Abstract

Using a unique dataset comprising 6313 firm-year observations for Chinese listed firms between 2008 and 2017, we investigate the impact of CEO social capital on cost of debt. Our results show that CEO social capital is negatively related to cost of debt, and the impact of CEO social capital in environments with a low degree of marketization or social trust is more pronounced than in environments with a high degree of marketization or social trust. Moreover, our results reveal that two potential mechanisms, discretionary accruals and information disclosure quality, mediate the impact of CEO social capital on cost of debt.

Introduction

Research into social capital in the area of social economics emerged late last century (e.g., Coleman, 1988 ; Putnam, 1993 , Putnam, 1995 ; Knack and Keefer, 1997 ; Uzzi, 1997 ; Portes, 1998 ; Woolcock, 1998 ; Dasgupta, 2005 ; Fafchamps, 2006 ). Prior studies have acknowledged the significance of the personal social capital embedded in social networks for corporate commercial activities, including corporate financing ( Engelberg et al., 2012 ; Ferris et al., 2017 ; Huang and Shang, 2019 ; Jin et al., 2019 ), corporate investment ( Faleye et al., 2014 ; Fracassi, 2017 ), mergers and acquisitions ( Fracassi and Tate, 2012 ; El-Khatib et al., 2015 ), executive employment and compensation policies ( Hwang and Kim, 2009 ; Fracassi and Tate, 2012 ; Nguyen, 2012 ; Engelberg et al., 2013 ; Ferris et al., 2020 ), risk-taking and accounting practices ( Ferris et al., 2017 , Ferris et al., 2019 ; Panta, 2020 ), and litigation risk ( Zhang et al., 2023 ). Personal social capital embedded in social networks, especially the social capital of corporate executives, has a significant influence on corporate financing. Social capital enhances the trust between borrowers and lenders and increases risk-taking behavior as social capital is seen as an informal insurance. As invisible social credit and a conduit for the exchange of information, CEO social capital benefits corporate financing activities.

We are motivated to investigate the connect between CEO social capital and cost of debt due to the complex institutional background of network and the importance of debt financing in the context of China. Despite China’s remarkable economic growth in recent decades, its financial and legal environments remain underdeveloped. Allen et al. (2005) suggest that in order to sustain this growth, China requires alternative governance mechanisms and informal institutional arrangements. In the Chinese context, China is characterized as a relationship-based society, where social capital embedded in social networks, known as “Guan Xi,” holds significant prevalence and complexity. These networks provide Chinese additional social resources such as information and status ( Song et al., 2012 ; Bian, 2019 ). For example, the CEOs and chairmen of Chinese non-state-owned firms use bank loans to raise funds through their political contacts ( Yu and Pan, 2008 ). Loan approvals and covenants for Chinese corporates are influenced by CEO social capital ( Shen et al., 2009 ; Xu and Li, 2016 ). CEO social capital is negatively associated with firm leverage and short-term debt ratio, and social capital lowers the need for corporate bank borrowing ( Huang and Shang, 2019 ), and the social capital benefits improving the quality of corporate loans ( Jin et al., 2019 ). These studies only reveal the impact of managerial social capital on corporate financing, while the research into the impact of CEO social capital on the cost of debt is relatively scarce, particularly in emerging markets such as China.

Conclusion

This study investigates the relationship between CEO’s social capital and cost of debt. We posit that CEO’s social capital offers incentives for CEOs to provide enhanced information transparency and quality, which lowers the monitoring costs for the borrowers, inducing reduced cost of debt. Additionally, CEO’s social capital creates a sense of trust between the lenders and the borrowers due to the informal tie that social capital creates among the networks. Using a unique dataset consisting with 6313 firm-year observations from the firms listed on the Shanghai and Shenzhen Stock Exchange markets from 2008 to 2017, our results suggest that CEO’s social capital reduces cost of debt in the context of China, and such effect is more pronounced when there is a lack of information verification from the regulators (i.e., marketization) and societal norm (i.e., social trust). Moreover, we find that CEO’s social capital reduces cost of debt through the path of reduced discretionary accruals and information disclosure quality. Our results hold after a battery of robustness checks, including the three individual proxies (betweenness centrality, closeness centrality and degree centrality) for CEO social capital, the two alternative proxies for cost of debt, sample without political capital, excess social capital, the consideration of family business characteristics, the interactive effect of state-owned enterprises and endogeneity concerns.

Abstract

This study theoretically and empirically analyzes the impact and mechanism of corporate green transformation on accrual earnings management using a sample of China’s A-share listed companies from 2015 to 2021. The results indicate that the green transformation of enterprises helps restrain accrual-based earnings management, especially accrual-based earnings management, which increases profits, and that the inhibition effect of enterprise green transformation on earnings management is more significant in high-tech and growth-stage enterprises. The mechanism test shows that corporate green transformation can inhibit accrual-based earnings management by increasing analyst follow-up and easing financing constraints. Using China’s environmental tax law, promulgated in 2018, as an exogenous shock to construct the PSM-DID, the conclusion still holds after alleviating endogeneity. Further research has found that green transformations can also help inhibit real earnings management. This study provides new empirical evidence for a comprehensive understanding and evaluation of the governance role of corporate green transformation and provides a reference value for further comprehensively promoting the green transformation of Chinese enterprises and improving the quality of accounting information.

