“Coordinating development and security [and] preventing and dissolving financial risks” is an important part of China's economic development and deepening reforms. Risks in the real estate market, especially abnormal fluctuations in real estate prices, the resulting economic bubbles, and the phenomenon of “deviation from the real to the virtual,” are key issues that threaten the country's economic and financial security. A large amount of domestic and foreign literature studies the causes of the formation and fluctuation of real estate prices from the perspectives of land finance, monetary policy, population, and urbanization. In addition, the literature proposes the principles and measures of real estate market price regulation based on predicting real estate price trends. However, the literature ignores the possibly significant impact of energy price fluctuations on real estate price fluctuations.
Because energy is a necessary input for modern production and modern life, the safety of its storage, extraction, and transportation are hot issues that attract global attention. In the 1970s, with the outbreak of shocks such as the “oil crisis,” abnormal fluctuations in energy prices led to stagnant growth and increased unemployment in major global economies that were accompanied by severe inflation and even triggered economic crises. Academics and policymakers began to realize that there might be important correlations between energy price fluctuations, macroeconomics, and financial markets. After 2000, the impact of energy price fluctuations on macroeconomic growth and inflation levels weakened, and the relationship between energy prices and macroeconomic variables changed significantly. In 2008, the outbreak of the global financial crisis provided a new perspective from which to study the relationship between energy prices and financial markets. Some studies note that the rapid rise in energy prices is an important reason for the bursting of the real estate bubble, the violent fluctuation of asset market prices, and the evolution of the global economic crisis.
Although the link between energy prices and the real estate market appears overly broad, it has a clear basis in reality. In the case of rising energy prices, monetary policies that aim to contain inflation expectations, such as raising interest rates, may lead to an increase in the defective rate of housing mortgage loans. At the same time, sharp rises in oil prices drive up the prices of other energy sources and residential living expenses. Due to the low price elasticity of household energy consumption, residents must postpone other consumption, objectively leading to a decline in their ability to repay their mortgages and an increase in the defective rate of housing loans. The above-referenced factors are intertwined, eventually leading to the bursting of the real estate market bubble and the financial crisis.
The 2008 global financial crisis provides an important inspiration for us to renew our understanding of the impact of energy price fluctuations on the financial market, especially the real estate market. Based on domestic research and the current situation, the impact of energy prices on the fluctuation of real estate prices has not yet attracted attention. The main reason is that China's market-oriented reform of domestic energy prices is incomplete. However, the severe energy shortage of 2021 in some areas of China reveals that the reform of the resource and energy price formation mechanism is lagging. Furthermore, the price linkage mechanism of domestic and foreign energy markets is not perfect,and the problem with this mechanism has become an important factor restricting high-quality development of the domestic economy. In the future, domestic energy prices will be more flexible, fluctuate significantly, and have an increasingly strong effect on residents' living expenses and welfare levels. From this perspective, research on the relationship between energy prices and real estate price fluctuations has a practical significance as it not only expands the traditional research framework on the relationship between energy prices and macroeconomics, but also provides a new perspective on predicting and preventing financial market risks.
For the reasons set forth above, we use the data of prefecture-level and larger cities in China to empirically analyze the relationship between energy price changes and house price fluctuations and examine its impact mechanism and routes. Our empirical results are as follows. First, similar to developed countries, energy price fluctuation is an cause of real estate price fluctuations in China. To prevent financial risks caused by real estate market fluctuations, it is necessary to pay attention to the role of energy prices. Second, the impact of energy prices on real estate prices occurs mainly through the intermediary of interest rates that affect the demand for house purchases and the intermediary of construction costs and investments that affect the supply of real estate. Third, by considering the population size factor, we find that the impact of energy prices on real estate prices is greater and more obvious in megacities than elsewhere. Fourth, the impact of energy prices on real estate prices is asymmetric; although rising energy prices lead to increased fluctuations in real estate prices, the impact of falling energy prices is non-significant.

Perceived economic policy uncertainty, defined as the subjective perception of consumers, managers, or other decision makers that economic policy is likely to change, is one of the greatest challenges faced by enterprises. Especially in recent years, the international political and economic spheres have been rife with uncertainty because of the impact of COVID-19, international trade friction, and regional conflicts, further increasing economic policy uncertainty. Therefore, economists are increasingly paying attention to economic policy uncertainty. The literature shows that in general, such uncertainty discourages business investment, reduces hiring and trade, lowers enterprises' output, and may impede long-term economic growth. Therefore, it is important to study ways to reduce enterprises' perception of economic policy uncertainty.
