Green is the “background color” of high-quality economic development. As the largest developing country and the world's largest carbon emitter, China's participation is necessary for achieving global carbon neutrality. China has pledged to achieve the goals of “carbon peaking” and “carbon neutrality” by 2030 and 2060, respectively. Green finance will have a major role in realizing green economic reform and promoting high-quality economic development. Thus, understanding the mechanism linking green finance and high-quality economic development and testing its actual effects are of interest to policymakers and academics. In recent years, many studies have focused on the macroeconomic effects of green finance. The latest empirical evidence suggests that green finance can indeed promote green economic growth, but its transmission mechanism remains unclear. Technological progress is the primary driving force for green growth, and one basic function of finance is to support technological innovation for economic development. A small number of studies have demonstrated that green finance can optimize resource allocation, but they do not explain the internal impact mechanism by which green finance improves the quality of economic growth. It is necessary to understand these issues from theoretical and empirical perspectives.
Starting from the literature and economic facts, this paper proposes a theoretical mechanism hypothesis: green finance can promote green economic development by supporting green innovation, building an endogenous green innovation and an economic growth model with financial sectors, and discusses in detail how green finance can support green innovation. Compared with previous green finance macro models, the model in this paper includes the endogenization of green innovation. Green innovation in this paper is different from the clean technology selection model. It is not a technology type that distinguishes industries but an endogenous emission reduction technology based on innovative research and development to reduce pollution emissions. This feature helps to describe the internal mechanism by which financial institutions influence the path of economic growth by supporting green innovation. The model in this paper not only explains the role of green finance in economic development through comparison of economic growth paths but also captures the relationship between green finance and quality of economic growth (environmental pollution per unit of output), which can be used for the estimation in the empirical part. In addition, the theoretical model in this paper considers both pollution tax policy and green finance policy. The analysis of the optimal growth path shows that the optimal green finance policy increases with the expansion of the economy and should decrease as pollution tax policy becomes stronger. Based on the theoretical model, the theoretical inference is tested using the provincial panel mediation effect model from 2005 to 2017; it is found that green finance does reduce the resource cost of economic growth by promoting green innovation.
The main marginal contributions of this paper are as follows. (1) It demonstrates the internal financial mechanism supporting high-quality economic development by promoting green technology. Thus, true green finance is not limited to support for a few clean industries. Financial services for upgrading environmental protection technologies in high-pollution and high-energy-consuming industries are crucial. This issue needs to be considered in future green finance policies, and it coincides with the current notion of transformation finance. (2) This paper discusses the optimal green financial policy from the theoretical level and points out that it must consider not only the stage of economic development but also the intensity of other environmental policies. This is a topic that previous research has not addressed. (3) In terms of theoretical modeling, endogenous green innovation supplants current modeling based on the “clean industry/polluted industry” binary. The modeling provides a reference for a theoretical framework for the macro analysis of green finance, promotes the “function” theory of green finance, and makes a marginal contribution to the literature on sustainable growth.

China's “Report on the Work of the Government” issued in 2020 emphasized the crucial role of local government debt in stabilizing investment and promoting economic growth. Under the premise of controllable risks, local government debt acts as the primary source of funds for the government to provide public goods and a tool for counter-cyclical adjustment, thus promoting economic and social development. China's 14th Five-Year Plan also elevates regional coordinated development to the level of a significant national strategy, proposing the building of urban agglomerations and metropolitan areas with “infrastructure interconnection” and “gridded transportation.” The regional distribution of the debt limit focuses on the three major urban agglomerations, and provincial-level local governments are also more inclined to allocate the debt limit toward urban agglomerations. The effect of local government debt on regional economic growth is therefore worthy of further discussion.
We explore the effect and mechanism of local government debt on regional economic growth in the context of coordinated regional development and the rapid growth of urban agglomerations. We obtain balanced panel data for 271 prefecture-level cities in China from 2008 to 2018 and apply the Dynamic Spatial Durbin Model. The main conclusions are as follows. First, local government debt can promote economic growth in neighboring regions, and its spatial spillover effect does not change with the model settings, proxy variables, or estimation methods. In terms of the spatial spillover effects, geographically adjacent regions can enjoy the positive externalities brought by public goods such as transportation infrastructure, thus making a geographical connection. Second, the spatial spillover effect of local government debt on the economic growth of neighboring regions has a time dimension: the service life of transportation infrastructure is long, and thus, there is an accumulation over time, i.e., the effect over the long-term is more significant than that in the short-term. Third, interprovincial market segmentation and administrative barriers cause the spatial spillover effect of local government debt to be stronger within than outside the province. We identify the geographical limit of the spatial spillover effect to be around 400 km, and it is mainly evident in the developed eastern regions. Finally, local governments mainly incur debts so that they can invest in the construction of transportation infrastructure. Similar transport development in neighboring regions will enhance transport grids and interconnectivity, thus significantly contributing to the economic growth of the neighboring regions. We therefore identify improvements in transportation infrastructure as the mechanism behind the positive effect of local government debt on the economies of neighboring regions.