Introduction

With the continuous adoption of an extensive economic growth model in recent years, China has become the second largest economy in the world. However, this extensive economic growth has seriously damaged China’s environmental resources, making China’s total greenhouse gas emissions the highest in the world [1]. The green economy has always been an important tool for developing countries to achieve sustainable development [2]. Therefore, to avoid environmental degradation caused by greenhouse gas emissions and political pressure affecting sustainable economic development, the Chinese government has proposed a series of economic development strategies based on environmental protection.1 The Chinese government’s green development method of “promoting the construction of a resource-saving and environmentally friendly society” reflects the determination and attitude of the government in formulating and implementing new development policies during the transformation period of national economic development [3]. China’s listed companies have long been the main source of carbon emissions.2 Today, with increasingly serious environmental problems, the traditional “high carbon emission” development model of listed companies is unsustainable, and companies must choose a development path that takes into account both economic and environmental benefits [4], and green transformation can just become an important driving force for the sustainable development of the corporate economy [5]. Therefore, given the Chinese government’s vigorous promotion of the sustainable development of the green economy based on the “dual carbon” goal, the green transformation of listed companies has become a hot topic of concern in all walks of life.

Conclusion

Earnings management has always been a key issue in corporate governance and improving accounting information quality is an emerging market goal. As one of the most important forms of sustainable economic development in China, corporate green transformation has a governance effect on earnings management, and is worthy of study. This study selects A-share listed companies in China’s Shanghai and Shenzhen stock markets from 2015 to 2021 as the research sample and empirically tests the impact of corporate green transformation on accrual earnings management. The results were as follows:

First, there is a negative correlation between corporate green transformation and accrual-based earnings management, indicating that corporate green transformation effectively inhibits accrual-based earnings management. Simultaneously, corporate green transformation has a strong inhibitory effect on accrual-earnings management, which increases profits. After using the environmental protection “fee reform tax” policy issued by the Chinese government in 2018 to employ a PSM-DID analysis to alleviate endogeneity, the conclusion still holds after a series of robustness tests such as replacing explanatory variables and explained variables.

Abstract

     Parental control is widely considered to have a detrimental effect on children’s psychological development. However, it is commonplace and generally accepted in China and is intended to regulate children’s behavior. It is unclear whether Chinese parental control promotes or hinders children’s inhibitory control (IC) development. This study investigated the influence of maternal control on Chinese children’s development of IC using a longitudinal design (N = 163), with attention to the influence of children’s temperamental exuberance and different parenting contexts. Children’s exuberance (at 2 years of age) was assessed via laboratory observations. Maternal control (at 3 years of age) was coded during parent–child interaction in play-based and cleanup contexts. Children’s IC (at 3 years of age) was assessed by day–night and snow–grass tasks. Results suggested that maternal control in the play-based context was negatively related to IC development. The association between maternal control in the cleanup context and IC varied in children with different levels of temperamental exuberance. Specifically, maternal control in the cleanup context impeded low-exuberant children’s IC development but promoted it for highly exuberant children. These findings support the self-determination theory and the goodness-of-fit model and have implications for educational practice in China.

Introduction

     Parental control, which refers to parents’ efforts to intrude and redirect children’s thoughts, feelings, and behaviors, has received great attention for its effect on children’s social adjustment (Grolnick & Pomerantz, 2009). Parental control has invoked a variety of conceptualizations and operationalizations such as behavioral versus psychological control (e.g., Barber, 1996, Steinberg et al., 1989) and firm versus lax control (e.g., Fauber et al., 1990, Rowe, 1981). In the context of self-determination theory, Grolnick and Pomerantz (2009) refined multiple forms of parental control approaches and identified intrusiveness, which may violate children’s autonomy, as a core characteristic of parental control. The current study followed this conceptualization that parental control is parenting characterized by pressure, intrusion, and dominance regardless of whether it is used to regulate children’s thoughts or behaviors. Parents may be well-intended, but their controlling behaviors often do not contribute to children’s ability to regulate their own behaviors they originally intended (Grolnick, 2002). This may be because of the disrupting feelings of autonomy—children who are exposed to great parental control either are used to following their parents’ instructions and thereby lose their intrinsic motivation and regulatory ability or are resistant to their parents’ instructions and become rebellious (Grolnick, 2002).

Results

     In our sample, a child’s age was significantly correlated with exuberance (r = .25, p = .001) and was marginally significantly correlated with IC (r = .16, p = .056) and maternal control in the play-based context (r =
.15, p = .083). A sex (0 = boy, 1 = girl) difference was found in exuberance that girls were less exuberant than boys, t(161) = 2.35, p = .020, Cohen’s d = 0.37). Family income (1 = less than ¥5,000 to 4 = more than ¥30,000) was correlated with IC (r = .25, p = .003). No significant effect of age, sex, and family income was found on the other variables (ps > .26). Maternal education showed no significant effect on key variables (ps > .17). To avoid interference from the child’s age, sex, and family income, we conducted further analyses controlling for these variables.

     Correlations between primary variables are reported in Table 1. Maternal control in two contexts was significantly correlated. Temperamental exuberance did not show any significant correlation with maternal control in either context or IC.

