Karen Jingrong Lin

In this study, we investigate the effect of China’s anti-corruption campaign that disrupts firms’ political connectedness on firms’ cost management decisions. Although studies using the Western setting find that higher level cost stickiness reflects rational managerial decisions, we find robust evidence that managers are more likely to lower cost stickiness upon the loss of political connectedness. Further analysis suggests that such cost decisions are driven by changes in managerial expectations concerning the firm’s future risk profiles associated with losing political connections. More importantly, we find that firms reducing cost stickiness in response to the loss of political connections can maintain their productivity levels, while those not doing so exhibit a decline in productivity. This evidence highlighs distinct cost management decisions under different political environment, indicating the higher cost stickiness in politically connected firms is suboptimal, which can provide complementary insights to policy makers.

Research Question/Issue: This study examines the role of government as a major customer in influencing corporate social responsibility (CSR) initiatives among supplier firms. Specifically, it investigates whether firms that rely on government customers are more likely to engage in substantive CSR practices to meet government expectations and maintain strong business relationships. Research Findings/Insights: Our findings indicate that supplier firms with greater reliance on government customers exhibit a higher propensity to adopt CSR‐related executive compensation plans, establish CSR committees within their boards of directors, and voluntarily disclose climate change risks in their SEC filings. These effects are more pronounced for firms operating in states governed by Democrats and for smaller firms. To address endogeneity concerns, we employ instrumental variable analysis, difference‐in‐differences estimation, and entropy balancing, all of which reinforce the robustness of our results. Theoretical/Academic Implications: This study contributes to the literature on CSR and stakeholder theory by highlighting the government's role as an influential stakeholder in shaping firms' CSR engagement through supply chain relationships. It also extends research on political economy by demonstrating how political leadership at the state level moderates firms' CSR responsiveness to government customers. Practitioner/Policy Implications: Our findings suggest that policymakers can leverage government procurement policies to incentivize broader CSR adoption among supplier firms, thereby fostering positive social externalities. Firms seeking to establish or maintain government contracts should consider aligning their CSR strategies with government expectations to enhance their business relationships and long‐term sustainability.

Research Question/Issue: This study examines how the initiation of coverage by environmental, social, and governance (ESG) rating agencies and the intensity of such coverage impact firms' stock price crash risk, particularly in the context of varying levels of information opacity. Research Findings/Insights: Exploiting the staggered coverage of US firms by multiple third‐party ESG rating agencies, we discover a significant negative association between the initiation and intensity of coverage by ESG rating agencies and firms' stock price crash risk. Utilizing the expansion of firm coverage by Refinitiv Asset4 in 2017 as an exogenous shock, this study provides evidence consistent with a causal relationship between ESG rating agency coverage and the reduction of stock price crash risk. This effect is more pronounced for firms with lower levels of analyst coverage, diminished voluntary disclosure, and poorer earning quality. Additionally, we find that the presence of commercial ties between ESG rating agencies and the firms they rate attenuates the effectiveness of ESG coverage in reducing stock price crash risk. Theoretical Implications: This study contributes to the literature on information asymmetry by demonstrating that independent ESG rating agencies serve as critical informational intermediaries. It highlights how enhanced ESG information can help mitigate risks associated with information opacity, thereby influencing financial market outcomes. Practitioner Implications: The findings suggest that investors should consider the coverage and credibility of ESG rating agencies when evaluating firms, particularly those with less transparency. Moreover, the results underline the importance for rating agencies of maintaining independence from the firms they rate to preserve their informational role and effectiveness in the market.

We use the setting of board interlock (i.e., firms sharing directors) to examine whether director style influences accounting properties. We find that board interlock is associated with greater similarity in accounting properties such as accounting conservatism and reporting timeliness. Building on this result, we find a stronger similarity when the board member creating the board interlock holds a key position or when a greater number of board members create the board interlock. This evidence provides construct validity to the result that directors influence accounting policy as reflected in accounting properties (i.e., accounting conservatism and reporting timeliness). As further evidence, we find that the convergence in accounting properties is attributable to the director‐destination firm and that the director‐source firms’ characteristics affect interlocking directors’ influence over the director‐destination firms. Overall, our evidence affirms that directors have style in the sense that their distinct influence or imprint is evident in data on accounting properties. Moreover, our study indicates an actual process through which individual directors put their stamp on accounting policy.

Using an international sample covering 17 emerging countries over the 1995 to 2018 period, we examine the instrumental role of firms’ balance she |

Manuscript Type: EmpiricalResearch Question/Issue: The Chinese government regulates on the adoption of cumulative voting (CV) in order to protect minority shareholders by allowing them to elect a dissident director. However, adopting CV may deter potential acquirers, reducing the effectiveness of corporate takeover as a governance mechanism. Even worse, lacking enforcement of CV adoption allows firms to adopt CV when they need to deter potential acquirers.Research Findings/Insights: First, we find CV adopters have better governance overall, but also have tightened control such as higher ownership concentration. This evidence hints that when a firm adopts better governance to signal the market, it may tighten control in other ways such as increasing shareholder power and adopting CV. Second, we distinguish the role of CV in investor protection by examining its competing effects on tunneling and antitakeover. We find that CV does not reduce tunneling but lowers the probability of CEO turnover and of the firm becoming a takeover target. These results indicate that CV is used as an antitakeover measure in family‐controlled listed companies. Finally, we find that adopting CV has no impact on company performance.Theoretical/Academic Implications: Our evidence sheds light on the incentives embedded in the ownership structure that can determine the governance mechanism in family firms.Practitioner/Policy Implications: Since 2002, the Chinese Securities Regulatory Commission requires firms with a controlling shareholder holding more than 30 percent of shares to adopt CV. Our study shows that this policy has unintended consequences and does not always protect minority shareholders.

China established its stock futures exchange in year 2006, but not until year 2010 did the first futures contract become publicly available for trading. The tight government as well as the composition of market participants raises the question that whether this futures market is informationally efficient. We study the information incorporation of the futures market during the extended trading hours beyond those of the underlying spot market. Our analyses show that, first, spot market is the main information source of the futures market. In addition, using a T-GARCH model, we show that the post-closing, overnight and pre-opening returns are significantly correlated with the overnight spot market return. Second, the return innovations of the futures market significantly correlate with the overnight spot market return, indicating a price discovery role of the futures market. Finally, the futures market during the extended hours reflects the overnight news in the U.S. market.