A common criticism of the easy monetary policy widely used in developed countries is that it increases asset prices, which asymmetrically benefits wealthy households and those working in the financial sector who own a large number of assets. Thus, it widens inequalities in income and wealth distribution. In China, there is also a widespread concern that monetary easing would worsen income and wealth distribution. Therefore, investigating these issues is important.
Income sources and asset composition vary greatly among income groups, and the effects of easy monetary policy differ among income sources and assets. These differences can significantly affect income and wealth distribution. According to the literature, easy monetary policy affects income and wealth distribution through various channels. On the one hand, easy monetary policy may worsen income and wealth distribution through two main channels. (1) The income composition channel. Middle-and low-income households mainly rely on labor income, while high-income households rely on capital income. Therefore, inequality in income and wealth distribution widens if the increase in capital income resulting from easy monetary policy is greater than the increase in labor income. (2) The financial segmentation channel. By stimulating financial activities, easy monetary policy would disproportionately benefit wealthy households, as they are generally more engaged in the financial market, and thus widen inequalities in income and wealth distribution. On the other hand, easy monetary policy may narrow the income and wealth inequality through three channels. (1) The saving redistribution channel. Decreasing interest rates or increasing inflation benefits debtors while hurting creditors, and creditors are generally wealthier than debtors, so easy monetary policy can decrease income inequality and narrow the wealth gap. (2) The earning heterogeneity channel. Studies show that the groups at the bottom of the income distribution are the most vulnerable to the effects of economic fluctuations. Specifically, during an economic downturn, those low-income groups are generally the first to lose their jobs or experience a decrease in wages, whereas those in high-income groups are less affected by economic fluctuations. Therefore, by stimulating the economy, easy monetary policy helps those low-income groups retain their jobs and increase their wages, thereby narrowing the income and wealth gaps. (3) The real estate channel. Studies find that in the United States, the inequality in wealth distribution is much milder than that in income distribution, mainly because of the appreciation of real estate held by the middle class, which prevents the continuous concentration of wealth among those in the wealthiest group.
As easy monetary policy may affect income and wealth distribution through various channels and its net effect is ambiguous, the issue calls for empirical exploration. Empirical studies of the relationship between monetary policy and income/wealth distribution in China are under supply because of data unavailability, especially a lack of micro-level, long-term household data. This paper contributes to the literature in the following ways: (1) It is the first study in China to use micro-level household data (China Household Tracking Survey, CFPS) to explore the impact of monetary policy on income and wealth distribution. (2) It also separately investigates the effects of monetary policy on various components of income and wealth, including labor income, financial asset income, net debt, and real estate values. (3) Different from the popular practice of focusing on overall indicators such as the Gini or Theil coefficients, we reveal the complete picture of inequality by specifically describing its effects on different income groups.
This paper's main findings are as follows: (1) Generally, credit growth reduces household income inequality. (2) Credit growth can significantly increase labor income and the wages of low-and middle-income groups, effectively reducing labor income inequality. (3) The impact of credit growth on financial asset inequality is insignificant because Chinese households have quite low proportions of non-monetary financial assets, even for high-income households. Moreover, most households find it difficult to profit from financial transactions. (4) Credit growth increases house prices for all income groups, but the increase is greater for high-income groups relative to low-income groups. Therefore, increases in house prices widen the wealth gaps between income groups. (5) Regarding the mechanisms through which monetary policy may affect income distribution, the two mechanisms through which easy monetary policy may worsen income distribution (the income composition and financial segmentation channels) are not significant because most families do not profit from financial transactions, even those in high-income groups. Meanwhile, among the three mechanisms through which easy monetary policy may improve income distribution, the saving redistribution and earning heterogeneity effects are supported by the data, whereas real estate has the opposite effect in China. Finally, as the most top-income households are not included in our sample, our conclusions may underestimate the effects of credit growth on income and wealth for those high-income groups.

The modernization of China is inextricably linked to its population. China is undergoing a rapid demographic transition, with a falling fertility rate, an aging population, and a shrinking population dividend. China's labor force has been decreasing since 2015, and its population peaked around 2021. Meanwhile, China's economy is undergoing a salient structural transformation, with a new technological revolution, a new wave of industrial change, and a rapid increase in high-tech manufacturing and modern services on the horizon. This structural transformation may affect population growth, while the demographic transition may also affect the structure of the economy. The relationship between these two processes and the related effects require comprehensive study to help China promote long-term, balanced population growth and promote structural transformation during this new development stage.