The arrival of the digital economy provides a solution to this dilemma. In the digital economy, enterprises transform their production and operation systems, management models, and core business processes with the help of digital technologies, creating disruptive innovations and changes. This process is called “digital transformation.” We argue that through digital transformation and by introducing digital technologies such as artificial intelligence, big data, and cloud computing, enterprises can, to some extent, alleviate the deficiencies arising from their limited access to information and limited ability to process information, thus reducing their perception of economic policy uncertainty.
We use 2012-2020 data on Chinese A-share listed manufacturing companies and find that companies' digital transformations effectively reduce their perception of economic policy uncertainty. The financial data are from the CSMAR database. We use textual analysis to extract words related to economic policy and uncertainty from the annual reports of the listed companies to construct firm-level economic policy uncertainty (FEPU) and firm-level indicators of digital transformation. In the baseline regression, the OLS estimates suggest that for a one standard deviation increase in a company's digital transformation, its perception of economic policy uncertainty decreases by 3.86%. In the robustness tests, the baseline results hold when we use the share of fixed assets related to the digital economy as a proxy for digital transformation, control for annual report characteristics (tone, sentence length), and exclude the possible strategic reporting behavior of companies in their annual reports. We use various methods to address potential endogeneity, such as controlling for high dimensional fixed effects, the Bartik instrumental variable method, and the synthetic difference-in-differences method (SDID), and our main results still hold. Finally, we explore two main channels through which digital transformation reduces companies' perception of economic policy uncertainty: reduced information asymmetry and improved information processing capabilities.
The two main contributions of our paper are as follows. First, we enrich the literature on economic policy uncertainty by revealing a new way to reduce perceived uncertainty. Unlike previous studies, we use a firm-level economic policy uncertainty perception index to identify the uncertainty perception of different companies. Meanwhile, we analyze how to reduce enterprises' perception of economic policy uncertainty from the perspective of digital transformation, thus filling a gap in the literature.Second, we find that an enterprise's digital transformation can reduce its perception of economic policy uncertainty, thus providing new insight into the effects of digital transformation. This paper is the first to study the effect of enterprises' digital transformations on their perception of economic policy uncertainty. As enterprises' policy expectations heavily influence their behaviors such as investment, hiring, and R&D, this paper reveals the deeper reasons or mechanisms behind enterprises' behavior and performance related to digital transformation.
Our research has important policy implications for maintaining economic policy stability and promoting the digital transformation of manufacturing enterprises. First, economic policies must be consistent and uniform to reduce uncertainty. With stable expectations, enterprises can have stable investment, hiring, and R&D, i.e., stable expectations can stabilize growth. Second, our research provides insight into how to promote the integration of the digital and real economies. We demonstrate that the digital transformation of enterprises can reduce their perception of economic policy uncertainty and thus promote the development of the real economy. Therefore, to accelerate the development of the digital economy, relevant departments should prioritize supporting the digital transformation of enterprises that are vulnerable to international and domestic macroeconomic situations and economic cycles.

According to data from the National Bureau of Statistics of China, by the end of 2021, the proportion of people aged 65 and above in China had reached 14.2%, which is far higher than the world average (9.54%) and exceeds the level that represents moderate aging of a society (14%). The report of the 20th National Congress of the Communist Party of China (CPC) stated that implementing the “national strategy of actively responding to population aging” is necessary to promote high-quality development. A superior financing environment and sufficient credit resources are crucial to maintain companies' operations and to realize economic transformation and upgrading. Companies' debt financing decisions are the micro embodiment of the financing environment and a frequent focus of academic research.
Since MM theory was introduced, the literature on corporate financing decisions has expanded, and the trade-off and pecking order financing theories have been developed. These theories discuss the optimal capital structure for companies and emphasize the advantages of debt financing, such as a reduced tax burden and its restraining effect on overinvestment. Debt financing decisions are related to companies' asset allocations, which are affected by many internal and external factors. Different from the literature, we introduce regional population structure to study the impact of population aging on corporate debt financing decisions and the efficiency of financial resource allocation.