Abstract

     We study financial reporting and disclosure practices in China using survey methods similar to prior studies of U.S. firms (i.e., Graham et al., 2005; Dichev et al., 2013). Comparing earnings features, motives to manage and smooth earnings, and voluntary disclosure practices between the two countries, we reveal three major differences. First, Chinese firms exhibit a stronger preference for predictive, relative to verifiable, attributes of earnings that can signal stable firm performance to their stakeholders. Second, smooth earnings are desired by various stakeholders and can be achieved through coordination among connected stakeholders, which is conceptually different from earnings management. Third, Chinese firms consider public disclosure as less relevant in the reduction of the cost of capital. In addition, Chinese firms do not have a bias towards conservative reporting. We explain and reconcile these differences as resulting from some unique institutional features of China. Our study provides novel field evidence that contributes to, expands, and directly corroborates existing empirical studies.

Introduction

     China’s economic significance has grown in recent decades, making it the second largest economy in the world. While China has continuously introduced new regulations to assimilate shareholder-driven practices of financial markets in the West, various institutional differences spanning cultural norms and socio-economic structures still play a considerable role in shaping the Chinese capital market. For instance, prior studies suggest that connections among many non-arm’s length stakeholders contribute to the functioning of capital markets in China (e.g., Ball et al., 2000; Allen et al., 2005; Wong, 2020). In this paper, we use a field-based survey approach to directly study how such institutional factors shape firms’ financial reporting and disclosure practices in China.

     A survey approach enables us to extend prior archival studies, providing evidence about unobservable coordination efforts and private communication channels among non-arm’s length stakeholders in China. While a series of surveys of CFOs at U.S. public firms have allowed academics to validate and reconcile findings on financial reporting and disclosure practices in the accounting and finance literature (e.g., Graham and Harvey, 2001; Graham et al., 2005; Dichev et al., 2013), these survey findings primarily reflect the financial reporting incentives of arm’s length shareholders. Our study extends this prior research by examining firm responses in China, where information demand is shaped by various stakeholders that are non-arm’s length. Moreover, our study complements the extensive archival literature on financial reporting and disclosure practices in China (Lennox and Wu, 2022).

Conclusion

     This paper provides novel field-based evidence on financial executives’ opinions and perceptions for financial reporting and disclosure practices in China. Chinese executives of public firms are directly asked about their incentives and the motives for their firms’ financial reporting and disclosure practices. Using financial executive opinions and motives at U.S. firms as a benchmark, we find that Chinese firms differ in what they consider as “high quality earnings”, in their motives for earnings management and earnings smoothing, and in their incentives to disclose bad news relative to good news voluntarily. Further field-based evidence suggests that these differences are primarily rooted in the institutional differences associated the dominance of retail investors, concentrated ownership structures, weak legal systems, and the role of diverse stakeholder groups – including arm’s length investors and non-arm’s length stakeholders.

     Our field evidence is consistent with a stakeholder-driven corporate governance model in China. Financial reporting is often considered as a vehicle to mitigate agency conflicts between firms and outside shareholders. The Chinese setting highlights that financial reporting may also have the important role of signaling stable performance to a variety of different stakeholders, including customers, suppliers, employees, and the government. Many of them constitute non-arm’s length stakeholders, and may have private communication channels with firms, which undermines the effect of public disclosures to mitigate agency problems. That is, public disclosure in China helps to signal the ability to coordinate among major stakeholders to maintain stable firm performance.

Abstract

     Today, more and more enterprises are achieving co-innovation across borders by joining digital platforms. However, many SMEs face difficulties in developing and benefiting from strong digital platform capability (DPC) due to limited experience, resources, and funds, which hinders innovation opportunities. This study constructs a model to explore how SMEs can enhance their innovation performance (IP) by adopting digital platforms based on resource orchestration theory. We then introduce ecological institutional norms (EIN) as the moderating variable to observe whether effective platform governance impacts enterprises’ value co–creation (VCC) and IP. We conduct a questionnaire survey on 346 SMEs in China’s manufacturing industry that participate in digital platforms, and the regression analysis and the bootstrap test results indicate that (1) DPC has a significantly positive impact on IP; (2) DPC has a significantly positive impact on VCC; (3) VCC partially mediates DPC and IP; (4) EIN positively moderate the relationship between DPC and VCC and positively moderate the mediating effect of VCC. These findings add to the literature on digital platforms theoretically and fill the gap in research on how participation in digital platforms can enhance enterprises’ innovation and development from the perspective of SMEs. Finally, the study has important managerial implications for SMEs to cultivate DPC, carry out VCC, and participate in platform governance.

Introduction

     Innovation is a critical component for enterprises to take the leading edge and occupy a dominant competitive position in the market in the context of information technology development and industrial integration [1,2]. In the digital economy age, digital technology provides infrastructural support for economic development [[3], [4], [5]]. However, most small and medium–sized enterprises (SMEs) in China lack core technologies and the digital divide further increases the resistance to breaking through low–end lock–in. SMEs need to deeply integrate into the digital economy and explore new value growth points through digital process transformation and cross–border integration based on network effects. Therefore, digital platforms and the internal digital business ecosystem (DBE), which can break the boundaries of time, space, and organization with the support of digital technology, are gradually attracting attention [[6], [7], [8]]. Industry leaders such as Ali, Tencent, and Haier are trying to build digital platforms and DBEs to break organizational barriers and achieve technological collaborative innovation [9]. However, most of the current research on digital platforms is centered on large enterprises, with less attention given to SMEs [10,11].