We propose a new theoretical mechanism of the gender gap in the labor market to better understand the relationship between structural transformation and demographic transition. Our novel dynamic general equilibrium model incorporates the endogenous evolution of the gender gap in the labor market, structural transformation, and population growth. The model also allows us to fully capture the structural effects of related policies, such as directly intervening in the price of female labor or lowering fertility costs. We focus on the gender gap in the labor market for three main reasons. First, the share of female employment differs greatly among sectors in China, and the sectoral shares of output vary. Second, the industries with the largest share of female labor are mostly skill-intensive. Skilled labor relies on mental labor, whereas unskilled labor relies on physical labor. Compared with male workers, female workers have an advantage in supplying mental labor relative to physical labor. Third, women have an advantage over men in raising children.
We find that because the structural transformation process increases the share of mental-labor-intensive sectors, it narrows the gender wage gap, increasing fertility costs and thus decreasing the fertility rate. This in turn increases the relative supply of female labor and mental labor. When the elasticity of substitution between sectoral outputs is high, the share of mental-labor-intensive sectors continues to increase. Hence, the economy experiences a dynamic transition in which the share of mental-labor-intensive sectors increases, the gender wage gap narrows, the relative supply of female labor increases, and the population growth rate falls. We also find that a policy to intervene in the price of female labor, which is intended to narrow the gender wage gap, may instead result in the structural unemployment of women, widen the gender gap in the labor market, and slow structural transformation. A policy to lower women's fertility costs would increase the fertility rate, but it could have the same side effects. In contrast, a policy to lower the fertility costs of men would increase the fertility rate, narrow the gender gap in the labor market, and promote structural transformation. We also find that the adverse effects of subsidizing childbirth may be reduced when sponsored by the government rather than firms. Thus, a policy to further lower men's fertility costs should be coordinated with a policy to lower those of women, with the former sponsored by firms and the latter by the government.
We derive the policy implications of these findings by suggesting policies to promote long-term, balanced population growth, narrow the gender gap in the labor market, and spur structural transformation. Moreover, the government should establish policies that simultaneously encourage families to have children, improve the structure of the labor supply, and narrow the gender gap. First, the government should act to reduce the opportunity costs of fertility, particularly for men. Second, the government should reduce the economic burden of having children and support firms with more tax breaks and public spending. Third, the government could also explore alternative ways to increase birth rates through public spending and tax reductions.
This paper contributes to the literature by systematically analyzing the relationship between the gender gap in the labor market and China's ongoing structural transformation and demographic transition. The conclusions offer a novel mechanism through which structural transformation and demographic changes affect each other and a comprehensive framework with which to evaluate the structural effects of related policies.

County and township governments are at the bottom of China's government hierarchy. They are also the ultimate undertakers of a large number of public affairs. After China's reform and opening up, county and township governments have experienced two major reforms. In 1983, with the disintegration of the People's Commune system, the township government and financial systems were re-established. However, after the Tax Sharing Reform in 1994 and the Rural Tax Reform after 2000, the contradiction between revenue and expenditure in villages and towns became more serious. Problems such as the lack of constraints on financial expenditure, the expansion of the financial-support population, the difficulty in guaranteeing normal public service expenditure, and even illegal charges and large-scale debt raising were exposed. To solve these problems, since 2003, some provinces have begun to explore the county-managing-town fiscal reform. In 2006, the central government began to explicitly encourage all provinces to promote this reform.
The county-managing-town fiscal reform means that township financial revenue and expenditure are directly managed and supervised by county-level financial departments. Although the county and township financial system still remain, townships' financial management power has been greatly shifted to the county level (Yang and Liu, 2012). Therefore, the county-managing-town fiscal reform is a reform of fiscal centralization. At the same time, with township finances becoming inappreciable, county-level governments began to directly bear a large amount of public service expenditure. In this sense, the reform is also a flat reform of the financial hierarchy (Jia, 2007).
This paper answers the following question: Has the county-managing-town fiscal reform improved the governance and public service provision capacity of grassroots governments and ultimately promoted economic development？ Based on county-level data from 2000 to 2014, this paper uses the difference-in-differences model to evaluate the impact of the reform on economic development. The results show that the reform has promoted economic development, and that county per capita GDP has increased by 4.8% on average. The mechanism analysis shows that the county-managing-town fiscal reform reduces the proportion of administrative expenditure, inhibits the expansion of the scale of the financial-support population, and reduces the tax burden. These results show that strengthening the financial management and supervision of the higher levels of the hierarchy will help to improve grassroots governance and promote economic development. This paper also finds that the promotion effect of reform is weak in counties with large populations and more developed economies. The reason for this is that it has become difficult for county governments to obtain information after the reform, or that it does not inspire enthusiasm among township governments, which indicates that the reform should not be implemented across the board.