Our conclusions offer the following policy implications. First, local government debt issuers should consider both direct and spatial spillover effects. Local government debt has a positive spatial diffusion effect through the development of the transportation network, as this encourages the economic growth of neighboring regions. The effect of local government debt can thus spill over to neighboring regions, and to maximize this effect, urban agglomerations and metropolitan areas should ensure that debt use is more efficient and strive to break through any barriers to enhance regional interconnectivity. This is conducive to optimizing the spatial structure of the population and economy and can ensure that investment is effective and satisfies consumer demand, thereby promoting regional economic growth. Second, In the key regions mentioned in the national major strategic deployment and the “14th Five-Year Plan”, moderately advanced infrastructure investment in regions with high investment efficiency and a high debt ceiling will help to play the role of debt funds in expanding effective investment and stabilizing growth. At the same time, moderately advanced infrastructure investment contributes to accumulating the spatial spillover effect of local government debt. Third, the crowding-out effect of local government debt should be prevented, and the level of debt should be monitored. As the scale of local government debt increases, its role in promoting local economic growth gradually weakens, and a crowing-out effect can occur. The government's premise is that the risks are controllable, and thus, China can continue to promote regional economic growth through a moderate amount of debt. For urban agglomerations experiencing robust economic development, an appropriate increase in local government debt can encourage further economic growth. In addition, the input-output efficiency of local government debt funds should be fully considered, the formulation of local debt-related policies should be tailored to local conditions and strike a balance between stabilizing growth (considering both local and regional economic growth) and preventing risks.

The effects of real sector leverage on the macro economy are of long-standing academic interest. Excessive real sector leverage exaggerates the true potential of economic growth. External shocks in the real sector amplify the financial system's vulnerability. High real sector leverage combined with the highly contagious and nonlinear effects of financial risks can adversely affect economic growth. In general, although scholars discuss the effects of real sector leverage and financial stability on the macro economy, some drawbacks exist in their assumptions. Excessive real sector leverage inevitably affects the growth of economies at various levels of development; however, the extent of this effect remains open to discussion, and no consensus has been reached yet. Besides debates concerning real sector leverage and economic growth, whether financial stability affects the correlation between real sector leverage and the macro economy is another matter of interest. Theoretically, financial stability is an important prerequisite for economic growth, and the effect of real sector leverage on the macro economy is inevitably affected by financial stability. However, two important questions exist: is the effect positive or negative？ And is the effect significant？ Clarifying the interactions among real sector leverage, the economy, and financial stability may help deepen our understanding of related issues. In addition, existing studies have considerable limitations with respect to research samples. Most of the foreign literature focuses on the United States, the eurozone, and other developed economies; by contrast, there is insufficient research on leverage in emerging economies, especially China. Domestic studies mainly focus on the effects of macro leverage on economic growth, mostly ignoring the heterogeneity of leverage across various sectors. Meanwhile, research on micro leverage mostly focuses on the leverage in a single sector and its influencing factors, without examining the effects of real sector leverage and financial stability on the macro economy from a global perspective.
This study uses the dynamic panel data of 43 countries and regions from 2001 to 2020 as the research sample and employs the systematic generalized method of moments estimation method to empirically assess the effects of real sectors leverage on economic growth. A financial stability index is constructed to assess the moderating effects of financial stability on the correlation between real sector leverage and economic growth. The results reveal an inverted U-shaped relationship between real sector leverage and economic growth, and the inflection points differ between sectors. Further tests to uncover the underlying mechanisms show that household, enterprise, and government leverages affect economic growth through the channels of consumption, investment, and government expenditure, respectively. Improvements in financial stability can positively adjust the effects of real sector leverage on the macro economy and improve the inflection point. These findings have certain policy implications in terms of a country's economic growth and leverage control. Thus, it is necessary to fully consider the heterogeneity of the leverage of various sectors and refine the regulatory directions of real sector leverage to achieve dynamic balance under the dual goals of economic growth and financial stability.