     Resource orchestration theory suggests that static enterprise resources cannot meet the needs of enterprise development. Thus, the ability to allocate, integrate, and utilize resources is key to establishing a sustainable competitive advantage [12]. Joining a digital platform does not directly generate benefits: enterprises can only achieve efficient value creation when they actively and spontaneously allocate resources in a digital platform [[13], [14], [15]]. Based on the digital platform scenario, some scholars have pointed out that digital platform capability (DPC) involves combining the resources obtained by enterprises based on information and communication technology (ICT) with other internal and external resources [16]. A stronger DPC can enhance online communication, collaboration, and marketing for efficient and cost–effective resource expansion, which further increases the identification and integration opportunities of critical shared knowledge. It also facilitates enterprises to reallocate internal and external resources to flexible respond to rapidly shifting market environment [[17], [18], [19]]. However, due to the disadvantages in resources, capital, experience, and other aspects, SMEs’ cooperative innovation with other enterprises in the digital platform is often accompanied by risks such as leakage of core resources and misaligned partnerships [20,21]. As a result, many managers of SMEs are resistant and reluctant to join digital platforms. In light of these contradictions, some intriguing questions arise: Can SMEs actually benefit from digital platforms? How does DPC affect the innovation performance (IP) of SMEs?

Discussion

     This study proposes a moderated mediating model to explore the relationship between DPC and IP and how governance mechanisms in the DBE environment impact the above relationship. Focusing on SMEs, we collected 346 valid questionnaires, tested the theoretical assumptions using empirical analysis, and found some interesting conclusions.

     First, DPC has a significantly positive impact on SMEs’ IP. The result is consistent with resource orchestration theory, which proposes that the orchestration, combination, and flexible allocation of heterogeneous resources can help enterprises maintain their long–term competitive advantage [100]. This suggests that stronger digital platform integration capability enables SMEs to quickly access the large amount of heterogeneous resources aggregated in digital platforms [18] and to accelerate the speed of value feedback between subjects through digital channels [50], continuously optimizing the information quality on the platform. At the same time, we found that DPC positively influences VCC. Stronger digital platform integration capability can effectively monitor and evaluate data elements and strengthen the quality of plans developed jointly between subjects [72]; it can reduce the cooperation risk [71] and effectively promote the willingness of subjects to engage in joint problem solving; it can provide more critical information and promote the flexibility of SMEs to adjust their relationships with partners [16]. Stronger digital platform reconfiguration capability can reduce the cooperation cost [57] and enhance the willingness to engage in joint planning among platform subjects; it can optimize the allocation of platform resources [13] and improve the efficiency of cooperating subjects in joint problem solving; it can make platform subjects behave in a loosely coupled state [60] and promote enterprises’ flexibility and mobility to adjust existing cooperative relationships.

Abstract

     Numerous countries cut payroll taxes in response to COVID-19, including China, which reduced employer contributions by up to 21 percentage points. We use administrative data on more than 800,000 Chinese firms to evaluate payroll tax cuts as a business relief measure. We estimate that the tax cuts cover 31.5% of the decline in business cash flow, but labor informality causes 53% of registered firms-24% of aggregate economic activity-to receive no benefits at all. We quantify the targeting of the policy in terms of how much benefits flow to small firms less able to access external finance and to sectors worse hit by COVID-19. We find that (1) small firms and vulnerable industries are comparatively more labor intensive, which leads to desirable targeting; (2) labor informality worsens, but does not eliminate, targeting by firm size; and (3) labor informality is uncorrelated with the COVID-19 shock, and therefore does not affect targeting by sector.

Policy background

     In the mid- to late-1990s, China adopted a mandatory “pay-as-you-go” pension system, Basic Old Age Insurance (BOAI), for employed persons funded mainly through employer contributions (see Fang and Feng (2018) for a history of pension programs in China). Likewise, in the early 2000s, a medical insurance (MI) program for employed persons was established, also funded by payroll taxes (Huang, 2020). These two programs are the largest components of the SI system. As of 2019, the nationally prescribed employer contribution rate for BOAI and MI was 16 and 8% of wages, respectively. BOAI and MI also require employee-side contributions-8 and 2%-which are recorded in notional individual accounts that are efectively pay-as-you-go.

Discussion and conclusion

     Many advanced economies responded to the COVID economic shock with fscal policies unprecedented in both scale and form. In comparison, China’s response to COVID by way of additional spending and foregone revenue is moderate as a proportion of its GDP and more typical for developing countries.28 Its payroll tax cuts amounted to about 1.68% of 2020 GDP, whereas in the USA the Paycheck Protection Program alone delivered government support equal to 4.55% of 2020 GDP.29 China’s choice of policy instrument was also conservative: instead of launching novel spending programs, it temporarily reduced rates under an existing tax.

Abstract

Keywords

1. Introduction

2. PCAOB registration, literature review, and hypothesis development

3. Sample and research design

4. Results

5. Conclusion

Data availability

Declaration of Competing Interest

Acknowledgement

Appendix.

References

Abstract

Despite the importance of registration with the PCAOB, there is surprisingly little academic research on the registration process and its impact on audit outcomes (Abernathy et al., 2013). The PCAOB allows registration of audit firms from non-US countries. However, China and a few other countries do not allow the PCAOB to conduct inspections of audit firms. We take advantage of this setting to investigate whether PCAOB-registered audit firms improve audit quality in the absence of inspections and whether they charge an audit fee premium. Our findings indicate that audit quality increases following PCAOB registration and that clients pay higher audit fees for audits by PCAOB-registered firms.