Using 2007-2019 data on Chinese listed companies, we empirically analyze the impact of regional population aging on companies' financing decisions. The results show that deepening regional population aging significantly reduces companies' debt financing. After using previous family planning intensity as an instrumental variable to address endogeneity concerns and performing a series of robustness tests, the conclusion holds. The mechanism analysis shows that regional population aging reduces corporate debt financing through two channels: intensifying financing constraints and increasing business risk. Our heterogeneity analysis shows that the impact of population aging on corporate debt financing is more obvious among non-state-owned companies, small and medium-sized companies, traditional industries, and capital-and labor-intensive industries. Furthermore, population aging exacerbates the mismatch of financial resources. This is reflected in the fact that regional population aging significantly increases the number of companies with insufficient financing, and this effect is more obvious among companies with higher productivity.
This study makes the following contributions. First, it enriches the literature on the economic impact of population aging from the micro perspective of corporate debt financing decisions. Many scholars research the effects of the increasing trend of population aging. However, their research mainly focuses on the macroeconomic level; few studies focus on the impact on micro companies. Using census data on prefecture-level cities, we are the first to explore the impact of regional population aging on the debt financing decisions of micro companies, which enriches the literature in this field. Second, this study expands the relevant research on the factors that influence corporate debt financing. Our in-depth analysis of the underlying mechanism aids understanding of how social factors affect corporate investment and financing decisions.
This finding has the following implications. First, attention should be paid to the economic effects of the aging population on companies, and financial strategies should be implemented to help firms cope. As population aging reduces the supply of capital, policymakers should actively implement supply-side structural reforms to improve the efficiency of resource allocation. Second, in the face of rising labor costs brought about by population aging, companies' business risks are gradually increasing. Companies can seek positive transformation through technological innovation and by substituting robots for human labor. However, the central and local governments should introduce relevant policies to increase the labor supply and reduce labor costs, such as delayed retirement policies and flexible pension system reforms.

With the development of digital technologies such as big data, cloud computing, blockchain and artificial intelligence and their widespread application in the financial field, FinTech has become an important force in promoting financial development and serving the real economy. The literature shows that FinTech is playing an increasingly important role in alleviating information asymmetry, reducing financial service costs, improving operating efficiency and enhancing financial accessibility. FinTech has also profoundly affected traditional financial products and services, especially the activities of traditional financial institutions. Thus, to better serve the real economy, promote high-quality economic development and further enhance the construction of the modern financial system, we need to have a better understanding of the development of FinTech and its relationship with traditional banks.
According to contemporary intermediation theory, banks fulfill two important economic functions: risk transformation and liquidity creation. However, although some studies discuss the impact of FinTech on bank risk-taking, little research examines the factors that affect the creation of bank liquidity. By realizing the function of liquidity creation, banks can effectively improve their capital allocation and promote the growth of the real economy. However, little theoretical and empirical research examines how FinTech affects bank liquidity creation. This paper theoretically and empirically explores the relationship between FinTech and traditional finance with the aim of promoting the integrated development of financial innovation and the high-quality development of the financial sector.
Based on data from 145 commercial banks in China from 2011 to 2020, this paper examines the impact of FinTech development on bank liquidity creation and its mechanism. The results show that (1) the external competition effect brought by the development of FinTech is greater than the technology spillover effect, which inhibits bank liquidity creation. This is mainly reflected in the negative impact on asset-side liquidity creation and off-balance sheet liquidity creation. However, FinTech has no significant impact on liability-side liquidity creation. The increase in the breadth of coverage and depth of use of FinTech reduces bank liquidity creation, while the increased digitalization of FinTech promotes bank liquidity creation. (2) FinTech reduces bank liquidity creation by decreasing the cost efficiency and profit efficiency of banks and inhibiting the overall default risk-taking, asset risk-taking and capital shortage risk-taking of banks. (3) With the development of FinTech, large banks and highly digitized banks create more liquidity, although banks in highly market-oriented regions create less liquidity.
This paper makes four main contributions to the literature. First, by investigating the impact of FinTech development on bank liquidity creation and its mechanism, we not only enrich research on the effects of FinTech on traditional bank behavior but also provide a useful supplement to research on the factors that affect bank liquidity creation. Second, following the method proposed by Berger and Bouwman (2009) and combined with the actual activities of Chinese commercial banks, we construct a bank liquidity creation index to reflect the bank liquidity mismatch. By examining the impact of FinTech on bank liquidity creation, we not only analyze the overall relationship between FinTech and bank liquidity creation but also further analyze the impact of FinTech on the components and sub-dimensions of bank liquidity creation. Third, this paper investigates how FinTech development affects bank liquidity creation through channels such as bank operating efficiency and risk-taking. Fourth, we analyze the asymmetric impacts of FinTech on liquidity creation among different bank entities. We classify the banks in our sample into large banks, highly digitized banks and banks in highly market-oriented regions, and examine the heterogeneous impacts of FinTech on bank liquidity creation.