The contributions of this paper are as follows. First, this paper quantitatively evaluates the impact of the county-managing-town fiscal reform on economic development and local government behavior for the first time. Second, this paper tentatively extends research on inter-governmental financial relationships to the county and township levels. Finally, this paper analyzes the effect of reforms that flatten the financial hierarchy from the perspective of the county-managing-town fiscal reform.

In recent years, China's economy has been under considerable downward pressure due to the COVID-19 pandemic, the shift in economic growth pattern and an increasingly severe external environment. How to ensure financial stability while making good use of various monetary policy tools and guiding financial institutions to better meet the financing needs of the real economy is one of the priorities of our current financial work. Commercial banks occupy a dominant position in China's financial structure system. Preventing bank risks is related to the stability of the whole financial system. Therefore, it is of great significance to deeply study the monetary policy and bank risk-taking nexus.
Chinese scholars have made many valuable researches on the risk-taking channels of monetary policy, and the conclusion is basically the same, that is, accommodative monetary policy increases the bank risk-taking. However, these studies mainly focus on the linear relationship between monetary policy and bank risk-taking, while the nonlinear relationship is not involved. At the same time, most studies do not distinguish between risk-taking channels and traditional credit channels in their empirical analysis, which will have a great impact on the identification of risk-taking channels. In addition, China's implementation of various policies to stimulate economic growth after the 2008 financial crisis has had an impact on banks' risk-taking, which is currently not studied in the Chinese literature.
This paper firstly theoretically analyzes the mechanism of monetary policy affecting bank risk-taking, and finds that accommodative monetary policy will increase bank risk-taking through valuation, income and cash flow mechanism, search for yield mechanism, central bank communication and response mechanism, and reduce bank risk-taking through risk transfer mechanism. As a result, there may be a complex nonlinear relationship between monetary policy and bank risk-taking. On the basis of theoretical analysis, this paper uses the data of 166 commercial banks (including 5 large state-owned commercial banks, 12 joint-stock commercial banks, 99 urban commercial banks and 50 rural commercial banks) in the China Banking Database of Wuhan University and panel threshold model to make an empirical analysis of China's monetary policy risk-taking channels. In the empirical analysis, this paper uses Z-score and risk-weighted asset ratio as proxy variables of banks' risk-taking, and uses the spread between benchmark interest rate and Taylor rule interest rate as proxy variables and threshold variables of monetary policy stance. It not only empirically tests whether there is a nonlinear relationship between monetary policy and bank risk-taking, but also examines the channels of risk-taking during the special period after the 2008 financial crisis when China implemented various policies to stimulate economic growth.
This paper finds that there is a threshold effect on the impact of monetary policy on the banks' risk-taking, that is, the impact of monetary policy on the banks' risk-taking depends on the extent to which the interest rate deviates from the Taylor rule interest rate (i.e., the Taylor gap). The critical value of Taylor gap estimated in this paper is-1.99, before and after the critical value, the impact of monetary policy on bank risk-taking will reverse. When the Taylor gap is-198.97 basis points or lower, a 1% cut in interest rate will decrease the Z-score by about 5.11 units, that is, the accommodative monetary policy will increase the banks' risk-taking. Conversely, when the Taylor gap is greater than-198.97 basis points, a 1% cut in interest rates will increase the Z-score by about 2.24 units, i.e. accommodative monetary policy would reduce banks' risk-taking. In addition, after the 2008 financial crisis (during 2008-2010), China implemented various policies to stimulate economic growth, which not only increased the banks' risk-taking, but also amplified the impact of monetary policy on the banks' risk-taking.
The complex nonlinear effects of monetary policy on bank risk-taking mean that monetary policy also has complex nonlinear effects on financial stability. Although there is still controversy between economists and central banks on whether financial stability should be taken as one of the ultimate goals of monetary policy, the existence of bank risk-taking channels on the one hand requires central banks to pay attention to the response of monetary policy to financial stability while maintaining economic stability; on the other hand, it also requires the improvement of macro-prudential policy framework. We should establish a long-term mechanism for preventing and defusing financial risks. Because monetary policy has a complex non-linear impact on financial stability, and economic stability and financial stability have complex interactions, we must strengthen coordination and cooperation between monetary policy and macro-prudential policy, coordinate economic development and risk prevention, strive to stabilize the overall macroeconomic situation, and maintain the overall stability of the financial system.

From a macroeconomic perspective, enhancing the flexibility of the RMB exchange rate system helps China hedge against shocks caused by external instability. It thus meets the essential need to maintain economic and financial security during China's high-level opening up to the outside world. As the market-based RMB exchange rate mechanism has improved, the RMB exchange rate has become increasingly volatile. For micro firms, the marketization of the RMB exchange rate brings greater exchange rate risk. Therefore, reasonably limiting the volatility of the RMB exchange rate, minimizing exchange rate risk, and reducing potential losses due to exchange rate volatility are essential issues for firms. The in-depth development of the global supply chain represents new opportunities for Chinese export firms. It also provides an opportunity for firms to naturally hedge their exchange rate risk. This paper shows that firms can form a natural hedge against the exchange rate risk inherent in exports by importing intermediate inputs and using global supply chains to effectively manage exchange rate risk.