Compared with the existing literature, the marginal contributions of this study are mainly reflected in the following aspects. First,by incorporating the variables of real sector leverage, the heterogeneity effects of leverage in different sectors on the macro economy and the specific mechanisms are investigated, bridging the previous gaps caused by lack of relevant domestic studies. Second, this study explores the moderating effects of financial stability on the correlation between real sector leverage and the macro economy, providing useful empirical evidence for policy formulation, with the dual goals of economic recovery and financial stability.

China's economy has achieved rapid growth since the reform and opening up, but the problem of unbalanced and uncoordinated economic development among regions remains. Administrative barriers can hinder the balanced and coordinated development of regions, particularly divisional border areas, as they negatively affect efficiency and fairness. We identify two main effects of these barriers on the economic development of border areas. First, they prevent the free flow of commodities and services between regions and thus produce a “boundary jumping effect,” which suggests that the differences in economic development between divisions will remain. Second, barriers between administrative divisions mean that border areas cannot fully benefit from the inflow of capital from the province, and their economic development lags behind that of the core provincial areas, resulting in a “boundary depression effect” that widens the development gap between internal border and non-border areas. However, these two effects do not necessarily occur at the same time. If the effects of border depression are severe on both sides of the border and economic development is low because of neglect of the border, then we may not observe the jumping effect.
We identify the boundary-jumping and boundary-depression effects using the high-precision global DMSP/OLS night-light raster data released by the U.S. National Oceanic and Atmospheric Administration (NOAA) and public goods data extracted from Gaode maps. We use the spatial breakpoint regression method to test the inter-provincial administrative boundary zone. First, we find no significant boundary jumping effect in the inter-provincial border zone in terms of economic development and the provision of public goods. Second, we find an obvious boundary depression effect in the inter-provincial border zone. The closer the region is to the provincial border, the more it lags behind the general level of economic development and public goods provision. The effect is particularly pronounced within 20 kilometers of the provincial border. This boundary depression effect prevents the economic development of the province's core from effectively radiating out to the boundary area, which may further explain why no boundary jump effect is observed.
Our study has the following research significance. First, we use refined grid-level nighttime light brightness data and public goods provision data to re-examine the economic development of administrative boundaries and assess the extent of the depression effect of public goods provision. Our empirical findings can offer geographically targeted policy recommendations that strengthen regional coordination and promote the economic development of provincial border areas. Second, we examine the boundary-jumping effect of economic development and public goods and discuss the relationship between this effect and the boundary depression effect, thus comprehensively revealing the impact of administrative division boundaries on economic development. Third, unlike studies focusing on the economic disparity in China in terms of physical capital, human capital, financial market development, geographical factors, social characteristics, infrastructure, policy systems, etc., we reveal the impact of administrative division barriers on the economic gaps between regions. Fourth, at the practical level, removing the barriers between administrative areas can promote sharing, coordinated development, and domestic market integration.
Removing the restrictions on the flow of resources caused by these barriers, ensuring that the supply of public goods is sufficient, and encouraging economic development in interprovincial border areas can lead to mutual benefits. To achieve this, the government can implement effective inter-regional coordination mechanisms that promote the orderly flow of capital, labor, and other factors across regions. Increased investment in public goods in the border areas of provinces can address long-standing shortcomings and further promote the equalization of basic public services in the province. The integrated development of urban agglomerations can also be promoted by focusing on removing the barriers between administrative division. Finally, the central government should establish an effective incentive mechanism for regional coordinated development, urge provincial governments to increase their public goods investment in inter-provincial border areas, and encourage local governments to establish cooperation and coordination mechanisms.

In recent years, the Chinese government has accelerated the promotion of common prosperity. However, China's intergenerational income elasticity has increased; moreover, the intergenerational income mobility shows a downward trend, indicating that the problem is relatively prominent. Thus, the issue of China's intergenerational income inequality needs to be urgently solved. China is unswervingly promoting high-level opening to the outside world, especially foreign trade. Therefore, one must consider the realistic background of China's high-level opening when studying intergenerational income inequality.
This study assesses (1) the changes in China's intergenerational income mobility, mainly focusing on changes in the influence of parental income on the offspring's income in the context of trade opening and (2) whether the effects of trade openness on intergenerational income mobility vary according to the parents' and offspring's characteristics. Judging from the original intention of the trade-opening policies and their positive effects, these policies have strengthened China's economic and trade exchanges with the international market; expanded the scale of China's import and export of goods and services; increased employment in the labor market; provided more opportunities for fair job selection; effectively increased citizens' income levels; and improved society's quality of life and overall welfare. As a new labor force entering the market, younger generations, as compared with their parents, can better enjoy the positive results of trade openness, including good economic growth, a broad international exchange platform, a fair environment for job selection and employment, and diverse promotion and development opportunities. Trade openness can affect the intergenerational income mobility by increasing the offspring's income levels and altering the intergenerational income elasticity.