The main conclusions of this paper have a number of important policy implications. First, the government should encourage banks to engage in digital transformation and technology empowerment, because in addition to improving their operating efficiency and risk-taking, this will increase their liquidity creation and improve their ability to serve the real economy. Second, the government should encourage banks to introduce online loans and increase their loan books under the premise of controlling risk, and thus promote bank asset-side liquidity creation. The government should also support banks in developing innovative off-balance activities and expanding their credit commitments, and thus increase the off-balance sheet liquidity creation of banks. Third, the government should support small and medium-sized banks, less digitized banks and banks in highly market-oriented regions to carry out digital transformation, enhance their ability to deal with the external shocks brought by FinTech and thus promote the creation of bank liquidity.

Since the 1980s, China's decentralization reform of its administrative system has effectively promoted the rapid growth of the economy by strengthening interregional competition. However, it has also triggered competition among local governments for production factors, leading to the regional segmentation of factor markets. In the labor market, although the gradual reform of the hukou system has reduced the blocking effect of hukou control on labor mobility, the discriminatory subsidy competition for human capital continues to affect the efficiency of the spatial allocation of labor. In the capital market, local governments can not only influence banking institutions and intervene in regional credit funds but also affect the relative price of capital through industrial policies. In recent years, the central government has launched a series of policies to deepen the market-oriented reform of production factors and build a unified national market. The central government clearly states that local protection and market segmentation should be eliminated and the free and orderly mobility of production factors should be promoted.
The literature mostly measures the interregional segmentation effect in factor markets based on the dispersion of labor and capital prices among different regions. The drawback of this approach is that the differences in factor prices between regions not only reflect institutional segmentation between different administrative jurisdictions but also contain various frictions that are difficult to observe. Economic and social differences between regions could also have an impact on factor compensation and productivity. Because non-institutional elements are not ruled out, it is difficult to directly test the existence of regional segmentation of factor markets; however, indirectly judging the segmentation status using the time trend of factor price dispersion among regions affects the reliability of any conclusions.
We design a novel identification strategy that is based on the spatial adjacency of the prefecture-level cities next to China's provincial borders and uses the Annual Survey of Industrial Firms (ASIF) to estimate the interprovincial segmentation effect in factor markets. Along each provincial border, we use the “cross-province” adjacent city pairs as the treatment group and their “within-province” counterparts as the control group to ensure similarity between the two groups with respect to the frictional barriers to factor movement. The benchmark regressions show that both the labor and capital markets experience an interprovincial leap in the gaps between factor compensation and productivity, indicating that there is a significant inter-provincial segmentation effect in the factor markets.
We then conduct three robustness tests. First, concerning the fact that some provincial boundaries may also be geographical and cultural dividing lines, we exclude adjacent cities that have mountains, rivers, or dialect diversity between them. Second, we use the balance test to exclude the city pairs that are not comparable in terms of various economic and social covariates. Third, to alleviate measurement error, we adjust our calculation of factor compensation and productivity using information about human capital and non-wage compensation provided by the ASIF over several years. All of our results show that our major conclusions hold. In addition, we use the same identification strategy to investigate factor market segmentation among prefecture-level cities within the same province. There are also segmentations of the labor and capital markets among prefecture-level cities, but the degree of segmentation is approximately half that of interprovincial segmentation.
Using the estimates of interprovincial segmentation effects in the factor markets, we then conduct a regression analysis of the institutional causes of segmentation. The results show that tax competition among local governments under fiscal decentralization and the overlap of interownership barriers and administrative boundaries are two major causes of interprovincial segmentation in factor markets. Furthermore, although the staggered opening process of the hukou system alleviates segmentation in the labor market, at least to some extent, the evidence on this point is limited.
The policy implication of this paper is that to achieve a market-oriented allocation of production factors, the elimination of factor market segmentation among administrative regions must be an important policy target. For this reason, it is necessary to build an incentive mechanism to support the construction of a unified national market, increase the supervision and punishment of factor market segmentation, and stimulate healthy competition between regions. At the same time, efforts should be made to eliminate institutional barriers that hinder market-oriented allocation and promote the mobility of factors in an integrated market.