Using a theoretical model, we first analyze the impact of exchange rate volatility on the intensive and extensive margins of exports by risk-averse firms and find that the exchange rate correlation of import sources and export destinations can hedge the exchange rate risk exporting firms face. As the exchange rate correlation of imports and exports varies greatly among firms, the effects of exchange rate volatility on firms' exports are heterogeneous, i.e., exchange rate volatility creates horizontal instability. However, exchange rate volatility changes firms' export volumes, causing export volatility over time, i.e., vertical instability. In addition to the intensive margin, we also analyze another type of vertical instability, i.e., the expansion margin and sustainability of firms' exports. We find that exchange rate volatility negatively affects the horizontal and vertical stability of exports and that firms can hedge the exchange rate risk associated with their exports by importing intermediate inputs. Further, this paper uses customs data on import and export transactions in 2010-2015 to investigate the impact of exchange rate volatility on the stability of Chinese firms' exports and to explore how exchange rate risk can be hedged through the importation of intermediate inputs. The benchmark results hold under a series of robustness tests.
This paper contributes to the literature in the following three ways. First, it innovatively discusses the impact of exchange rate volatility on the intensive margin of exports in a framework that incorporates endogenous market penetration decisions. Previous theoretical analyses consider only the impact of exchange rate volatility on the export expansion margin. The primary mechanism is exchange rate volatility, which increases the productivity of export markets. Second, this paper focuses on firms' export stability, measures China's horizontal and vertical export stability from 2010 to 2015 using microdata, and analyzes the impact of exchange rate volatility. In contrast with the literature on the measurement of a single export indicator, this paper investigates the impact of exchange rate volatility on Chinese firms in a comprehensive and multifaceted manner and considers both the horizontal and vertical dimensions, the intensive margin, the expansion margin, and the impact of export stability. Third, using Chinese customs data that identifies the source of imports and the destination of exports, this paper examines how firms in developing countries can hedge their exchange rate risk by importing intermediate inputs. The literature extensively analyzes the economic impact of exchange rate volatility from the perspectives of financial development, foreign exchange derivatives, productivity, and the degree of diversification in export destinations. Chinese firms are highly embedded in global supply chains at both the import and export ends, and many firms are both importers and exporters. Therefore, understanding how exchange rate risk can be hedged by the importation of intermediate inputs is of great practical importance.

Economic development based on the consumption of large amounts of non-renewable resources is not sustainable in the long term. Under the direction of the CPC Central Committee and through the joint efforts of its citizens, China has made initial steps in controlling its carbon emissions, although the goal of achieving its dual carbon targets remains a challenge. Nonetheless, as an energy sector dominated by fossil fuels is incapable of meeting the required reduction in carbon emissions, the development of low-carbon industries needs to be vigorously promoted to realize the dual carbon targets. However, China's energy sector, which is rich in coal but poor in oil and gas, is difficult to change in the short term. Accordingly, the orderly adjustment of the energy sector and the development of a green and low-carbon national economy is a long-term dynamic optimization process. Overall, China is currently facing a tight transition window and strong pressure to achieve its dual carbon target. In addition, there is growing demand for targeted financing and more effective financial regulation policies.
Finance should not only support economic development but also the gradual withdrawal of the traditional energy sector. Investment needs to guide the improvement and replacement of traditional carbon-intensive production capacity by supporting the implementation of higher standards and more efficient production, and the gradual transformation of the energy sector. Accordingly, it is worth examining the optimal regulatory policies for promoting the orderly transformation of the energy sector and their transmission mechanism. This paper uses a E-DSGE model containing heterogeneous enterprises to analyze the transmission mechanism of green credit policy. The effects of this policy are also analyzed in relation to promoting the orderly transformation of the energy sector, expanding the theoretical framework of green credit policy. The findings of this paper have a number of practical implications with respect to determining the optimal regulatory policies for promoting the orderly transformation of the energy sector and designing a reasonable mechanism to enable the central bank to implement effective monetary policy regulations.
There are a number of limitations to research in this field. First, theoretical research is lacking on the means of developing low-carbon industries and adjusting the energy structure. Moreover, work still needs to be done to apply green credit policy to the development of a low-carbon energy sector and industries. Thus, it is difficult to fully clarify the transmission mechanism through which green credit policy can best promote the development of low-carbon industries and the upgrade of the energy sector. Second, although numerous studies examine how to promote the development of clean energy and reduce carbon an emission, relatively little research examines the optimal level of policy regulation. Determining the optimal regulatory level is important as such interventions can easily generate economic imbalances and negative impacts in the short term.
