We provide firm-level evidence that processing trade helps relax credit constraints on exports. We show that firms engaged in processing trade have better export performance than those engaged in ordinary trade in financially vulnerable sectors. The results are not driven by firm size, time, or other sector characteristics. The findings are consistent with the fact that processing trade is less credit-constrained due to its lower upfront costs and less working capital needs. Our findings highlight the importance of processing trade in firm exports, particularly in developing countries with imperfect capital markets.

This paper investigates how acquirers' board gender structures respond to the target country's gender-equal culture following cross-border M&A deals. Using a sample of Chinese public firms that conducted cross-border M&As from 2008 to 2019, we find that acquirers tend to adjust the proportion of female directors to better align with the target country's gender-equal culture. We address the potential selection concerns by adopting the Heckman two-step method and show the results are robust. Further analyses show that acquirers are more likely to adjust their board gender structures when the deal size and the target size are larger, and when the communication and legitimacy barriers are greater, suggesting the adjustment is a strategic move. Moreover, we find evidence of synergy gains following board adjustments in terms of enhanced firm performance and increased innovations.

We examine the impact of the global trend towards trade protectionism on household stock market participation, focusing on the 2018–19 US-China trade war as an exogenous trade shock. We leverage cross-city variation in exposure to the trade war by combining industry-specific increases in US tariffs with variation in industry composition across cities. Using nationally representative household finance survey data collected around the trade war years, and a difference-in-differences design, results show that the onset of the trade war decreases the likelihood of households participating in the stock market and reduces the proportion of stocks in their portfolios. Further evidence reveals that these effects stem from the trade war's influence on decreasing household income, increasing income volatility, fostering risk aversion, and promoting negative views or beliefs about the economy. Our findings suggest that reduced stock market participation is a pathway through which trade protectionism affects the financial system and the economy.

This paper explores the impact of political connections on zombie business in the presence of massive economic stimulus. Although a stimulus plan may substantially ease financial constraints for a politically connected firm, it distorts the firm’s decision regarding market exit. Exploiting China’s 2008 stimulus package as a semi natural experiment, we show that a firm with political connections is more likely to become a zombie following such stimulus measures. Further analysis indicates that the zombification impact of the stimulus plan is more pronounced for the firms operating in the key industries targeted by the stimulus package.

Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 accounts in 247 cities, we find that air pollution significantly increases investors’ disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissipation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a potential mechanism.