MR is associated with lower financing cost, indicating that MR provides incremental information, and reduces the information asymmetry between investors and bond issuers, and this effect is more pronounced for issuers with consistent ratings or using investor-paid mode. In addition, when multiple ratings are inconsistent to each other, the average rating is more informative than the single rating. Further analyses show that the effect of MR in reducing financing cost is more pronounced for private issuers or those obtaining ratings from agencies with better reputation.
We conduct several robustness checks for our results by using PSM method, two-stage Heckman model, alternative samples and variables, and we use the exogenous event of double rating system implemented by Chinese regulatory authorities in 2012 to test the causal relationship between multiple ratings and bond financing cost. All test results support our major conclusions.
We make three distinctive contributions in this paper. First, the existing studies on China's bond market mainly focus on single credit rating. We contribute to this line of literature by examining the relationship between multiple credit ratings and bond financing cost, which allows us to explore the implications of credit rating from a quantitative perspective. Second, the available mechanisms of multiple ratings in the literature are inconsistent with the empirical evidence, and most of these studies focus on the United States or other developed economies. Our focal point is on Chinese bond market system, and we reveal how the investors in the emerging market interpret the multiple ratings and the key mechanism of multiple ratings. Moreover, we provide a better theoretical explanation for the phenomenon of multiple ratings. Third, we evaluate the effect of different payment modes under multiple ratings on the cost of bond financing, which enable us to provide verification results under multiple rating system on the controversial question that whether “issuer payment” mode is better than “investor payment” mode.
Our findings have several implications for regulators, issuers and bond rating agencies. For regulatory institutions, our paper suggests that it is necessary to gradually implement the mandatory multiple rating system and promote the multiple rating model embedded in the investor-paid rating agencies. For bond issuers, our findings imply that the market can extract more accurate information through multiple credit ratings when confronting with different ratings from multiple rating agencies, which helps reduce their cost of bond financing. For credit rating agencies, we provide evidence that reputation is a valuable asset.

China is embracing opportunities and challenges as it heads toward a new era of economic upgrading and transformation. China has proposed a plan to build a domestic circle in which economic growth relies on domestic markets more than on international markets. A critical aim of the domestic circle is to boost consumption and increase its contribution to the economy. Household income in China has displayed fast and steady growth over the last few decades. This has increased the demand for housing. As a result, housing now represents the biggest share of household worth in China. An increase in house prices can add to a household's net worth and thus household consumption. Fast-growing house prices also increase mortgage burdens and therefore restrain consumption. The effects of housing wealth on consumption are thus theoretically ambiguous. This is confirmed in the literature. It is therefore interesting in policy and academic terms to explore how changes in housing wealth affect consumption in China.
We examine the effect of changes in housing wealth on household consumption and the channels of this effect by utilizing China Household Finance Survey (CHFS) data spanning 2013-2019. The CHFS is a biennial national representative survey, launched in 2011, that records information on household finance positions in 29 of the 34 provinces in China. The survey records details of income, consumption, financial assets, housing wealth, debt, jobs, and demographic characteristics, among many variables. Each round of the survey revisits a set of households that were interviewed in the previous round. We trace a set of households that were surveyed in all the survey rounds from 2013-2019 and build a balanced panel of 13,328 households.
When examining the link between housing wealth and consumption in a baseline model, we impose household fixed effects to account for idiosyncratic and time-invariant omitted variables (e.g., beliefs). It is furthermore possible that consumption also affects housing wealth, because consumption is driven by income, which also contributes to housing demand and house prices. We use a province's average house price in the year prior to each round of the survey (i.e., in 2012, 2014, 2016, and 2018) as the instrumental variable (IV) for the housing wealth of the households in that province. This alleviates the two-way causality. We then re-examine the effect of housing wealth on consumption using the two-stage least squares and fixed effects methods.
The results show that an increase in housing wealth raises household consumption, with a marginal propensity to consume out of housing wealth (house-price MPC) averaging at 2%. Increases in housing wealth furthermore reduce the share of life necessities in consumption and raise that of hedonic goods, thus increasing household consumption. Additional investigations show that housing wealth influences household consumption via a collateral channel that relaxes borrowing constraints and finances consumption growth as house prices rise. As home equity loans are not available in China, part of the credit for the consumption growth is from credit cards. We find evidence that as house prices increase, credit card limits and balances both go up. This implies that credit cards provide funding for the housing wealth effect. Finally, we find that the housing wealth effect on consumption is stronger for households with a second home and for households in central and western China.