1. Introduction

Following the high-profile audit failures of Enron, WorldCom, Sunbeam, and other companies, the Sarbanes-Oxley Act of 2002 (SOX) created the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing industry. Under SOX, audit firms, including non-U.S. firms that audit or play a substantial role in the audit of clients listed on U.S. stock exchanges, are subject to oversight by the PCAOB. Although PCAOB regulations require inspection of both U.S. and non-U.S. registered audit firms, legal constraints have prevented the PCAOB from inspecting registered audit firms in China. Interestingly, despite these restrictions on PCAOB inspections, some audit firms in China have nevertheless chosen to register with the PCAOB. We examine whether the audit quality of PCAOB-registered audit firms improves and whether the audit fees paid to the auditors increase following PCAOB registration.

Since its inception, the PCAOB and its activities have attracted considerable attention from academics. One widely debated question that has been studied is whether PCAOB inspections are effective at improving audit quality. Critics argue that although PCAOB inspectors may be more independent, PCAOB inspections may not improve audit quality because peer review inspectors may possess greater expertise.1 Academic research on the effects of PCAOB inspections generally finds that they have a positive impact on audit quality (e.g., Carcello et al., 2011, Defond and Lennox, 2017) and that PCAOB inspection reports provide signals about audit quality (e.g., Dee et al., 2011, Abbott et al., 2013, Gunny and Zhang, 2013). We add to research on the impact of the PCAOB by examining whether PCAOB registration is associated with increased audit quality in China, a country where inspections are not allowed. Given the weak institutional environment in China, client firms may attempt to communicate the reliability of their financial reports by hiring a credible auditor. Employing a PCAOB-registered auditor may be an approach that client firms take to signal the reliability of their financial statements. Further, if clients value audit firm association with the PCAOB, they may be willing to pay an audit fee premium.

Abstract

1. Introduction

2. Hypothesis development

3. Data and methodology

4. Empirical result

5. Conclusions

CRediT authorship contribution statement

Acknowledgements

References

Abstract

     By utilizing listed firms inand China from 2014 to 2018, this paper investigates how air pollution affects firms’ accrual earnings management. Empirical results show that higher air pollution promotes a firm’s earnings management. Next, we conduct a series of robustness checks, including a random discontinuity design regression and an instrumental variable regression; and confirm the causal effect of air pollution on companies’ earnings manipulation behaviors. Our results indicate that air pollution affects earnings management by lowering labor productivity and strengthening executives’ negative sentiments. In the additional analysis, air pollution transfers firms’ real earnings management to accrual earnings management. Finally, we found that the positive effect of air pollution on earnings management is more pronounced in firms in low polluting industries and non-state-owned firms. In summary, our study not only enriches the literature on how the external natural environment reshapes firms’ behaviors but also contributes to the literature on the determinants of firms’ earnings management. Our research could also provide policy implications for developing countries to balance the relationship between environmental protection and economic development

Introduction

     In most developing countries, rapid economic development and industrialization are associated with environmental pollution, especially air pollution. According to the 2018 Environmental Performance Index Report, which was constructed by Yale University and Columbia University, China’s environmental performance ranks 120th out of 180 countries, and 20% of the deaths in China are associated with air pollution. In addition to physical health, air pollution could also reshape human sentiment and decisions (Qin and Zhu, 2018; Roback, 1982) and affect firms’ behaviors (Shen et al., 2020; Tan et al., 2021; Wang et al., 2021a; Wang et al., 2021b; Zhang et al., 2021). Our paper intends to examine the impact of air pollution on firms’ accruals earnings management.

     Air pollution might reshape a firm’s earnings management in two ways. First, air pollution is detrimental to labor productivity and increases operating costs (Chang et al., 2016; Graff Zivin and Neidell, 2012; Zhu et al., 2022). The existing literature shows that air pollution lowers employees’ cognitive capacity and psychological concentration, finally resulting in lower productivity (Graff Zivin and Neidell, 2012; Heyes et al., 2016) and reducing firms’ total factor productivity (Li et al., 2020). On the other hand, air pollution might affect managerial sentiment and finally change firms’ earnings management. Previous studies show that air pollution could reshape investors’ and funds managers’ sentiment, thereby altering their risk preferences and lowering investment returns and volatility (Ding et al., 2021; Lepori, 2016; Wu et al., 2018). Besides, air pollution could also impact managerial sentiment and ultimately promote a firm’s investment in social responsibility. Combining these analyses together, air pollution could reshape labor productivity and managerial sentiment and finally affect a firm’s earnings management. Yao and Liu (2020) analyze the uncertainty of air quality and confirm that stronger uncertainty regarding air quality could promote a firm’s downside earnings management. However, it is still unclear how air quality affects firms’ earnings manipulation. Our studies enrich the research on the economic consequences of air quality and extend the external determinants of earnings management.

Conclusions

     By utilizing the data on public companies in China from 2014 to 2018, we investigate the causal relationship between air pollution and accrual earnings management. Our results show that firms engage in more earnings management when air pollution is stronger. This result is robust to alternative measurements for earnings management and air pollution and the random discontinuity design. Moreover, air pollution affects earnings manipulation by affecting managerial sentiment and labor productivity. This is reflected by the impact of air pollution being stronger in firms with higher labor productivity and lower negative managerial sentiments. In addition, we find that firms are more likely to positively manipulate earnings when air pollution is high. Then, we show that real earnings management is reduced by air pollution, indicating that earnings management is transferred. Finally, the relationship between air pollution and earnings manipulation is weaker in firms in polluting industries and state-owned firms.

