Applying the difference-in-differences method, we show that high-speed rail (HSR) construction improves investment efficiency in China. The effect is more pronounced for companies with low information transparency and low media coverage, suggesting that HSR can mitigate information asymmetry while reducing external regulatory costs. Our analysis also shows that the effect is more powerful for non-state-owned enterprises, high-growth firms, and those companies located in core cities. Overall, our findings suggest that HSR can improve investment efficiency by shortening the travel time between firms and their investors. 

Geographic proximity and corporate investment efficiency: Evidence from high-speed rail construction in China

Effect of green financial reform and innovation pilot zones on corporate investment efficiency

Based on China’s mandatory requirement for listed firms to implement online voting in their annual general shareholder meetings, we investigate whether and how minority shareholders influence corporate environmental performance (CEP). We use the difference-in-difference approach and find that the implementation of online voting promotes minority shareholders’ participation in shareholder meetings, which, in turn, leads to improved CEP of listed firms. We discover that “local pollution” exposure and “the increasing awareness of listed firms’ environmental risks” are the main motives of minority shareholders concerning listed firms’ environmental performance. Furthermore, we find that the minority shareholders improve CEP of listed firms through influencing groups with greater bargaining power. 

/pdf/building-eco-friendly-corporations-the-role-of-minority-s9mrs6q3.pdf

Building Eco-friendly Corporations: The Role of Minority Shareholders

Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms' overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development. 

The adverse impact of corporate ESG controversies on sustainable investment

Using the online voting policy in Chinese market as a natural experiment of minority shareholders protection, this paper explores the relationship between minority shareholders protection and corporate financial leverage. The results show that the participation of minority shareholders in online voting of shareholders' meeting can significantly reduce corporate financial leverage. Our results are still valid after a series of robustness tests. In terms of mechanism, we find that minority shareholders participating in the online voting can play a crucial supervisory role on the management, which can improve the level of internal control and reduce the overconfidence of the management. The above monitoring effect can reduce the corporate financial leverage. In addition, our heterogeneity test results show that the impact of online voting on financial leverage is more significant for small capitalization, non-state-owned firms, and firms with relatively low level of external supervision. 

Minority shareholders protection and corporate financial leverage: Evidence from a natural experiment in China

This study examines how holding voting shares in banks can impact the improvement of firms’ investment efficiency in the Chinese capital market. We found that bank ownership improved firms’ investment efficiency by mitigating both overinvestment and underinvestment and by improving investment sensitivity to investment opportunities. We further found that alleviation of overinvestment in firms was driven by the enhancement of corporate governance (disclosure channels). The better corporate governance in bank holding firms reduced corporate cash holdings and controlling shareholder expropriations. Moreover, we found that this bank-firm connection reduced underinvestment by mitigating financial constraints (financing channels), through the raising of more bank loans and the reduction of the cash flow sensitivity of cash holdings. This connection also served as a buffer when bank lending is tightened. Finally, we found that bank ownership had a more pronounced impact on improving investment efficiency in non-SOEs, in firms located in provinces with low marketization, and in firms without institutional investors.

How does bank ownership affect firm investment? Evidence from China

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How does bank ownership affect firm investment? Evidence from China