The empirical results show that, overall, trade openness has significantly promoted China's intergenerational income mobility (particularly the upward intergenerational income mobility). Moreover, compared with export trade opening, import trade opening has had greater and more significant effects on intergenerational income mobility. A test of the impact mechanism shows that trade openness has improved the intergenerational income mobility primarily by promoting the upward mobility of intergenerational education and occupation. The effects of stimulating enterprise innovation and increasing the offspring's personal efforts are not significant. Trade openness has significantly improved the intergenerational income mobility of male offspring with lower education levels; however, it has had no significant impact on the intergenerational income mobility of female offspring as a whole or male offspring with higher education levels. Furthermore, trade openness has significantly improved not only the intergenerational income mobility of the male offspring in urban households but also that of those in rural households; however, trade openness has had no significant effects on the intergenerational income mobility of the female offspring in either urban or rural households. Finally, trade openness has significantly improved the intergenerational income mobility of low-income households but has had no significant impact on the intergenerational income mobility of low-income and middle-income households, middle-income households, upper middle-income households, or high-income households. Thus, trade openness has reduced the impact of the father's income on the offspring's income in low-income households, thereby significantly improving the intergenerational income mobility of low-income households, and is more conducive to the offspring of low-income households as well as male offspring to the upward mobility.
This study makes several contributions to the literature. First, existing studies mainly focus on the income and employment effects of trade and deal with the direct benefits and short-term effects of trade. By contrast, the present study extends to intergenerational income mobility, analyzes the indirect benefits and long-term effects of trade, broadens the scope of research on trade benefits, and greatly contributes to the research on trade and income issues. Moreover, this study examines the in-depth effects of trade openness on intergenerational income mobility and reveals underlying associated mechanisms. The study findings not only supplement and enrich the relevant research on the factors of intergenerational income mobility from the perspective of trade openness but also provide a new theoretical basis and policy guidance to explore how to improve the intergenerational income mobility to promote common prosperity. Finally, this study uses the latest CHIP data to analyze the effects of China's trade opening on intergenerational income mobility over a longer duration and employs various methods to perform robustness tests. Moreover, the study conclusions are more scientific and reliable and have more practical significance in guiding current policy adjustments.

The sudden COVID-19 outbreak greatly impacted the global economy, and China continues to issue a series of policies and measures to deal with the negative effects of the pandemic. Policy continuity changes not only affect the local country but also spill over to other countries through trade and financial channels. In other words, beggar-thy-neighbor policies can offset each other. Existing studies show that policy adjustments by developed economies have strong cross-country spillover effects; by contrast, China's spillover effects are relatively limited. However, in the turbulent international situation, extreme shocks will promote the continuous adjustment of the roles of countries and reshape their influence.
Existing studies use the spillover index based on the vector auto-regression or time varying parameter vector auto-regression model, which generalize the relationships that prevail at the conditional mean to the entire conditional distribution, such that it cannot adapt to different shock sizes and directions. Therefore, under the QVAR model framework, this study uses a conditional quantile-based spillover index to study the cross-country spillover effects of policy continuity under different shock sizes for both positive and negative shocks. The study focuses on spillover changes in the extreme states of policy continuity as compared with the intermediate state and further investigates the asymmetric spillover effects between extreme rising and declining states. In addition, to explore China's international influence in extreme states, a relative spillover index is constructed to study the heterogeneous effects of extreme shocks on directional spillovers across countries.
The findings are as follows. First, both the total spillover level of policy continuity and the spillover-in level of each country show a U-shaped structure at various quantiles, highlighting the significant positive effects of shock size. Second, compared with that in the intermediate state, in the extreme states, the total spillover and the directional spillover levels of most countries increase significantly. Moreover, the two extreme rising and declining states have asymmetric spillover effects, i.e., the total spillover shows a greater increase in the extreme declining state, and the spillover-out shows a stronger asymmetry than the spillover-in in the two extreme states. Third, the effects of extreme shocks are heterogeneous across countries, and China's directional spillover level, especially the left-tail spillover to developed countries, has risen sharply. Thus, China's international influence has increased significantly in the extreme states. Therefore, the traditional spillover index may be unable to accurately describe the cross-country spillover characteristics of different states of policy continuity. A conditional quantile-based spillover index should thus be used to comprehensively understand the policy continuity network and the roles of the countries involved.