We make two main contributions. First, we identify a house-price MPC of 2% and provide evidence of the housing wealth effect on consumption by combining the fixed effects and IV methods to fix endogeneity issues. Second, we find that credit cards fund consumption growth as house prices increase when home equity loans are not available. This proves the universality of a collateral channel regardless of financial institutions.
The implication of our findings is that policy makers should utilize the housing wealth effect to boost and upgrade household consumption when risks and leverage are under control.
Future studies could explore administration data from banks to confirm the link between credit card credits and the housing wealth effect. Other funding sources that are popular in China (e.g., private lending) and their impacts on the housing wealth effect could also be an interesting topic.

In 1901, the Qing government was forced to sign the “Boxer Protocol” with western countries to pay 450 million “haikwan tael” of silver (the “Boxer Indemnity”). The research on the Boxer Indemnity is quite rich, but there are still some shortcomings. Previous studies are mainly based on traditional data and historical research methods, the application of new historical materials and new methods needs to be extended. Most studies treat the Boxer Indemnity as a separate event and are limited to commenting on the event and its impact, comparisons with other international indemnities of the same era and analysis of its connection with the global economic and financial markets are lacking.
This paper studies the Boxer Indemnity and its impact from the perspective of debt. Based on previous research results and related materials, this paper compiles a flow chart of the Boxer Indemnity payment, and concisely explains the payment process of the Boxer Indemnity. Furthermore, from the perspectives of currency purchasing power and international comparison, it analyzes the equivalence of the Boxer Indemnity to the proportion of economic aggregate and government fiscal revenue, the value of the Boxer Indemnity and its historical influence in public finance, banking, currency and other aspects.
The research findings of this paper include the following. First, the principal of the Boxer Indemnity is equivalent to 4.33 times of the Qing government's fiscal revenue in 1903. However, through the arrangement of debt repayment, the actual amount of the indemnity paid each year gradually decreased in its percentage to the fiscal revenue, avoiding the direct bankruptcy of the Qing government. Second, converted to the 1900 International dollar (Geary-Khamis Dollar) by the purchasing power parity, the Boxer Indemnity accounted for about 2.1% of China's GDP in 1900. In addition, due to the global depreciation of silver in the second half of the 19th century, the proportion of the Boxer Indemnity to the total indemnities in modern China is significantly lower when converted to the purchasing power of rice than in its silver amount. Third, compared with the domestic and foreign debt interest rates of the Chinese government at that time and the long-term sovereign debt interest rates of major countries around 1900, the 4% interest rate of the Boxer Indemnity is at a moderate level. Fourth, compared with Germany's war indemnity after World War I, the principal of the Boxer Indemnity is far lower in its proportion to the total national economic volume. However, China's actual payment each year is higher in its proportion to the fiscal revenue than that of the German indemnity. Unlike the German indemnity, the repayment of which produced unprecedented hyperinflation and exerted a great impact on the German history thereafter, the Boxer Indemnity did not bring hyperinflation to China. The main reason is that China did not have a real central bank and government credit paper money at the time, and the government could not relieve the fiscal pressure by issuing paper money indiscriminately, but the impact of the indemnity on China's financial system was more long-term. At last, the Boxer Indemnity had profound impact on China's finance, banking and currency. In terms of fiscal taxation, the Chinese Maritime Customs Service, which was managed by foreigners, took advantage of the Boxer Indemnity to expand its power, monopolized China's most important source of tax revenue and became “the second fiscal authority” independent from the Chinese government. In the financial market, foreign banks further strengthened their financial privileges and market advantages by handling the Boxer Indemnity business, and established their status as “recessive central banks” in China. In particular, the power expansion of the HSBC and the Citibank is the most obvious. In terms of currency, the Boxer Indemnity did not change the “old system” of China's chaotic currency system, but gave birth to a “new cycle” and “new crisis” in currency circulation, which became an important fuse for the Shanghai “rubber wave” (financial crisis) in 1910.
Based on the above findings, this paper shows that the debt settlement of war reparations in modern history was not only dominated by political and diplomatic situations, but was also closely related to the transnational operations of financial institutions, especially banks. The economic impacts of war reparations depend not only on the total repayment amount, but also on the ability to govern the economy and the fiscal and financial systems.