Financial regulatory reform and bank risk prevention consistently attract substantial attention and have become strong protectors of stable national economies and social development. Under these circumstances, a slight change in the loan-to-deposit ratio reform (LDR), as one of China's major financial regulatory reforms, could affect the entire reform program. Since June 2015, both the loan-to-deposit ratio and the non-performing loan (NPL) ratio have been climbing in the banking industry following the State Council's “Amendment to the Commercial Bank Law (Draft),” which formally abolishes the requirement that the loan-to-deposit ratio should not exceed 75%. According to statistics from the China Banking and Insurance Regulatory Commission, the deposit-to-loan ratio of the entire banking industry exceeded 75% as of 2019, while the NPL ratio increased from 1% in 2013 to 1.87% in 2019. Those data challenge the financial regulatory reform, raising the question of whether the regulatory reform conflicts with the goal of “guarding the bottom line of systemic risk”. Accordingly, our innovative focus is the relationship between LDR regulatory reform and bank risk-taking, which is a matter of both theoretical and practical significance.
We primarily explore the net effects of LDR regulatory reform on bank risk-taking and the transmission mechanism using micro panel data of 124 Chinese commercial banks from 2013-2018 and a continuous difference-in-differences (DID) and mediating effects model, which uses the regulatory reform as a quasi-natural experiment. Our main conclusions are as follows. First, the LDR regulatory reform reduces bank risk-taking, which implies that regulatory reforms of the deposit-to-loan ratio are consistent with the goal of “preventing systemic risk”. Second, both the theoretical and practical evidence support our key points. On the one hand, the rising NPL ratio is not caused by the regulatory reform, but by the macroeconomic downturn; on the other hand, the LDR regulatory reform reduces bank risk-taking through the three channels of the risk transfer of deposit competition, the risk transfer of shadow banking business, and the risk absorption of asset returns. Third, based on our heterogeneity analysis, the LDR regulatory reform primarily reduces the risk-taking of non-state-owned banks with assets of more than 200 billion yuan. Fourth,the LDR regulatory reform has a negative effect on bank risk-taking, which shows poor credit risk management capabilities, indicating that there is room for further optimization of regulatory reform according to the moderating effect analyses.
Our marginal contributions are as follows. First, we evaluate the net effect of the LDR regulatory reforms on bank risk-taking for the first time and reveal the logic behind it. At the theoretical level, we further analyze the mechanism using the three channels to provide more detailed theoretical support than in the past and, to a certain extent, fill the gap in the literature on the relationship between China's LDR regulatory reforms and bank risk-taking. At the practical level, we provide evidence for the regulatory reform of China's deposit-to-loan ratio. Second,compared to the dichotomous DID, using the continuous DID to assess the policy effect can not only overcome the sample self-selection bias caused by grouping but also accurately characterize the relationship between the two methods given that the regulatory reform is a “one-size-fits-all” policy.
We also provide focal suggestions from the perspectives of both regulators and commercial banks.First,regulators should build a dynamic reporting system for business data under the existing liquidity supervision system and establish a scientific evaluation system based on credit risk management capability that avoids a “one-size-fits-all” policy.Second,banks should actively construct a financial technology platform and improve their credit risk management system. Third, banks should optimize their internal risk control framework and establish a liquidity risk management committee to enhance the self-discipline mechanism. Fourth, banks should actively engage in social responsibility and allow their good reputation to play an active role in absorbing medium-and long-term deposits to provide sufficient capital for loans. Fifth, banks should use financial instruments such as asset securitization to transform illiquid medium-and long-term loans into liquid, highly creditworthy bond-type securities in the financial market to improve asset liquidity.

Ecological laws are essential for the green transformation of the economy and overall social development. Firms play a key role in economic development and ecological protection. We examine the effect of strengthening the ecological legal environment on the green technological innovation of microenterprises to better understand how enterprises cope with changes in the external judicial environment and how they can achieve high-quality development within the context of ecological laws.
According to the classical view, environmental regulations increase firms' costs, crowding out other investments. Meanwhile, green technological innovation involves high risk, high investment, long time horizons, and patent conversion. Therefore, environmental regulations may hinder technological innovation. However, recent studies confirm that green technological innovation, as a long-term green transformation strategy, can help enterprises reduce their environmental costs, enhance their green competitiveness, and realize their transformation and upgrading. This ultimately results in a win-win in terms of economic efficiency and environmental protection. However, empirical evidence of how regional environmental justice reforms affect firms' green innovation is lacking. We examine this effect using the gradual establishment of regional environmental courts as a quasi-natural experiment.