Abstract

     Internal audit quality is the foundation for a company’s survival and development across the world. As a result, global efforts have been made to develop a scientific and accurate evaluation index for internal audit quality. However, literature shows that existing internal audit quality evaluation indices have many flaws, such as a lack of systematic internal audit evaluation indicators, poor execution, and inability to identify priority areas. To address gaps in the literature, this study intended to construct an internal audit quality evaluation index utilizing the joint approaches of the Balanced Scorecard, Delphi Process, and Analytical Hierarchy Process. A systematic literature review, examination of companies’ internal audit guidelines, Balanced Scorecard, and Delphi approaches resulted in a multilevel internal audit quality evaluation index with five dimensions (stakeholder satisfaction, stakeholder contribution, financial results, internal audit process, and learning and growth) and 36 indicators. The Analytical Hierarchy Process revealed that the most prioritized dimension is the internal audit process. The consistency ratio and evaluation feedback from the listed companies’ internal auditors, management, and audit committee members revealed that the results are valid and reliable.

Introduction

     Internal audit quality is the foundation for a organization’s survival and development across the world. According to Boskou et al., 2019, internal audit quality (IAQ) is a critical component of an organization’s sustainability since it assists the business in maintaining effective controls and avoiding fraud. Several publications (Ashbaugh-Skaife et al., 2008; Hoai et al., 2022) have shown that effective internal control may improve the quality of financial reporting. It is commonly acknowledged that IAQ is a critical component of successful internal control, on which financial reporting quality is also dependent. It helps the organization’s operations since it is a separate activity that assists a corporation in achieving its goals by employing a well-organized approach to risk management, internal control, and governance efficiency and effectiveness (Stewart and Subramaniam, 2010; El Gharbaoui and Chraibi, 2021). Scholars from all around the world have discovered a link between IAQ and organizational performance (Hazaea et al., 2020; Kaawaase et al., 2021). Hence, IAQ is of interest to managers, shareholders, investors, auditors, and consequently international organizations and nations.

     In line with the usefulness of the IAQ, there have been global efforts in establishing a scientific evaluation index for IAQ. International organizations and regulatory bodies such as the Financial Reporting Council (FRC) and the largest six audit firms in the United Kingdom; the Public Company Accounting Oversight Board (PCAOB) in the United States; the Chartered Accountants of Australia and New Zealand (CAANZ); the Accounting and Corporate Regulatory Authority (ACRA) in Singapore; and the International Organization of Securities Commissions (IOSCO) put forward indicators for evaluating IAQ. For instance, PCAOB published 28 indicators for evaluating audit quality while CAANZ published only nine indicators. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) also published five components of a firm’s internal control system with 17 principles (COSO, 2013).

Conclusion and recommendations

     The need for a scientific and reliable IAQE index to guide companies to improve internal auditing influenced this study. This study constructed the IAQE index by combining literature review, preliminary analysis, and review of companies’ internal audit guidelines, BSC, Delphi Process, and AHP methodologies. A systematic literature review, review of companies’ internal audit guidelines, BSC, and Delphi approaches resulted in a multilevel IAQE index comprising five dimensions and 36 indicators. Eight indicators were selected stakeholder dimension, nine indicators for stakeholder contribution dimension, seven indicators for financial results dimension, six indicators for internal audit process dimension, and six indicators for learning and growth dimension. The AHP results through experts’ judgment of the dimensions and indicators revealed that all the five dimensions are important in the IAQE index system. Overall, “achieving internal audit objectives” had the highest weight while “the number of complaints received by the internal audit department” had the lowest weight in the IAQE index system. The CR and feedback evaluation from the internal auditors and audit committee members of the selected enterprises revealed the acceptability of the results. In line with internal auditing standards, the developed IAQE index fits well with internal audit components since the index offers an independent, objective assurance and consulting among key stakeholders internal auditing for evaluating and improving the efficacy of risk management, control, and governance systems.

Abstract

Background

     Due to the onset of sudden stress, COVID-19 has greatly impacted the incidence of depression and anxiety. However, challenges still exist in identifying high-risk groups for depression and anxiety during COVID-19. Studies have identified how resilience and social support can be employed as effective predictors of depression and anxiety. This study aims to select the best combination of variables from measures of resilience, social support, and alexithymia for predicting depression and anxiety.

Methods

     The eXtreme Gradient Boosting (XGBoost1) model was applied to a dataset including data on 29,841 participants that was collected during the COVID-19 pandemic. Discriminant analyses on groups of participants with depression (DE2), anxiety (AN3), comorbid depression and anxiety (DA4), and healthy controls (HC5), were performed. All variables were selected according to their importance for classification. Further, analyses were performed with selected features to determine the best variable combination.

Results

     The mean accuracies achieved by three classification tasks, DE vs HC, AN vs HC, and DA vs HC, were 0.78, 0.77, and 0.89. Further, the combination of 19 selected features almost exhibited the same performance as all 56 variables (accuracies = 0.75, 0.75, and 0.86).

Conclusions

     Resilience, social support, and some demographic data can accurately distinguish DE, AN, and DA from HC. The results can be used to inform screening practices for depression and anxiety. Additionally, the model performance of a limited scale including only 19 features indicates that using a simplified scale is feasible.