Our study has the following implications. First, related departments should not only strive to ensure the continuity, consistency, and sustainability of macro policies but also exploit the strength of policy coordination with other countries to maintain multilateral cooperation. Second, regulatory authorities should refine the early warning mechanisms related to the policy continuity shock size and direction, formulate clear and specific control schemes for different situations, and focus on preventing the adverse risks associated with increased spillover effects in the extreme states. Finally, to ensure stable economic development, China should accelerate the development of dual circulation, fully tap into the potential of domestic demand to create a strong domestic market, and effectively resolve the negative spillover effects caused by the adjustment of other countries' policies. More importantly, information sharing and implementation cooperation should be enhanced in extreme states, and the common development of all countries should be promoted to ensure high-level opening policies.
Our study has the following strengths. First, the latest proposed conditional quantile-based spillover index is used to explore the impact of shock size and direction on cross-country spillovers of policy continuity. Second, using the 0.95^th and 0.05^th percentiles to represent the extreme rising and declining states of policy continuity, respectively, we examine the spillover changes and asymmetric spillover effects in the extreme rising and declining states. Third, we construct a relative spillover index to test whether the traditional spillover index accurately captures China's directional spillover level under extreme shocks, thereby revealing China's international influence in the extreme states and providing empirical support for the construction of a new dual circulation development pattern.

This study uses the nationally representative survey data of the China Health and Retirement Longitudinal Study to empirically analyze the main characteristics of the defrauded Chinese elderly and the variations across different dimensions related to rapid digitization and aging in China. The study also assesses the factors rendering the elderly vulnerable as fraud targets, whether they suffer actual losses after being contacted, and the underlying mechanisms, particularly the role of Internet use and the development of digital financial inclusion.
First, we comprehensively portray the overall incidence of fraud exposure and actual fraud and the amount lost by the elderly; summarize the regional differences in fraud prevention ability; and provide a group portrait of elderly people who were exposed to fraud and ultimately damaged. Next, using regression analysis, we assess the role of Internet use in the elderly being approached by fraudsters and incurring related losses. We also examine the roles of individuals' traits (e.g., health status, living arrangement style, and cognitive ability) and digital financial inclusion. Finally, we perform heterogeneity analysis along the urban-rural and gender dimensions.
This study has several key findings. First, Internet use has both exposure and learning effects; the former indicates that Internet use increases the incidence of the elderly being approached by fraudsters, whereas the latter indicates that it reduces the elderly's risk of being approached by fraudsters and consequently suffering losses. Second, we construct an anti-fraud ability index to analyze the differences in the incidence of fraud exposure and actual fraud and the amount lost by the elderly across provinces and find that the anti-fraud ability of the elderly in underdeveloped provinces is significantly lower than that in developed provinces. Third, the regression analysis shows that although elderly individuals with better economic conditions are more likely to be targeted, after being approached by fraudsters, the most vulnerable groups are rural residents, women, and the less educated. Fourth, further analyses show that both individual cognitive ability and the degree of local digital financial inclusion are the key factors affecting the previous two effects of Internet use, influencing the likelihood and amount of losses the elderly incur. Finally, the results of the heterogeneity analyses show that digital technology has a greater positive effect on the female elderly and on those living in rural regions because they are more likely to lack information than their male counterparts and those living in urban regions, and the positive learning effect surpasses the negative exposure effect among these women. The development of digital financial inclusion plays a significant role in helping women but needs to be further improved in rural areas.
This study makes four main contributions. First, the current literature on elderly fraud almost exclusively focuses on the actual fraudulent situation; this study not only analyzes the actual fraudulent situation but also the incidence of fraud exposure among the elderly, thereby expanding the existing local and international literature related to the fraudulent situation among the elderly. Second, because few domestic studies focus on the relationship between the development of digital financial inclusion in the region and fraudulent exposure among the elderly, this paper supports the study of the factors influencing the exposure of the elderly to fraud. Third, this study compares the fraud prevention ability among elderly groups in each province and provides a specific portrait of the fraud-exposed and defrauded elderly, which deepens our understanding of the situation of fraud among the elderly in the digital economy. Fourth, we systematically portray the basic situation of the elderly being defrauded; the factors influencing fraud exposure; and the regional and gender differences in being exposed to fraud, actually being defrauded, and the loss amount, providing a policy grip for efforts to prevent the elderly from being defrauded and improving their financial literacy.

