Business Strategy, State-Owned Equity and Cost Stickiness: Evidence from Chinese Firms

This paper investigates the relationship between business strategy and cost stickiness under different ownership. Using the data from listed firms in China from 2002 to 2015, we find that first, firms with different strategies exhibit different cost behavior. The cost stickiness of choosing a differentiation strategy is higher than that of choosing a low-cost strategy. Second, management expectations will affect cost stickiness. Optimistic expectations will increase cost stickiness, while pessimistic expectations will reduce cost stickiness. Third, management expectations can adjust the relationship between business strategy and cost stickiness in terms of government-created advantages (GCAs). If management expectations tend to be optimistic, the cost stickiness is higher with a differentiation strategy than with a low-cost strategy. If management expectations tend to be pessimistic, then cost stickiness is higher with a low-cost strategy than with a differentiation strategy. Finally, the state-owned equity affects the extent of the effect of a differentiation strategy on cost stickiness. State-owned firms, which receive more GCAs than non-state-owned firms, have stronger cost stickiness than non-state-owned firms, even if both categories of firms use more differentiation strategy

High-speed rail to prosperity? Assessing the role of transportation improvement in the urban economy

Investigate the impact of high-speed rail (HSR) on local economy is of great importance and interest to policy makers and scholars. Though there is a big body of literature in this area, the estimates of such impact are inconsistent or even contradictory. The empirical evidence remains problematic for several reasons: endogenous route placement; omitted variable bias; heterogeneity across different regions; various confounding factors. In this paper, we assess this impact by constructing the appropriate counterfactual in the absence of HSR services with similar GDP level and GDP trend before the debut of HSR services. The control group forms a good fit for the treatment group, and the economic performance of the control group was even slightly stronger than that of the treatment group before 2007. Using the DID method, we find the HSR network promoted local GDP by approximately 3.3 percentage points. The introduction of HSR service helped cities attract more industrial enterprises and achieve more industrial output, but its effect on the service sector was not pronounced. Our results are robust to different sample selection procedures, to the dynamic analyses, to different empirical strategies. Our study thus provides new and solid empirical support to the argument that HSR benefits local economic development

Customer Concentration, Economic Policy Uncertainty and Enterprise Sustainable Innovation

Few studies have addressed how customer concentration affects the decision of a firm’s research and development (R&D) strategies and then innovation outcome. Using a sample of China’s listed companies for the period from 2009 to 2017, this study investigates the relationship between customer concentration and enterprise sustainable innovations, as well as how such the relationship changes with economic policy uncertainty. The findings imply that there is a significant inverted-U-shaped relationship between customer concentration and enterprise sustainable innovations. Under a high level of economic policy uncertainty, the advantage of the customer relationship is maximized. In this context, raising customer concentration significantly promotes enterprise sustainable innovations. Customer concentration affects innovations differently as the equity properties, and locations of enterprises vary under different levels of economic policy uncertainty. Thus, the interval of customer concentration conducive to enterprise innovations differs. The results are robust to econometric techniques that control for endogeneity. Overall, our findings suggest that enterprises build and adjust the customer relationship and improve the driving mechanism for sustainable innovations

The Impact of Financial Redundancy on Corporate Social Responsibility Performance: Evidence From Chinese Listed Firms

This study examines the impact of financial redundancy on corporate social responsibility (CSR) based on a sample of Chinese listed firms from 2010 to 2020. The results indicate that financial redundancy has a significant positive effect on CSR. However, financially redundant resources are not balanced in terms of how they encourage firms to undertake different dimensions of social responsibility; specifically, firms actively take social responsibility toward shareholders and the public but take less responsibility for employees and the environment. The incentive for firms with financially redundant resources to promote CSR initiatives is attributable to their high level of social awareness and pursuit of reputation. Consistent with their motives, our economic consequence analysis reveals that the incremental effect of CSR driven by financial redundancy improves corporate reputation but has no enhancement effect on corporate performance. Finally, our extended analysis reveals that the relative impact of financial redundancy on CSR depends on several organizational variables that influence a firm’s preferences for CSR investments. The positive impact of financial redundancy on CSR is stronger among firms with high managerial career concerns and firms in regions with high market competition. This research provides a necessary structure for future CSR studies to follow. By delving deeply into the relationship between financial redundancy and CSR, it enables scholars to better address the critical management question of whether wealthy firms do more good for society compared to those that are less wealthy.</jats:p

The Impact of Green Credit Policy on The Firms’ Green Strategy Choices: Green Innovation or Green-Washing?