This paper adds to the literature by constructing an E-DSGE model that includes high carbon and low carbon enterprises. The model depicts the behavioral choices and financing decisions of different enterprises and can better explain the transmission of monetary policy. In addition, in the context of a differentiated energy sector, we conduct a welfare analysis of monetary policies with different regulatory aims and discuss the optimal regulatory policies for preventing short-term economic imbalances, meeting the consumption demand of enterprises and residents and promoting the smooth and orderly transformation of the energy sector.
The results of this paper show that in the long run, the optimization and upgrading of the energy sector is an inevitable task for the country and its citizens. Although we find that green credit policy can promote the development of low-carbon industries, if it exceeds the optimal policy requirement in the short term, it may lead to a decline in total output, lower consumption and reduced employment. Thus, the proportion of coal-generated electricity should continue to be reduced and the development of low-carbon industries should be encouraged through green credit policy guidance. To achieve a smooth transformation of the energy sector, the relevant authorities need to pay more attention to optimizing regulatory policy and full play to the guiding role of green credit policy to prevent economic imbalances in the short term. Great importance also needs to be attached to the role of transition finance in adjusting the energy sector.

The COVID-19 pandemic caused profound and unprecedented changes, which have increased the complexity and uncertainty of both internal and external business environments. China is facing the triple pressures of shrinking demand, supply shocks and weakening expectations. Moreover, the production and operation of enterprises are facing severe challenges. One feature of the structural contradiction in China's economy is that when the financial sector grows rapidly, the real economy starts to decline. Consequently, non-financial enterprises shift from their main business to financial business, showing an obvious trend of financialization. This weakens the structural adjustment function of the financial sector to the real economy and aggravates the accumulation of risks in the real economy. The Fourteenth Five-Year Plan clearly states that there should be a focus on improving the financial system to effectively support the real economy.
How to improve the structural adjustment function of the financial sector to the real economy is an important goal of financial supply-side structural reform. Interest rate liberalization reform has led to considerable concern in the government and among scholars regarding how it affects the real economy. This study provides a feasible explanation for the internal logic on how interest rate liberalization affects enterprise operational risk, with theoretical analysis showing that interest rate liberalization reduces enterprises' operational risk by easing their financing constraints and inhibiting their financialization. This study uses two external shocks to identify the causal effect of interest rate liberalization on enterprise operational risk, namely the deregulation of the upper limit of loan interest rates in October 2004 and the reduction of limits on loan interest rates in July 2013 by the People's Bank of China, and constructs quasi-natural experiments to verify the above theoretical inference. The empirical results show that interest rate liberalization reduces the operational risk of enterprises. When interest rate liberalization rises by one standard deviation, operational risks decrease by approximately 2.39% of the sample standard deviation. This result indicates that prudent financial liberalization promotes the orderly operation of enterprises. In particular, interest rate liberalization reduces enterprise operating risk through the mechanisms of easing financing constraints and inhibiting financialization. Furthermore, this effect is pronounced for firms facing severe financing constraints and increased industry competition and investment opportunities. This finding suggests that during financial liberalization, effectively providing classified auxiliary conditions from the dual perspectives of “financing” and “investment” plays an important role in maintaining stable, healthy and orderly economic development.
The marginal contributions and main work of this study are threefold. First, while previous studies have focused on the firm-level determinants of enterprise operational risk and explained the evolution and causes of enterprise operational risk from a financial perspective, this study focuses on what drives enterprise operational risk from the perspective of interest rate liberalization reform and provides evidence in favor of deepening the reform of the financial system to effectively support the orderly operation of real enterprises. Second, this study theoretically explains the feasibility of interest rate liberalization in reducing enterprise operational risk by easing financing constraints and inhibiting financialization. In particular, interest rate liberalization reduces enterprises' operational risk by suppressing their profit chasing motivation (rather than preventive savings motivation) during financialization, which is important for deepening the financial system reform to effectively guide capital “from virtual to real” and promote the high-quality development of the real economy. Third, this study constructs quasi-natural experiments by taking the cancellation of the upper and lower limits of loan interest rates of financial institutions and employs a difference-in-differences model to identify the causal relationship between interest rate liberalization and enterprise operational risk. The identification strategy improves the reliability of the results and confirms that orderly interest rate liberalization plays a positive role in reducing enterprise operational risks.