Since the 2005 reform, the RMB exchange rate has been market-oriented, fluctuating in a wide band against the world's major currencies. The “8·11 Exchange Rate Reform” of 2015 streamlined the RMB mid-price mechanism further, switching the RMB/USD exchange rate from one-way to two-way movement, so that the market now plays a decisive role in the RMB exchange rate. The RMB exchange rate is more elastic at a reasonable equilibrium level. As the RMB exchange rate has become more flexible, the impact of RMB exchange rate fluctuations on firms' performance has grown. Especially in recent years, because of increased trade frictions between China and the U.S., RMB exchange rate fluctuations have increased. Chinese enterprises have become increasingly sensitive to exchange rate risk, a material factor affecting their operations (He et al., 2021a). Thus, it is critical to mitigate the adverse impact of exchange rate risk on businesses.
In a bank-dominated financial system, Chinese enterprises rely heavily on bank loans for funds. Loan rates directly affect their investment decisions, which in turn affect their performance and long-term competitiveness (He et al., 2017). The importance of loans makes bank credit a major channel through which exchange rate sensitivity affects businesses. However, few scholars have focused on the relationship between exchange rate exposure and business loan rates. Because of rising exchange rate uncertainty and successive reforms of the interest rate system, a full clarification of this relationship will benefit Chinese enterprises in hedging exchange rate risk and financial institutions in pricing the risk.
This paper investigates the impact of exchange rate exposure on business loan interest rates using data from A-share listed companies in China from 2009-2018. The findings show that there is a significant positive correlation between exchange rate exposure and corporate loan interest rates. The positive relationship between negative exchange rate exposure and corporate loan interest rates is stronger than the positive relationship between positive exchange rate exposure and corporate loan interest rates, indicating that corporate loan interest rates better reflect the potential loan default risk associated with exchange rate exposure, particularly negative exchange rate exposure. A moderation effect test shows that the positive relationship between exchange rate exposure and corporate loan interest rates is more significant for companies with higher foreign income, more investment in foreign subsidiaries, and more use of foreign exchange derivatives. This suggests that Chinese companies have poor risk diversification in their foreign operations and may misuse foreign exchange derivatives. The basic findings remain robust to the use of the generalized method of moments estimation (GMM), the inclusion of alternative indicators, and different group regressions.
We further compare the heterogeneity of the relationship between exchange rate exposure and corporate lending rates across different bank-firm relationships, different collateral values, and firms with different shareholder-creditor conflicts of interest to explore the mechanisms by which exchange rate exposure affects corporate lending rates. We find that the positive relationship between exchange rate exposure and corporate loan interest rates is more significant under closer bank-firm relationships and more intense shareholder-creditor conflicts of interest. Under lesser collateral value, the positive relationship between exchange rate exposure and corporate loan interest rate is even stronger.
The contributions of this paper are as follows. First, it is the first to demonstrate the extent and mechanism of the impact of exchange rate exposure on corporate loan interest rates in China. The research results can help commercial banks cope with exchange rate risks, reduce financing costs in the credit market, and guide financial institutions to serve the real economy. Second, this paper explores the mechanism by which exchange rate exposure affects corporate loan interest rates based on the heterogeneity test. Focusing on the U.S. market, Francis and Hunter (2012) explored the relationship between exchange rate exposure and lending rates; however, the influence mechanism remains unclear. Our paper further discusses the moderating effects of firms' foreign operations, investments, and use of foreign exchange derivatives on their exchange rate exposure and lending rates. This paper also uses empirical evidence to explain the mechanism of the effect of exchange rate exposure on loan interest rates from three perspectives: the bank-firm relationship, firms' collateral value, and shareholder-creditor conflict of interest.

The implementation of a financial security strategy was made a high priority in the 14^th Five-Year Plan, which includes the aim to “improve financial risk prevention, early warning, handling and accountability systems.” Frequent black swan incidents have accentuated the shocks of systemic risk on global production activities and enterprise financial stability. Thus, using systemic risk indicators to improve predictions of financial distress is of academic and practical value.
This paper contributes to the research on financial distress forecasting. First, few studies consider the potential impact of systemic risk on production. Thus, we introduce systemic risk indicators into our prediction of financial distress to provide a more comprehensive analysis. Second, research into financial distress mainly focuses on bankruptcy events, although reductions in corporate valuation and creditor losses typically occur before bankruptcies (Gupta and Chaudhry, 2019). Instead of bankruptcy events, we regard special treatment (ST) designation as a signal of corporate financial distress, as it increases foresight and enables the early warning of potential corporate crises, thus preventing huge losses for firms and creditors. Third, current prediction models of financial distress mainly forecast bankruptcy events only one month or one quarter ahead, and thus, they cannot provide early warnings. Instead, we predict the risk event one year in advance, which gives regulators sufficient time to intervene. Finally, conventional parametric models are typically applied for predicting bankruptcies, whereas we utilize newly developed machine learning models to improve the accuracy of our prediction, and we provide references for optimizing the early warning system for corporate financial distress.
