The influence of external institutional environments on the internal functioning of business groups remains a critical yet underexplored area of research. In this paper, we focus on China's pro-market judicial reforms and examine how these reforms affect internal product and service transactions within business groups, finding that such reforms significantly reduce intra-group transactions. We further demonstrate that this decline reflects a strategic substitution toward external market transactions rather than an overall contraction in firm operations, and that the effect is not driven by managerial self-dealing but aligns with institutional voids theory. The effect is particularly pronounced in regions with underdeveloped product markets and weaker informal institutions, and in firms with lower reputations and stronger political connections. Moreover, our results hold consistently across various transaction types, whether seller- or buyer-initiated, service- or goods-related, and remain robust across alternative regression models, explanations, and regardless of the geographic proximity of group firms. These findings contribute to understanding the role of internal transactions within business groups in addressing institutional voids and add to the broader literature on how business groups emerge and adapt in response to gaps in institutional frameworks.

Many emerging markets allow foreign investment as a way to reform domestic markets. Extant studies have found a positive externality on innovation brought forth by foreign direct investment (FDI); however, we know very little about the externality of another form of foreign investment, ownership by foreign institutional investors (FII), on innovation. In this paper, we document one form of FII externality by showing that foreign institutional ownership of the customer firm results in higher supplier innovation. We also show that the FII externality on supplier innovation is stronger when customers have more influence on the suppliers and when the FIIs can facilitate information flow better. Our findings suggest that the real impact of FII can go beyond the underlying firms, and promoting FII may benefit firms, especially smaller firms in emerging countries that do not directly have foreign ownership.

Investment banker human capital is valuable in mergers and acquisitions. Exploiting a unique hand-built dataset, this paper studies whether and how investment banker's education and experience impact the merger performance in China. We find that investment bankers' education credentials are positively related to the post-merger performance; however, greater investment banker experience does not. We further explore the channels and show that the education effect is stronger in deals with higher information asymmetry and acquirers with worse corporate governance. On the other hand, experience increases merger performance in deals with high information asymmetry but reduces deal performance in poorly governed firms. Our findings suggest that higher education attainment facilitates both the advisory and monitoring role of investment bankers, while more experience makes investment bankers better advisors yet worse monitors. Our findings also suggest that investment bankers' roles in value creation are highly dependent on different institutional backgrounds, and one cannot generalize the findings in the U.S. across borders.

We assess the impact of nationwide minimum wages on employment throughout the whole wage distribution by exploiting geographical variation in the level of wages. We find a substantial increase in wages at the bottom of the wage distribution, while we detect a small, statistically insignificant negative effect on employment. Combining the estimated change in the wage distribution with a tax and benefit microsimulation model, we show that the minimum wage generates considerable proportional income gains up to the middle of the household income distribution.