In China's credit markets with financial repression, state-controlled non-financial firms (SOEs) are privileged in gaining access to bank credit, while non-SOEs, especially those small- and medium-sized firms, are disadvantaged. Corporate re-lending emerges as a response wherein the former secure bank loans and then re-lend to the latter. We document the characteristics of inter-corporate loans from a sample of legal cases. We employ four empirical strategies to conduct a forensic study of re-lending by detecting abnormal relations between financial accounts of listed firms. State-controlled companies conduct more re-lending, and firms with better growth opportunities, stronger corporate governance, and more financial constraints engage less. We compare re-lending with entrusted loans and find that firms extending nonaffiliated entrusted loans conduct re-lending actively, while firms offering affiliated entrusted loans do not. We also compare inter-corporate loans with micro-credit company loans in a review of legal cases.

This paper investigates the local peer effects of corporate social responsibility (CSR). We find that a firm's CSR engagement comoves with that of other firms headquartered nearby. The results are robust when considering the nonlocal dominant industry CSR portfolio and different cross-region sensitivities to macro shocks. Moreover, the CSR of firms that change their headquarters location experiences an increase (decrease) in comovement with the CSR of firms in the new (old) location. We further explore several channels through which the local CSR comovement is motivated. We show that local CSR comovement is mainly driven by a firm's incentives to access financing. Besides, we find weak evidence that firms comove in CSR in order to set a positive image to the public and our findings do not support the agency channel of the local peer effects of CSR.

This paper provides new evidence on the roles and strategies adopted by different types of debtor-in-possession (DIP) lenders: “loan-to-loan” (LTL) lenders—prepetition secured bank lenders providing DIP financing, and “loan-to-own” (LTO) lenders—activist investors (i.e., hedge funds or private equity funds) providing DIP financing. We find that LTL is more likely in Chapter 11 firms with better operating performance, when prepetition bank lenders' stakes are at risk, or when they have prior lending relationships with the distressed borrower. In contrast, LTO is more likely in small firms or when prepetition bank lenders' loans are over-collateralized. Finally, we show that much of the governance improvement at the emergence is attributed to LTO lenders. We conclude that creditors of different institutional types adopt distinct strategies to enforce their control rights under Chapter 11 reorganization and to have contrasting effects on the governance outcomes of emerged firms.

The percentage of S&P 500 firms using multiyear accounting-based performance (MAP) incentives for CEOs increased from 16.5% in 1996 to 43.3% in 2008. The use and design of MAP incentives depend on the signal quality of accounting versus stock performance, shareholder horizons, strategic imperatives, and board independence. After the technology bubble, option expensing, and the publicity of option backdating, firms increasingly use stock-based MAP plans to replace options, resulting in changes in pay structure, but not in pay level. While firms respond to the evolving contracting environment, they consider firm characteristics and shareholder preferences and do not blindly follow the trend.

Although the impacts of air pollution on individual health are well documented, it is unclear whether and how air pollution affects firm strategy on employee treatment. This study examines this issue in the context of China and presents strong evidence that air pollution significantly enhances employee treatment. To establish causality, we further instrument for air pollution using thermal inversions, introduce a regression discontinuity approach relying on the Huai River boundary, and a falsification test. Monetary compensation, safety security, and career training jointly determine our findings. Two plausible mechanisms are corporate brain drain and public attention. Our results are more pronounced for non-state-owned firms, and firms with less financial constraints, intensive R&D or competition, and increased job market opportunities. Overall, we highlight that air pollution is an important noneconomic factor driving firms' human capital and employee treatment strategy.

We examine whether audit partner individualism reduces earnings comparability in the United States. We argue that individualistic audit partners are more likely to deviate from internal working rules and allow clients more flexibility in making accounting choices, consequently decreasing their clients' earnings comparability. Using a novel partner‐level measure of individualism, we find that within individual Big 4 audit firms, earnings are less comparable between a company audited by an individualistic partner and a company audited by a non‐individualistic partner, relative to a pair of companies that are each audited by a non‐individualistic partner. Our inferences are robust to a changes analysis, a falsification test, and a propensity score matching procedure. We also find that the effect of partner individualism is less salient when the audit firm is under more stringent regulatory monitoring and when clients are more important, but more salient when individualistic partners are more confident about being different. Further analyses suggest that our main inferences are robust to controlling for differences in partners' cultural backgrounds and using client‐pairs audited by the same audit partner. Collectively, our study provides novel evidence on the role of auditor individualism in earnings comparability.

Many studies examine the use of false news as a method of stock price manipulation. Empirical research shows, for example, that false news generates persistent abnormal returns and affects trading volume. Studies also show that institutions often know about news before it breaks. However, the role institutions play in false news events is still unclear. To understand that role, we track institutional order flow around the release of false news in the Chinese stock market. We find that institutions seem to have early information about false news releases. Their prerelease order flows predict false news sentiments and market reactions. We further find that the early information may come from the media outlets reporting the false news. We also find evidence that institutions reverse their positions several days after the denial releases rather than when the news breaks. In turn, our evidence shows which trading patterns could bring more potential profits than reversing right on the news breaks. Our results provide unique insights into price movements and institutional reactions on false news, as well as evidence regarding regulating institutions, media platforms, and information manipulation in the stock market.