Our sample consists of 3,806 Chinese listed companies, with the time period spanning from January 1, 2010 to May 31, 2020. All of the data are obtained from the CSMAR and Wind Databases.
First, we run logit regressions and find that systemic risk indicators serve as powerful predictors of the financial failure of firms, particularly those in mid and downstream industries. Next, a relative importance analysis suggests that the predictive power of systemic risk indicators is independent from that of financial information and market performance. As the partial dependence plots show, the probability that a company faces a financial crisis rises sharply in response to its systemic risk level reaching a certain threshold. We also apply the out-of-sample test and out-of-time test methods proposed by Petropoulos et al. (2020) to compare the predictive abilities of the conventional logit model and our newly developed machine learning model. The results suggest that systemic risk indicators improve the prediction accuracy of these models and that the random forest model outperforms other predictive models, thus highlighting the relative advantages of machine learning methods in financial distress forecasting. In addition, the combination of systemic risk indicators derived from factor analysis and random forest is better suited to the forecasting system in China than other construction methods of systemic risk indicators and predictive models. After we remove the samples in which the distress is due to financial fraud, shrinking net worth, or sudden operating losses, the prediction framework based on random forest and logit regression provides effective early warnings for most financial failure events in China.
Based on this, our study offers three policy implications concerning the listed company regulations in China. First, systemic risk indicators should be included in the early warning system for the financial distress of enterprises to improve the mechanism for the long-term prevention of financial risks. Second, regulators should apply discriminative supervision to different industries. Finally, from a technical perspective, the introduction of newly developed machine learning methods can conduce to a prudent regulation mechanism. This will not only improve the forecasting system for financial distress but also enhance the financial risk disposal mechanism.

Although China's financial market has greatly progressed, the depth and structure of the financial system still need improvement. Meanwhile, because of the increasing domestic and foreign environment uncertainty, the downward pressure on the economy, and the devastating effects of COVID-19, China's economic development is facing the triple effects of demand contraction, supply shocks, and weakening expectations. Low-constraint firms detach themselves from their main businesses and invest in financial intermediaries such as shadow banking, which provides them with environmental and conditional support to bypass formal institutions for financing, inducing a rapid increase in shadow banking. Given that the development of China's formal financial system has not reached the high-end level, regulatory arbitrage has also been an important factor prompting firms to engage in shadow banking.
However, most collective investments in shadow banking are structured and securitized as risky innovative tools, and mismatch between assets and liabilities may trigger risk contagion and evolution. The Chinese government has launched successive measures to maintain the stable and healthy development of the real economy. For example, the 19^th National Congress of the Communist Party of China (CPC) recommends that “improve the financial supervision system and hold the bottom line of avoiding systemic financial risks”; moreover, the 14^th Five-Year Plan passed by the Central Committee of the CPC at the fifth plenary session states that “adhere to the focus of economic development on the real economy and build a sound financial system and mechanism to effectively support the real economy.” Thus, it is critical to understand how the financial system can be improved to better support the real economy as well as establish a long-term governance mechanism of shadow banking to promote stable and sustainable economic development.
This study explores a long-term governance mechanism of shadow banking from the perspective of a game between formal and informal finance. Given China's economic development practices and the mechanisms of shadow banking, this study uses banking competition to represent financial marketization and uncovers two main mechanisms, credit distortion and regulatory arbitrage, through which banking competition affects shadow banking. Credit distortion focuses on shadow banking between firms (e.g., entrusted loans) from the perspective of inter-firm differences in financing constraints, whereas regulatory arbitrage focuses on firms' shadow banking with the participation of financial institutions (e.g., entrusted wealth management). Based on the data of non-financial firms listed on the Shanghai and Shenzhen Stock Exchanges between 2003 and 2019, this study reports that banking competition helps reduce firms' shadow banking by weakening credit distortion and regulatory arbitrage; moreover, for each unit of increase in the standard deviation in banking competition, shadow banking decreases by an average of approximately 15.88% of the sample standard deviation. This effect is more prominent in firms with high financing constraints and low investment opportunities, indicating that banking competition can provide timely assistance to govern shadow banking.