The growing use of credit cards increases consumer credit accessibility, alleviates liquidity constrains, facilitates smooth consumption, and increases total consumption. Previous studies investigate the effects of credit cards on consumption, savings, and financial market investments; however, few studies explore the effects on human capital investments. Meanwhile, given slowing economic growth and aging population in China, the government is facing budgetary pressure to increase education finance. Household human capital investments can increase human capital accumulation and promote high-quality economic development. Thus, this study investigates whether and how credit card usage affects household human capital investments.
We use panel data from the 2011-2017 China Household Finance Survey. These nationally representative survey data provide information on households' financial and nonfinancial assets, liabilities, income, consumption, investments, and demographic characteristics. Our study proceeds in several steps and produces various findings.
First, we find that credit card usage has significantly positive effects on household human capital investments. To deal with the potential concern of endogeneity, we control for the time trend of the baseline difference between households with and without credit cards into the specification. In addition, we exploit the proportion of households using credit cards in the same community as the instrumental variable. We also conduct a battery of robustness checks for alternative outcome variables, dimensional effect exclusion, different samples, propensity score matching, additional controls, and outlier exclusion. The results of all of these tests are consistent and robust.
Second, we examine and establish several possible channels through which credit card usage affects household human capital investments. First, credit card usage may increase household consumption and investments, including human capital investments. Second, it may promote increased consumption and optimize the consumption structure. In other words, credit card usage can increase human capital investments for the purpose of individual development. Third, credit card usage may ease household budget constraints and optimize intertemporal asset allocation, thereby increasing human capital investments.
Third, we conduct further investigation and find that credit card usage has persistent, long-term promotion effects on human capital investments. We also find that households increase their labor supply and other liabilities to ensure greater cash flow to deal with repayment pressure in the future, which raises concerns regarding potential financial risks. Heterogeneity analysis indicates that the effects of credit card usage on human capital are more pronounced among urban households and those with high income and high education levels, which may widen the gap in human capital accumulation among households.
Our findings have a number of policy implications. In terms of the effects of COVID-19 and the recent substantial slashes in taxes and fees, China is facing government pressure and a slowdown in its economic growth. Our findings provide new insights into human capital dividend accumulation and show that it is a new driver for economic growth. For example, digital consumer credit can be combined with student loans to encourage households to invest more in human capital. Supervision laws and regulations and risk control systems should be improved to reduce financial risks. Thus, consumer credit can facilitate the development of the real economy, expand domestic demand and promote high-quality economic development.
The study contributes to the extensive body of literature on the effects of consumer credit. Previous studies mainly focus on the impacts of consumer credit on household consumption and savings. Our findings expand the literature by providing new evidence from the perspective of household human capital investments. Moreover, our findings provide new insights into how to effectively increase human capital accumulation.

Investor education is important for ensuring the smooth operation and benign development of capital markets. Therefore, it has become the main pathway for promoting the sustainable development of China's capital market; accordingly, objectively evaluating its practical effects is of great significance.
Using data from the Nationwide Mutual Fund Individual Investor Survey on more than 20,000 investors, this paper analyzes the impact of investor education on mutual fund investment returns and explores its underlying mechanism using the behavioral finance framework. The survey data of mutual fund investors is used for two main reasons. First, individual investors are the main targets of investor education, and the mutual fund market is the primary means through which they participate in the capital market. Second, individual and institutional investors differ significantly in their investment behaviors. “A fund makes money, not the investors” has become a long-time phenomenon in China's fund market.
Theoretical and empirical evidence demonstrate that financial literacy significantly affects investment returns. This paper finds that the effect is associated with the way in which financial literacy is obtained. Furthermore, the literature focuses on the effects of financial literacy on risk market participation, investment portfolios, and other aspects. From the behavioral finance perspective, this paper studies the corrective effect of investor education on three types of behavioral bias: trend-chasing, overtrading, and the disposition effect. The results provide a broader perspective and objective support for understanding the behavioral characteristics of mutual fund investors in China.
The data include economic and demographic information, fund investment experience, and the interviewees' investment decision-making processes. The questionnaires were distributed in the second quarter of 2019 by fund management companies and sales institutions through a QR code. The quality of the sample was guaranteed by a trial survey before formal collection, tracking and monitoring during collection, and data quality verification after collection. We collected 49,800 valid questionnaires from 31 provinces (municipalities and autonomous regions), and 35,103 of them report mutual fund investments. The final sample comprised 20,131 questionnaires, after removing those with missing data needed to calculate the primary study variable.