Decisions regarding capital structure directly affect long-term corporate performance and value. Morellec, Nikolov, and Schurhoff (2012) emphasize the role of agency conflicts in corporate financing decisions and develop a tradeoff model to investigate the importance of manager-shareholder conflicts in capital structure choice. Following Morellec et al. (2012), other studies investigate the roles of various corporate governance mechanisms, such as external governance mechanisms, board oversight, and executive compensation contracts, in alleviating the problem of sub-optimal capital structures caused by the conflicts between shareholders and managers.
However, most studies focus on individual CEOs as the representatives of the top management team, the roles of non-CEO executives in corporate decision-making have not been fully examined. Non-CEO executives have a significant influence on corporate decision-making as they are the implementers of business decisions, and thus monitor and constrain the self-interested behavior of CEOs. The internal monitoring that takes place from the bottom up within a top management team (TMT) is known as TMT internal governance.
The effectiveness of internal governance within a TMT requires non-CEO executives to be independent from the CEO. In China, a CEO has the right to propose the appointment or dismissal of non-CEO executives. The CEO may prefer to select non-CEO executives who share similar values, and these executives may also be grateful to the CEO who hired them, thus diminishing their monitoring role. In this study, we use the proportion of the top four highest-paid non-CEO executives appointed before a current CEO’s arrival to measure TMT internal governance. The larger this proportion, the greater the independence of non-CEO executives and the stronger the TMT internal governance.
Using a sample of Chinese listed companies from 2001 to 2017, we investigate the effect of TMT internal governance on capital structure decisions. We find that TMT internal governance significantly increases a firm's leverage when its actual leverage is lower than the target leverage ratio, particularly for non-state-owned enterprises (non-SOEs). In addition, the effect of TMT internal governance is greater for firms with more severe agency problems and those with non-CEO executives who have stronger incentives to monitor the CEO. Our analysis of the mechanism reveals that TMT internal governance reduces the degree of deviation from the target leverage ratio by reducing the agency costs.
Our study contributes to the literature on corporate governance and capital structure and has important policy implications for the further development of the corporate governance of Chinese listed companies. Our study contributes to the literature focusing on the impact of corporate governance on capital structure decisions by taking the perspective of TMT internal governance, which has previously been neglected. Our study also provides policy implications for improving corporate governance and optimizing capital structures.

Insider selling has recently become a common feature of the Chinese stock market. The economic consequences of insider selling for listed firms and the capital market as a whole has attracted much attention from practitioners and academics. Insiders such as large shareholders, directors, senior executives, and supervisors often use their information and valuation advantages to inflate stock prices by manipulating information disclosure, engaging in capital operations, and paying large stock dividends. Thus, their holdings are likely to be overvalued by external investors, allowing insiders to gain abnormal trading profits through selling them. These opportunistic self-serving insider sales exhibit strong negative externalities, which not only harm the interests of external investors but can also have negative real effects. Insider selling can then attract the attention of regulators, and authorities will attempt to restrain it by issuing stricter laws and regulations. However, insiders may still attempt to sell their holdings and cash out, and some may deliberately seek loopholes in the trading rules. Thus, a market mechanism in addition to government supervision is required to restrain insider selling.
The implementation of a margin trading mechanism represents a major innovation in China's stock market, and opens the door to short selling. The price discovery function of short selling can increase the efficiency of stock pricing, thus reducing the likelihood of stock price overvaluation. Can short selling restrain insider selling by reducing stock price overvaluation？ This question has not been previously addressed. We propose that if the main purpose of insider selling is to obtain excess returns, the incentives of insiders to sell their holdings will be weaker after the deregulation of short selling, as the market pricing efficiency increases and the degree of stock price overvaluation and the excess trading return of insider selling decrease.
In this study, we explore the effect of short-selling on insider selling in the context of China's implementation of the margin trading mechanism, using a sample of A-share listed firms from 2006 to 2016. Our findings are as follows. (1) Short selling can restrain insider selling. (2) The restraining effect of short selling on insider selling is realized by alleviating the degree of stock price overvaluation. (3) Short selling can restrain the share selling of large shareholders, directors, and management, but has no effect on that of supervisors. (4) Short selling can reduce the excess profit of insider selling. (5) The effect of short selling on insider selling is stronger when insiders have a greater incentive to sell their holdings. (6) Short selling improves stock price efficiency by restraining inside selling. (7) Short selling also decreases insider buying.