Our study has important policy implications. First, the government should continue to deepen the financial system reforms and enhance the breadth and depth of the participation of financial institutions in economic development by promoting two-way financial openness. Meanwhile, we should further deepen the factor market reforms, improve financial infrastructure construction, enhance the credit allocation efficiency, reduce capital misallocations, and promote the structural adjustment functions of financial services for real economic development. Second, the government should strengthen its functional financial supervision to improve firms' information disclosure quality and reduce information asymmetry between firms and stakeholders. Moreover, policy makers should optimize the investor protection system, strengthen the scientific evaluation of firms' information disclosure quality, and improve the effectiveness of financial information disclosure to prevent firms from engaging in shadow banking. Third, policy makers also should focus on dynamic tracking and real-time monitoring of financial institutions' businesses. This will help prevent financial institutions from entering the shadow banking business for regulatory arbitrage motivation, thereby reducing the formation of excess shadow banking returns. This will also lead to the adoption of effective economic policies according to the reality of economic development, including the use of targeted policies to curb the credit flow to financialized firms, maintain optimal credit growth, improve credit quality, and optimize credit allocation structure, all of which are conducive to fundamentally curbing firms' motivation to participate in shadow banking.

Mergers and acquisitions (M&A) are common economic activities that are essential for the efficient allocation of social resources. As China's capital market has matured, M&A activities by listed companies have become frequent. However, research on the M&A activities of Chinese listed firms mainly focuses on how the reform of the corporate control market or the within-firm adoption of anti-takeover provisions affects firm value. How firms respond to increased takeover pressure has not been fully explored. More recently, voluntary disclosure has been identified as a firm strategy for dealing with takeover pressure. By changing information disclosure, firms can reduce the likelihood of being acquired or strive to gain higher price premiums in future M&A deals.
This paper studies whether firms respond to rising takeover pressure by adjusting the timing of the publication of their invention patents. In China, by default, invention patents are published by the China National Intellectual Property Administration (CNIPA) 18 months after filing, making the patent specification and other relevant details available to the public. However, inventors can also request early publication of their patents, which means that they can decide at what point within the 18-month period to publish their patents. As innovation is closely related to firm value, timely disclosure of innovation achievements can alleviate undervaluation of the firm. However, different ways of disclosing innovation information may alleviate information asymmetry in different ways: compared with announcements, conference calls, and other traditional forms of voluntary disclosure, the publication of patents is done through official agencies and can help outsiders learn the details of patents quickly. The information about innovation achievements is thus more comprehensive and credible, and should accordingly have a more significant influence on firm valuation. Therefore, we expect that firms may time their patent publications to deal with takeover pressures.
We first estimate the takeover pressure faced by listed companies, following the literature (e.g., Billett and Xue, 2007; Cremers et al., 2009). Next, we conduct an empirical test based on 77,276 invention patent samples of listed companies from 2007 to 2016. We find that firms publish their patents earlier when takeover pressure increases. Mechanism tests show that the early publication of patents can increase the abnormal returns of stocks, thus reducing the probability of being targeted in the future or increasing the price premium that can be obtained from future M&A transactions. Further research shows that when takeover pressure increases, firms with more analyst coverage and a higher proportion of venture investors are more likely to publish patents in advance; firms are more likely to select high-quality patents and those involving mature technology for publication; and when there are alternative strategies, the effect of takeover pressure on patent publication is weakened. The results remain robust when we use instrumental variable analysis and two exogenous shocks to takeover pressure to deal with the endogeneity problem. Finally, accelerating patent publication because of rising takeover pressure helps improve peer companies' innovation efficiency.
This paper contributes to several strands of the literature. First, we expand the literature that considers voluntary disclosure as a strategy for coping with takeover pressure. Unlike previous research that focuses only on traditional voluntary disclosure (Healy, 2015; Chen et al., 2022), we show that patent publication, as a unique form of information disclosure, can be used as an effective coping strategy. Second, this paper enriches research on patent publication from the perspective of the capital market. Previous studies mainly focus on the impact of the technology market and product market pressure on patent publications (Glaeser and Landsman, 2021). From the perspective of M&A, we document that pressure from the capital market can also affect firms' patent publication decisions.
This paper has valuable policy implications. First, there is still no agreement on whether an active M&A market should be encouraged. We provide direct evidence to support the bright side of takeover pressure, which contributes to the overall assessment of active M&A activities. Second, aside from encouraging increased innovation input, it is very important to improve innovation efficiency. This paper provides new insights for improving a society's overall innovation efficiency, which can promote economic growth.