The findings show that (1) investor education significantly improves the investment returns of mutual fund investors. Compared with other learning methods, such as independent learning, work experience, or learning from relatives and friends, formal investor education (offered by financial institutions or financial/economic courses or training) helps investors achieve a higher return on investment. Therefore, we suggest that the government further accelerate the incorporation of investor education into the national education system. (2) Investor education can help investors achieve a better return on investment by mitigating their behavioral biases. Our data shows that overtrading, trend-chasing, and the disposition effect significantly reduce investment returns, whereas long-term investment objectives, regular fixed investments, reverse strategies, and the counter disposition effect significantly improve investment returns. By improving investors' rationality, investor education increases the probability of investment profitability, total return on investment, and average annual rate of fund investment by 19.41%, 17.09%, and 12.75%, respectively. Therefore, investor education should pay special attention to improving investors' risk identification skills to reduce behavioral bias and promote rational investment concepts. (3) Enthusiasm for and the effectiveness of investor education differ among groups of investors. Therefore, investor education should be tailored to improve its effectiveness for women, high-net-worth individuals, and long-term investors, and designed to appeal to men, low-net-worth individuals, and new investors.

Illegal insider trading mainly occurs before the M&A announcement. From 2015 to 2019, the national securities regulatory system handled 418 illegal insider trading cases, of which 75.84% were related to major investments and major asset purchases of enterprises. As a major investment decision, mergers and acquisitions are sensational news in China's capital market, and a complex investment revolving around various stakeholders and sometimes requiring time-consuming approval. These characteristics of M&A make it more difficult to identify illegal insider transactions, but existing literature provides limited insight into the problem. Therefore, how to characterize, recognize and prevent informed trading based on private information in mergers and acquisitions has become an important issue that needs to be resolved urgently in theoretical research and practical supervision.
Illegal insider trading is informed trading based on private information in the area of market microstructure research, where there are assumed to be two types of traders in the market. Informed traders can access private information like M&A events and make transactions in advance, while uninformed traders make transactions independently without private information. Although it is impossible to observe whether a trade is based on private information or not directly in the transaction data, the calculation of the probability of information-based trading (PIN) provides an efficient measure to capture the possibly illegal insider trading in empirical research. Based on the improved indicators of informed purchase and informed selling trading, this study is aimed to investigate the impact of informed trading based on private information on the M&A, the participant and mode of informed trading based on private information, and try to find the solution to potential adverse impact.
A large number of empirical studies have found that informed trading will have an impact on the short-term market performance of mergers and acquisitions. Firstly, informed trading before M&A announcement will cause the stock price to react in advance. Secondly, informed trading before M&A announcement will reduce the cumulative abnormal return around M&A announcements. However, the theoretical interpretation, subject, and mode of informed trading remain controversial. Rational structure uncertainty theory attributes price reaction to incomplete information structure among different investors. Informed traders take advantage of private information to make a transaction in advance so that the stock price goes up before the M&A announcement, leaving an inadequate price reaction at the announcement date. Behavior theory claims that uninformed investors are irrational and tend to follow the trend of trading when the stock price rises, so the announcement return decreases afterward. The study will empirically examine the theoretical foundation of the stylized fact. Furthermore, the study will use the indicator of informed purchase and informed selling to figure out the transaction mode. The study also sheds light on two types of important investors including outsiders and insiders of bidding firms, investigating whether they use private information of M&A to gain illegal returns in the capital market. Finally, the study tests the improvement of the information environment as a precautionary approach to informed trading based on private information.
The study uses the M&A events taking place between January 2006 and July 2020 of listed companies in China as a research sample to investigate the influence of informed trading on the market performance of mergers and acquisitions. The trading data is obtained from the Tinysoft database, while other financial data is obtained from the CSMAR database.
We find that informed trading before mergers and acquisitions triggers an early response in the bidding firm's stock price, thereby reducing the market reaction at the date of the M&A announcement. This phenomenon is caused by the leakage of insider information and undermines the fairness of the capital market. We also find that the informed selling transaction before the M&A announcement is not based on private information, causing no insider information leakage; while the informed purchase transaction before the M&A announcement is based on private information. We find that the information leakage effect of informed purchase transactions is more serious in the bidding companies with low institutional investors' shareholding and low employee shareholding in employee stock ownership plans. It implies that inside information is mainly from insiders like employees, not institutional investors. Further analysis shows that improving information transparency can effectively alleviate the problem of information leakage before mergers and acquisitions. Specifically, improving the quantity and quality of information disclosure of enterprises, as well as the issuance of M&A inquiry letters by stock exchanges, can improve the information transparency of bidding companies, effectively mitigating the information leakage before M&A.
