We investigate how international trade shocks affect corporate investment efficiency. Utilizing a novel pairwise firm-product level dataset in China, we find that the investment efficiency of target firms significantly improves following the implementation of trade defense instruments (TDIs), including antidumping, countervailing, and safeguard measures. The reduction in free cash flow and heightened competition triggered by TDIs discourage overinvestment, particularly in firms more prone to overinvestment and those operating in industries with lower ex-ante competition. Moreover, the efficiency-enhancing effect is more pronounced in firms subject to stricter penalties and higher-value targeted products. Taken together, these findings suggest that Chinese target firms respond to international trade shocks by altering their investment strategies and improving efficiency.

This study examines the relation between share pledging by controlling shareholders and optimism in analyst earnings forecasts. Using a sample of listed Chinese firms from 2007 to 2018, we find that analysts make more optimistic forecasts for firms whose controlling shareholders have pledged their shares for bank loans and whose share pledge ratio is high. This relation is stronger for firms with poor prior stock performance, for firms located in regions with a high level of marketization, and for analysts who have close connections with firms, but is weaker for reputable analysts and those from larger broker firms. In addition, analyst optimism becomes weaker when the share-pledging loan approaches the end of the term and when the analyst forecast date is closer to the earnings announcement, and becomes more pronounced when analysts make forecasts over a longer horizon. The results suggest that in cases of share pledging, the threat of losing controlling rights creates significant incentives for controlling shareholders to collude with analysts.