Since 2007, intermediate people's courts have been establishing environmental courts. Using the 2003-2019 data of A-share listed manufacturing companies in China and the difference-in-differences method, we examine the impact of this environmental justice reform on firms' green innovation. Our results show that the establishment of environmental courts significantly enhances firms' production of green patents. Moreover, mechanism tests suggest that the courts promote firms' green transition by increasing their risk of litigation and expected cost of environmental violations. This effect is stronger in areas with high judicial independence, strong legal governance, and high industrial pollution emissions and in areas where residents have a strong awareness of judicial protections. The environmental courts motivate firms to improve the efficiency of their innovation resources. Furthermore, firms that invest in environmental protection in the short term improve their green innovation in the long term.
Our study's contributions are as follows. First, we find that the establishment of local environmental courts promotes corporate green innovation. This provides micro-level evidence supporting previous studies' finding that environmental courts mitigate urban pollution. It also reveals the specific mechanism by which local environmental courts promote environmental pollution control: firms improve their environmental governance through green innovation activities.
Second, we test for differences in this effect using the establishment of environmental courts as a shock to the local legal environment. The results show that enforcing environmental law at the local level promotes firms' green innovation without crowding out other investments.
Third, according to the Porter hypothesis, firms that invest in environmental protection increase their innovation and application of clean technologies, ultimately achieving a win-win situation for both environmental management and profitability. Consistent with the Porter hypothesis, our results show that firms that make short-term environmental investments are more likely to engage in green innovation activities in the future. This implies that short-term responses to changes in the judicial environment have a transitional effect. Short-term environmental investments promote the transition to a long-term development strategy, which is a practical reference for understanding the transition decisions of firms that face changes in their judicial environment.
Finally, most studies of law and economics in China focus on how changes in the legal system affect economic performance. Our study enriches this body of literature by examining the establishment of regional environmental courts to strengthen environmental justice. The results demonstrate that such legal capacity building can promote economic development.

Huge declines in corporate performance not only results in significant economic losses for investors but also affects the development of other corporations in the group and upstream and downstream enterprises. Thus, it is not conducive to the development of a stable and healthy capital market. Moreover, many corporations have complex economic networks with hidden economic links, creating pathways through which economic events can have ripple effects at the regional, industry, or even national level. Large declines in corporate performance, a prominent phenomenon in China's capital market in recent years, may create negative externalities through such economic networks. However, both practical and academic discussions of the economic impact focus on the affected corporation and directly related corporations. Therefore, we lack reliable empirical evidence of whether it affects corporations that are not directly related.
In a market economy, corporations can build broad economic networks through economic transactions and have indirect links with other corporations via the government. In China's market, there are long-term economic links between the government and corporations, with taxation being the most common. This link provides a useful perspective for examining the spillover effects of large declines in corporate performance. Tax collection efforts by tax authorities adapt to changes in the external environment, which affects the tax burdens of regional corporations. Specifically,when there is a sudden large decline in corporate performance, particularly by major corporations,there will be a corresponding sharp decrease in tax payments. This affects the annual tax collections by tax authorities, which in turn increases their efforts to collect tax from other local corporations and ultimately increases the tax pressure on those corporations.
To verify this hypothesis, this paper examines the influence of the huge declines in corporate performance on the tax pressure experienced by other local corporations using 2008-2018 data on A-share listed corporations. The CSMAR, Wind, and RESSET financial research databases are used to gather firm-level financial data, and the CEIC China Economic Database is used to obtain the macroeconomic data. According to the test results, the tax burden of other local corporations significantly increases following a large decline in some corporate performance within a city. The results of the mechanism test show that the tax collection authorities in a region experience tax collection pressure as a result of a large decline in corporate performance, so they increase their tax collection efforts in the short term, creating the aforementioned spillover effect. Furthermore, we find that the effect is stronger following performance declines by pillar corporations and that pillar corporations and corporations with higher quality of earnings suffer greater tax pressure than their counterparts after a huge decline in corporate performance within a city. Finally, a large decline in regional corporate performance may stymie the investment activities of other local corporations and harm their market value.