The marginal contributions of the study are as below. First, it expands the cognition of informed trading based on private information in China's capital market. This paper emphasizes the negative impact of informed trading is information leakage, which is mainly caused by informed purchase transactions. This paper also finds that it is not institutional investors, but employees of the company who cause information leakage. These conclusions enrich the mode and subject cognition of informed trading in academic research. Second, it explores the impact of existing trading systems and direct regulatory measures on informed trading, such as margin trading system and exchange inquiry letter system. The conclusions have reference values for the evaluation and optimization of the current system. Moreover, the study finds that the improvement of the information environment can effectively curb the adverse effects of informed trading, which emphasizes improving the indirect regulatory measures of illegal insider trading. Third, from the perspective of informed trading, it deepens the understanding of the limitations of short-term M&A performance measurement indicators. This paper finds that the early reaction of stock prices will lead to a decline in the announced earnings, making the cumulative abnormal return at the time of announcement less than the real short-term M&A performance in the case of seriously informed trading transactions. This conclusion suggests that the precondition for interpreting the cumulative abnormal return as the performance of M&A is that there is no information leakage, which enriches the relevant research on the measures of M&A performance.
The paper focuses on informed trading based on private information, providing a reference for the screening and supervision of illegal insider trading. In future research, the identification of illegal traders can be further expanded in combination with the practice. Moreover, the identification of illegal insider trading should not simply rely on the judgment of economic indicators, but also needs to be comprehensively considered in combination with judicial evidence.

A contractual innovation in the M&A market, valuation adjustment mechanisms (VAMs) signal positive effects, such as reduced risk and M&A costs, for investors. However, whether accepting an excessive M&A premium to reach an agreement constitutes a reasonable VAM is an open question. Therefore, this paper theoretically and empirically analyzes the role of VAMs in transferring M&A risk and enhancing investor utility.
This paper makes three main contributions to the literature. (1) Building on previous research, it establishes a game model of buyers and sellers in an information-asymmetric M&A market to theoretically analyze the role of a VAM in transferring M&A risk and enhancing investors' utility, and the correlations between the variables in the model are theoretically sorted. (2) The empirical analysis supplements two strands of the literature on the correlations between VAMs, M&A premiums, and market reactions. First, it examines the relationship between the details of VAMs (relative performance commitment size and contract length) and the premiums offered in M&A transactions. Second, as the market reacts to a VAM, this paper further explores the masking and threshold functions of the M&A premiums resulting from VAMs on the relationship between the VAM and abnormal stock returns. (3) This paper focuses on the follow-up after the VAM agreement is signed. The role of M&A premiums in the relationship between the contract details and VAM performance and between the market reaction and VAM performance are further analyzed.
The data are mainly from the VAMs, M&A, and Stock Market Transactions Database of the China Stock Market Accounting Research (CSMAR). The sample comprises 2,564 asset acquisition cases from 2006 to 2020 in which the acquirer is a listed company, including 1,831 M&A transactions with a VAM and 733 M&A transactions without a VAM. Among the transactions with a VAM, 1,194 involve performance of the VAM, and 704 have completed performance requirements in every year.
The three main findings are as follows: (1) The transactions with a VAM have higher M&A transaction premiums compared with those without a VAM, and those transactions also have larger relative performance commitments and longer betting periods. However, the contribution of the performance commitment to the premium varies. Excessively high relative performance commitments reduce the acceptance of betting agreements by high-quality acquirees, resulting in a crowding-out effect. A further grouping study using a subsample of unrelated transactions shows that investors are willing to pay a higher premium for a VAM. In other words, the prominent premium effect in the unrelated transaction group indirectly illustrates that a VAM reduces the risk of information asymmetry. (2) This paper investigates the intermediate masking effect of M&A premiums between VAMs and stock market responses. The results show that in general, the market response to a VAM is positive. This indicates that because VAMs are used to address information asymmetry, the market does not interpret relatively high premiums as a signal of overpayment within a certain range. However, in cases of severe information asymmetry, it is irrational to accept a very high premium to obtain a VAM agreement, because if the premium is too high, it creates an adverse selection problem. In this case, the partial masking effect of the M&A premium causes the market to react negatively. The threshold effect test confirms that above a certain threshold, the market has a negative reaction to the introduction of a VAM in an M&A transaction. (3) After addressing potential endogeneity in the model using the propensity score matching (PSM) and instrumental variable (IV) methods, further analysis of the realization of a VAM reveals that the probability of VAM realization is lower with more strict performance targets and longer horizons. However, high performance targets and long horizons can, to some extent, help firms obtain more funds through the premium, which will help them win the bet. Thus, the M&A premium has a negative intermediate masking effect on the relationship between contractual stringency and the probability of winning the bet. In addition, investor confidence is only well aligned with future VAM performance under certain conditions. M&A events with high or low premiums indicate high uncertainty, such that the stock market overreacts during the M&A window and fails to correctly predict future performance.
These findings can help firms avoid valuation premium bias caused by overprotection, agency problems, and information asymmetry. Moreover, investors can use M&A premiums and VAM agreement details to mobilize positive emotions and enhance confidence.