Our study makes three main contributions to the literature. First, studies of insider selling mainly focus on the motivations behind it and its economic consequences, rather than how to restrain it through market mechanisms. We contribute to the literature by examining the effect of short selling on insider selling.Second, we provide new empirical evidence of the economic consequences of the margin trading mechanism and short selling. The effects of this trading mechanism after its implementation have been extensively examined. Its effectiveness has been confirmed, and short selling has been found to improve market price efficiency, reduce stock price volatility, and potentially contribute to the stability and healthy development of the stock market. However, another strand of literature suggests that the deregulation of short selling can increase the stock crash risk. Thus, the economic consequences of the margin trading mechanism remain unclear. In this study, we examine the governance effect of the margin trading mechanism from the perspective of insider selling, thus providing new empirical evidence of the economic consequences of margin selling and short selling.
Our findings also have implications for policymakers. Methods of restraining insider selling have been considered by regulators,but insiders with strong incentives to cash out will attempt to find loopholes in the trading rules and get around the ban to sell their holdings. Thus, restraining insider selling requires not only government supervision but also a market mechanism. We find that short selling can restrain insider selling by improving stock price efficiency, thus providing policy implications for securities regulatory authorities in further improving the construction of China's capital markets and protecting the interests of small and medium-level investors.

The Shanghai-Hong Kong stock market exchange mechanism (hereafter referred to as the Shanghai-Hong Kong Stock Connect) was implemented on November 17, 2014. Investors in Hong Kong have been able to buy and sell stocks on Shanghai Stock Exchange within a specified range since the implementation of the Shanghai-Hong Kong Stock Connect mechanism. Mainland investors, conversely, are now able to buy and sell Hong Kong Stock Exchange stocks within a specified range. We take this capital market opening policy as a quasi-natural experiment. We use data from A-share listed companies from 2010 to 2019 to study the impact of capital market opening on the quality of public information disclosure by listed companies.
Referring to the literature, we calculate two readability indicators to measure the quality of companies' public information disclosure. These indicators are the proportion of commonly used words and the degree of text certainty. We take companies affected by the Shanghai-Hong Kong Stock Connect as the experimental group, and the remaining companies as the control group. We use difference-in-differences (DID) estimation, propensity score matching (PSM), and the synthetic control method to identify the causal effect of this capital market opening on the quality of companies' public information disclosure. We source companies' annual report texts from the Juchao Information Network. The financial data come from the CSMAR database.
We find that the capital market opening has improved the readability of relevant companies' annual report texts and significantly improved the quality of public information disclosure. This result is robust to various processing methods, including the addition of corporate governance and information environment control variables, consideration of the Shenzhen-Hong Kong Stock Connect, and the adoption of time-varying DID estimation. Further heterogeneity analysis shows that the improvement of text readability is more pronounced in companies with greater earnings manipulation and less stock price information. This indicates that the capital market opening effect is more significant in companies with weaker governance and lower information disclosure quality.
The main contributions of our research are as follows. First, we shift the research perspective from the amount of information disclosure by listed companies to information disclosure quality given the exogenous impact of capital market opening. Our findings indicate that capital market opening is an effective way to improve the market's overall information quality.
Second, we exploit text mining technology to construct text readability indicators, thereby enriching related research on information disclosure quality. We provide a more intuitive and less dependent method of measuring the quality of information disclosure by mining and analyzing listed companies' annual report texts. We thereby enhance understanding of the impact of capital market opening on the quality of information disclosure.
Third, we provide new empirical evidence of the impact of capital market opening on corporate behavior and performance. We find that capital market opening improves the quality of corporate public information disclosure. Our empirical evidence helps us to understand the important role of capital market opening in promoting the maturity of financial markets. It also provides theoretical support for the Chinese capital market opening policy.
Our study's policy implications for capital market opening and capital market system construction are as follows. First, China could open its capital market further to the global financial market, expand the market's capacity, make full use of the resources of both domestic and international markets, and guide enterprises to improve their governance. Second, the expansion of financial market opening leads to more stringent requirements for the quality of supervision. Supervisory departments should increase their emphasis on the quality of information disclosure and actively guide enterprises to improve their information disclosure quality, especially regarding public information. Finally, supervisors should also pay attention to the difficulty of understanding disclosure texts and to minimizing false and ambiguous statements that may mislead investors. This will guide companies to improve the quality of their information disclosure in annual reports. For example, supervisors could ask companies to clarify unclear words in their annual reports to urge them to enhance their information disclosure.