This paper makes the following contributions. First, it is the first to show that a large decline in corporate performance has a broad spillover effect. Moreover, we find that such an event has negative externalities for corporations that are not directly related. This finding not only provides market participants with a more thorough understanding of the spillover consequences of a large decline in corporate performance but also presents scholars with new ideas to investigate the economic externalities of other unexpected events.
Second, this paper broadens academic understanding of the issues that determine corporate tax burdens. Few studies consider how a corporation's tax burden affects other corporations. We find that a large decline in corporate performance disrupts local governments' tax planning and thus increases the tax burdens of other local corporations.
Third, this paper has reference value for implementing tax cuts and policies to reduce tax burdens. We find that a huge decline in corporate performance increases the tax burden of other local corporations, decreasing investment and damaging market value. Other unexpected economic events in recent years may have had comparable spillover consequences. This paper could assist government departments in determining how to deepen tax reform and improve the flexible taxation system to deal with unexpected situations.

In recent decades, China has experienced rapid urbanization, during which the spatial size of its cities has expanded substantially. To accelerate its urbanization, for example, China launched a nationwide jurisdiction-adjustment policy in the past decade that incorporated one or several peripheral counties into the central city and expanded the spatial scale of cities. However, the impacts of this government-directed city growth on households are not well investigated in the literature. We fill this gap by examining the causal effects of government-directed city growth on households' disposable income.
Since 2010, China has been using city annexation in many prefecture-level regions to promote the New Urbanization strategy. By redefining the counties adjacent to prefectures' central cities as municipal districts, city annexation expands the spatial scale of central cities. Unlike rural counties, where agriculture accounts for a significant share of the local economy, municipal districts focus on industrial and commercial development. Therefore, incorporating a county into the central city promotes the development of non-agricultural sectors and urbanization in the treated counties. Using data from the China Household Finance Survey (CHFS), we investigate the effects of incorporating counties into central cities on individual households, focusing on household disposable income.
We utilize data from the CHFS of 2013, 2015, and 2017, along with the difference-in-differences method, to examine the effects of county-city mergers on household disposable income in China, reveal the mechanism underlying these effects, and further explore their role in narrowing income disparity. We report four main findings. First, city annexation significantly improves the disposable income of households in the treated counties by an average of 9.35%. A flexible estimation shows that the disposable income of households in the treatment groups is not different from that of households in the control group before the county-to-district conversion, but it is significantly higher after the conversion. Second, the county-to-district conversion increases household disposable income by increasing wages and industrial/commercial income. Our channel analysis shows that incorporating a county into the central city improves labor market conditions, increases the number of jobs, and stimulates entrepreneurship in the treated counties. Third, the revealed income effects exhibit heterogeneity between counties and households. Entrepreneurship's effects on income exist only in counties that belong to prefectures with developed central cities. In contrast, the conversion's effects on wages are significant only if the central cities are relatively undeveloped. Rural areas with a low level of economic development are more likely to be affected than urban areas. Educated people in the treated counties are more likely to obtain higher wages and industrial/commercial income after the reform than are uneducated people. Finally, incorporating counties into central cities has different income-enhancing effects in households with different income levels. Incorporation has a strong impact on middle-and low-income households but has no significant impact on wealthy households, suggesting that incorporating counties into central cities decreases income disparity within households in the treated counties.
We make two contributions to the literature. First, using data from a household survey, we contribute to the literature by examining the effects of the government-directed and planned urbanization policy on the level and structure of household income. This is our main contribution. Previous studies on jurisdiction adjustment focus on its impacts on macro indicators such as urbanization, public goods provision, and economic development. However, the impacts of jurisdiction adjustment on households are not well investigated. Second, our finding that incorporating counties into central cities affects household disposable income through its effects on labor markets and entrepreneurship reveals the mechanisms of jurisdiction adjustment.

Since China's reform and opening up, the property income of Chinese households has gradually increased, but its proportion of total income has remained low. In 2021, property income in China increased by 10.2% month-on-month, while the proportion of property income in total income was only 8.8%. The asset structure of Chinese households is relatively homogeneous, with assets highly concentrated in real estate. Meanwhile, the degree of participation in various financial markets is low, and risk-free financial assets are valued more than risky financial assets.
