Using hand-collected data, we find residual state ownership is negatively related to stock return volatility, following China's secondary privatization initiated by the non-tradable share reform. Conservative corporate policies are channels through which residual state ownership reduces stock return volatility. Further, the volatility-mitigating effect is more prevalent in firms in which the government has greater influence on corporate decisions. However, the volatility-mitigating effect is temporary, lasting up to three years after state shares become fully tradable. The evidence suggests the government can send credible signals by retaining state ownership, which reduces investor uncertainty. However, investors must weigh the positive signaling effect of residual state ownership in reducing uncertainty, surrounding sudden policy changes, against the inefficiencies of state control.

Using manually matched data from US-China trade dispute records and Chinese customs trade data, this study assesses the impact of the US-China trade disputes on corporate earnings management (EM) of Chinese listed companies. We find a significant reduction in accrual-based EM in firms affected by the retaliatory tariff changes due to the trade disputes. Furthermore, the impact of this shock goes beyond the directly affected firms and spreads along the supply chain as well as through block shareholding. Importantly, after excluding alternative explanations such as government subsidies, or managerial slack caused by government implicit guarantees, our results remain robust. Our mechanism analysis suggests that in response to the trade disputes, contracting parties seek transparency to alleviate information asymmetry, therefore, the increased demands for high earnings quality from creditors explain the impact of trade disputes on EM. We further find that trade disputes mainly reduce downward earnings manipulations, with no significant impact on upward EM or real EM. Additionally, the trade disputes effect is weaker in firms with political connections and effective monitoring mechanisms. Overall, this study highlights that firms strategically manage the disclosure of accounting information under uncertainties, where contracting demand is a significant factor explaining why firms enhance earnings quality in reaction to trade disputes.