Abstract Taking the green credit policy in 2012 as a quasi-natural experiment, this paper has investigated the impact of green credit policy on firms’ green strategy choices in China by using the panel data of the A-share firms listed from 2008 to 2019. The results reveal that green credit improves firms’ green innovation overall. In terms of time, listed firms’ green-washing can be significantly increased at the early stage of the implementation of green credit policy, but as time goes by, such green behavior of firms will be detected, which in turn will motivate firms to improve green innovation. Furthermore, the green credit policy has a more significant effect on the green innovation in firms in localities under high environmental regulation, economically developed regions, and without other alternative financing channels. Firms located in economically underdeveloped and low environmental regulation regions prefer to adopt the behavior of green-washing environmental information. Besides, green innovation by firms after the implementation of green credit can promote corporate financial, environmental, and social performance, while green-washing behavior will damage corporate financial, environmental, and social performance. Our findings contribute to the literature on green credit policy, corporate green innovation, environmental disclosure, and also provide some policy implications to improve the quality of green credit policy in the future.</jats:p

Analysing managers' financial motivation for sustainable investment strategies

The purpose of the research is to examine the importance of financial rewards andmanagers' motivations, including sustainable investment projects. For that, the role of financial motivation for managers is analysed to understand strategic priorities for sustainable investment policies. Panel data for non-financial listed companies in China are used to determine the best-fit values of the proposed model, and the results of the Lagrange multiplier (LM) and Hausman tests are discussed for sustainable investment strategies. The results demonstrate that both low-paid and highly-paid managers in valuable project firms tend to be conservative and that managers consolidate their positions through underinvestment. This finding is clear evidence that managers are reluctant to take a risk on sustainable investment strategies. However, highly-paid managers of non-valuable project firms are generally willing to obtain high productivity through advanced technologies. The results are also generalized for strategies that are related to project managers' financial motivation to increase the efficiency of sustainable investment decisions.Soft Science Research Project of Fujian Province, ChinaChongqing Federation of Social Science Projec

Capacity Reduction Pressure, Financing Constraints, and Enterprise Sustainable Innovation Investment: Evidence from Chinese Manufacturing Companies

Resolving the problem of excess production capacity through sustainable technological innovation is an important issue facing the Chinese economy in achieving high-quality development. The Guiding Opinions of the State Council on Resolving the Contradiction of Severe Overcapacity promulgated by the government in 2013 undoubtedly had a huge external impact on the traditionally competitive manufacturing market. This paper uses 6680 company-year sample observations of 1609 A-share manufacturing listed companies in China from 2010 to 2017 to examine the impact of capacity reduction pressure on &lsquo;corporate sustainable innovation&rsquo; (the strategic response made by the enterprise administrator to cope with the impacts of the external environment including economic, social and environmental aspects) investment and the moderating role of financing constraints on this relationship. The research shows that after the promulgation of the Guiding Opinions, the degree of overcapacity had a significant positive effect on the R&amp;D investment of enterprises, indicating that the policy to resolve overcapacity promoted their sustainable innovation investment. Such a phenomenon indicates that, to a certain extent, in the context of capacity reduction, companies have strong pressure and motivation to seek a way out through sustainable innovation. However, financing constraints have a significant inhibitory influence on the anti-forcing effect of the capacity reduction policy, indicating that the ability of enterprises to respond to external capacity reduction policies is subject to their own limited financing. Further investigation shows that capacity reduction pressure mainly promotes the sustainable innovation investment of private enterprises and has no significant impact on that of state-owned enterprises. This may be because private enterprises struggled more for survival during the transition period. The results of this paper provide a theoretical basis and reference value for the formulation of government policies and the development of enterprises