Many recent studies examine how Chinese households invest their financial assets and the factors that influence those decisions, such as demographic characteristics (e.g., age and education), background risks (e.g., labor income and health risks), family income, and asset scale. To a certain extent, these studies explain the limited participation of households in financial markets, but most studies ignore the credit constraints households face. Credit constraints are the various restrictions creditors impose on borrowers due to information asymmetry and other factors, such as creditworthiness, financial status, and repayment ability. As a developing country, China's financial markets are not yet mature, and there are serious credit constraints on both the supply and demand sides. Households facing credit constraints are unable to borrow funds and must use savings to meet their financial needs, which negatively affects their income and risk, so they reduce their investment in risky financial assets. Thus, credit constraints have a non-negligible impact on households' financial-asset allocations. However, research on this issue is lacking.
Using 2018 China Household Income Project Survey (CHIPs) data, this paper examines how credit constraints affect households' participation in financial markets. The results show that credit constraints have a significant negative effect on the probability and degree of financial market participation in general. Moreover, demand-based credit constraints have a stronger negative impact on households' financial market participation than do supply-based credit constraints. Regarding channels, households that face dual institutional and private credit constraints have a lower probability of holding and a lower weight of risky financial assets compared with households that face only a single type of credit constraint. Regarding intensity, the greater the credit constraints, the lower the probability and degree of household financial market participation. In terms of a mechanism, credit constraints affect households' incomes and risk preferences, which in turn negatively affect their financial market participation. Finally, the effect is stronger for households with low wealth, young and old households with high relative wealth, and middle-aged households.
This paper's three main contributions to the literature are as follows. First, it comprehensively and accurately defines credit constraints using CHIP survey data, which extends and enriches the related literature. Second, it distinguishes between supply-based and demand-based credit constraints, institutional and private credit constraints, and the strength of credit constraints and examines their effects on households' financial market participation. Finally, a heterogeneity analysis explores the influence of wealth and age in the effect of credit constraints on households' financial-asset allocations. The results can be used to formulate credit support policies differentiated by wealth level and age.

Modern economics research demonstrates that protecting real rights is an important cornerstone for promoting economic growth and financial market development. The promulgation and implementation ofReal Rights Law of the People's Republic of China(hereinafter referred to as the“Real Rights Law”)marks an increase in real rights protection in China. However, the literature mainly studies the economic effects of the Real Rights Law from the perspective of the expanded list of potential collateral and constraints on corporate finance, ignoring how it strengthens creditor protections. Meanwhile, the implementation of Enterprise Bankruptcy Law of the People's Republic of China (hereinafter referred to as the “Bankruptcy Law”) on June 1, 2007, established and improved legal protections for creditors. Against this background, understanding how changes in the creditor protection regime affect the credit market and stable development of the real economy is extremely important.
Creditor protection has long been an important issue in corporate finance. The literature about the effects of creditor protection on corporate economic behavior comprises two main categories: The first studies how enhancing creditor protection affects borrowing behavior from creditors' perspective and finds that an increase in the level of creditor protection eliminates credit market frictions and enhances creditors' willingness to take risks, thus increasing the availability of corporate finance. The other category examines the effects of creditor protection enhancements from the debtors' perspective. The main findings are that creditor protection enhancements increase the risk of transferring control to creditors, which reduces debtors' willingness to take risks and ultimately has a negative effect on a firm's product market performance. The essence of risk-taking is that managers are good at grasping investment opportunities and bearing investment risks to obtain excess profits. This is the driving force behind the sustainable development of enterprises and an important factor in improving enterprise value. Companies that are willing to take risks and pursue good investment opportunities ultimately promote long-term economic growth. The implementation of China's 2007 Bankruptcy and Real Rights Laws provide a research opportunity to identify the relationship between creditor protection and corporate risk-taking.
Using the 2007 Bankruptcy and Real Rights Laws as a quasi-natural experiment, we construct a sample of firms with high bankruptcy risk and study the effects of creditor protection on corporate risk-taking using the difference-in-differences method. After excluding alternative explanations, this study finds that strong creditor protections significantly inhibit corporate risk-taking. Further tests show that this effect is more pronounced for those in regions with more efficient law enforcement. The economic consequences test shows that the reduction in a firm's willingness to take risks as creditor protections become more stringent significantly weakens its product market performance.
The academic contributions of this study are summarized as follows. First, from the risk-taking perspective, this paper extends the research on the economic consequences of creditor protection by verifying the impact of strengthened creditor protections on corporate risk-taking and identifying its mechanism.
Second, using a difference-in-differences model and taking the 2007 implementation of China's Bankruptcy and Real Rights Laws as a quasi-natural experiment, this paper identifies the causal relationship between creditor protections and corporate risk-taking.