Introduction

     Since its outbreak, COVID-19 rapidly became a pandemic (Wang et al., 2020a). Several factors including demographic characteristics (e.g., gender, occupation, education level, health status) and those related to COVID-19 (e.g., physical symptoms, contact history, worry level, and preventive measures) significantly impacted people’s mental health, which, in some cases, further developed into psychiatric disorders (Banerjee and Rai, 2020; Minihan et al., 2020; Wang et al., 2020c; de Figueiredo et al., 2021), such as depression, anxiety, insomnia, and post-traumatic stress symptoms (Bao et al., 2020; Huang and Zhao, 2020; Luo et al., 2020; Shader, 2020; Li et al., 2022). Typically, diagnoses for depression and anxiety depend on the clinical evaluation of symptoms, as well as scales, such as the Patient Health Questionnaire-9 (PHQ-9) and Generalized Anxiety Disorder-7 (GAD-7). However, medical resource shortages during the COVID-19 pandemic made it increasingly challenging to identify these psychiatric disorders and intervene (Emanuel et al., 2020). This necessitated the development of psychiatric screening tools with minimal demand on the already limited resources of clinical staff. Although the aforementioned measures are readily accessible, they only offer short-term evaluations based on patients’ subjective experiences, which may only detect the recent abnormal (last two weeks) psychological fluctuations of such patients (Garabiles et al., 2020). Therefore, it is difficult for PHQ-9 and GAD-7 to effectively describe the risk of depression or anxiety. We hope to use some indicators that can describe the risk of depression or anxiety to predict depression and anxiety, so as to quantify the probability of depression and anxiety. In addition, because there are many risk factors related to depression and anxiety, it is difficult for participants to complete if all the factors are included. It may ultimately affect the prediction results. Thus, we hope to find some stable key variables to simplify the whole process without affecting the prediction effect.

Results

     3.1. Descriptive and data analysis of demographic characteristics, COVID-19 related factors, current health status, and psychological factors

     The results of the descriptive analysis of the 29,841 participants (male: 10,592, female: 19,249) is presented in Table 1. The demographic data reveals that older, higher education level and divorced women are more likely to suffer from depression and anxiety (p<0.01). As for the factors related to the COVID-19 epidemic, having patients with infection (including family members, friends or colleagues) around them, having COVID-19 contact history or being infected are tend to depression and anxiety (p<0.01). In terms of general health status, the worse the general health status, the more prone to depression and anxiety (p<0.01). In psychological assessment, social support and resilience are protective factors of depression and anxiety (p<0.01). The higher the score of SSQ or CDRISC, the less likely to suffer from depression and anxiety. The results of the descriptive analysis showed all factors are related to depression and anxiety. However, it is hard to explain the impact of these variables on depression and anxiety, so it is necessary to further quantify the predictive effect of these variables on depression and anxiety with machine learning models.

Abstract

Keywords

1. Introduction

2. Evolution of China’s distant water fisheries and management policy

3. Challenges of the development and management policy of China’s distant water fisheries

4. Prospects of the development and management policy of China’s distant water fisheries

5. Conclusion

CRediT authorship contribution statement

Declaration of Competing Interest

Acknowledgements

References

Abstract

China’s distant water fisheries management policy has made significant contributions to the development of distant water fisheries since 1985. Analyzing the evolution of China’s distant water fisheries management policy is conducive to solving China’s frequent IUU problems and promoting further development of sustainable fisheries. This paper first summarizes how China’s distant water fisheries management policy has evolved, which can be divided into four stages: the start-up period (1985–1990), the rapid development period (1991–1997), the sustainable development period (1998–2007), and the optimization and adjustment period (2008-present). Then the characteristics of current distant water fisheries management are summarized, including how management has adapted to international rules, emphasize sustainable fisheries, diversification and facilitation of management methods. China’s distant water fisheries management policy still faces severe challenges in terms of technology, marine rights, management system, industrial structure, and employee capabilities. Finally, this paper highlights the importance of attaching importance to science and technology, re-evaluating distant water fisheries subsidies based on environmental policies and IUU activities, establishing a polycentric governance mechanism with stakeholders at the core, improving the supervision system, and establishing overseas distant water fisheries bases to strengthen international cooperation.

1. Introduction

China has been the world’s largest fishing country since 1990, which is mainly due to overexploitation of offshore fishery resources (Xue, 2006; Yang et al., 2016). In recent years, the depletion of offshore fishery resources and the deterioration of the marine environment caused by overfishing have severely restricted the development of China’s fisheries (Zhao and Shen, 2016; Ding et al., 2020; Kang et al., 2018). Therefore, the development of distant water fisheries and aquaculture has become an important way to reduce the pressure of overfishing in China (Liu et al., 2014). In addition, as a strategic industry, distant water fisheries are of great significance for meeting the domestic demand for high-quality aquatic products, ensuring food security, increasing fishermen’s income, and promoting the development of the fishery economy (Mallory, 2013; Zhang et al., 2019; Yue et al., 2016).

About 90 % of the world’s fish stocks have been over exploited or are fully developed, but there is still potentials for distant water fisheries resources, especially small pelagic fish, cephalopods and Antarctic krill (FAO, 2016; Ministry of Agriculture and Rural Affairs of the People’s Republic of China, 2012). Although the industrial fishing of Antarctic krill is controversial, the Chinese government regards the harvesting of Antarctic krill as one of its important strategies for distant water fisheries (Schiermeier, 2010; Tang and Shi, 2010; Nicol and Foster, 2016). Accurate resource assessment, effective catch control and sound fishery management are essential for sustainable fisheries (Nicol et al., 2012). In 2019, China had 170 distant water fisheries enterprises, operating 2654 distant water fishing vessels, and the output of distant water fisheries was 2.257 million tons. The scale and total output of the fishing fleet were among the highest in the world. China has become an important distant water fishing nation (DWFN) (Chesnokova and McWhinnie, 2019). In 2017, among the seven principal tuna species1 in the world, the fraction of the stocks at biologically sustainable levels was 66.6 percent, which has increased by ten percent compared with 2015. It proves that fisheries management is effective (FAO, 2020). If China’s distant water fisheries can achieve reasonable management, it will make a significant contribution to the world’s marine fisheries.ش

Abstract

JEL classification

Keywords

1. Introduction

2. Theoretical debates and research hypotheses

3. Sample selection and research design

4. Results and analysis

5. Conclusion

CRediT authorship contribution statement

Appendix A

References

Abstract

This study examines the financing/funding of private firms in China. Our results show that private firms are significantly less funded through formal financing channels such as bank loans than state-owned firms, and hence have to resort to alternative financing such as trade credit. Consistent with the theoretical expectation and literature, there is a substitution effect between trade credit and bank loans for private firms, but this effect is much weaker compared to that of state-owned firms. Moreover, while the univariate comparisons indicate that private firms obtain more notes payable than state-owned firms, the multivariate regression analyses show that the relation between bank loan and notes payable is positive and indifferent between private and state-owned firms.

1. Introduction

The Chinese economy had been dominated by state ownership and central planning before the Chinese economic reform in 1978. After that, the privatization and contracting out of much state-owned industry has remarkably boosted the rapid growth of the private sector which accounted for as much as 70 % of China’s GDP (Engardio, 2005). In the last decade, the private firms, mainly composed of family or individual-owned firms, have become an important force to promote China’s economic growth by expanding employment, promoting technological innovation, and contributing to the government tax revenues (Li et al., 2006; Allen et al., 2005; Tsai, 2002). Despite its fast growth and the increasing importance in the Chinese economy, the private sector encountered many challenges in the due course. One of the biggest challenges is the difficulty in obtaining sufficient financing. Chinese authorities give priority to the financing demand of the state-owned firms by imposing financial constraints on private sectors and ownership discrimination in financial policies. The financial constraints and ownership discrimination make it very difficult for the private firms to be financed by the banking sector which tends to supply most credit resources to the inefficient state-owned companies. Also, the credit rationing in the capital market also limits the sources of funds available to private firms. The ownership discrimination in the capital markets results in the “resource misallocation” that would adversely affect the private firms’ performance and the economic growth in China. Some studies argue that the Chinese capital market provides alternative financing channels and governance mechanisms for private firms. For example, Allen et al., 2005 find that the system of alternative mechanisms and institutions based on reputation and relationships effectively support the growth of the private sector. One stream of literature finds that trade credit might be an important indirect way to provide financing to fast-growing private companies. According to the substitution hypothesis (Meltzer, 1960; Schwartz, 1974; Petersen and Rajan, 1997; Burkart and Ellingsen, 2004; Pattnaik et al., 2020) which is built on the pecking order assumption, because the cost of trade credit can be very high, firms first use relatively inexpensive bank loans and then expensive trade credit after bank loans become unavailable (e.g., Smith, 1987; Petersen and Rajan, 1994). Empirical evidence shows that small U.S. firms that are subjected to bank credit rationing tend to use more trade credit. Hence, trade credit has become one of the most important sources of short-term financing around the world (Rajan and Zingales, 1995; Seifert et al.

1- Introduction

2- Theoretical foundation

3- Literature and hypothesis development

4- Research design

5- Empirical results and analysis

6- Additional analyses

7- Conclusion and implications

References

Abstract

The purpose of this paper is to examine whether firms’ embrace of an integrity culture will affect the performance of corporate social responsibility (CSR). Employing manually collected data on corporate culture and 5,149 firm-year observations in China from 2008 to 2016, our empirical study finds that corporate integrity culture has a strong positive effect on CSR performance, suggesting that an integrity-oriented corporate culture helps companies to bear CSR on their own initiative. We further find CEO duality leadership strengthens and analyst coverage attenuates the above relationship. This article is the first to explore the effect of corporate integrity culture on CSR behavior and validates the role of corporate culture as a crucial informal institution in guiding companies to uphold CSR. The empirical results also confirm the role of corporate culture in enhancing the social value of corporations. Our paper is helpful to broaden our understanding of the factors influencing CSR and provides a possible solution to the problem of CSR fulfillment.

Introduction

Modern global business determines corporations to become more aware than in the past of the importance of socially responsible business. Since enterprises are the basic economic units and play a central role in economic growth and social development, it is very meaningful and necessary for companies to be more socially responsible through the behaviors of giving back to society in different ways such as charitable donations, safety production, employment promotion, employee rights protections, product quality, environmental protection, resource conservation, etc. However, these responsible activities cannot be accomplished without the supports of honesty and integrity awareness embedded in the minds of firms’ management and employees, as well as ethical corporate cultures. As an important dimension of corporate culture, the significance of integrity to enterprises is self-evident. Prior studies show that integrity is vital to the survival and development of enterprises (e.g., Koehn, 2005; Erhard and Jensen, 2017; Jiang et al., 2019). For instance, a corporate culture of integrity can help companies attract investment (Denison and Mishra, 1995), reduce transaction costs (Gosling and Huang, 2009), enhance operating efficiency (Hsu, 2007), and thus improve corporate profitability and performance (Reichheld and Teal, 1996; Simons, 2002; Erhard and Jensen, 2017).