Adrian (Wai Kong) Cheung

This study examines the role of artificial intelligence (AI) adoption in the market for corporate control using a sample of Chinese listed firms from 2011 to 2021. We construct a novel firm-level AI Index through textual analysis of annual reports and find that AI adoption significantly enhances both the likelihood of becoming an acquisition target and the valuation premiums commanded in M&A transactions. Specifically, a one-standard-deviation increase in the AI Index is associated with a significant increase in the probability of being acquired and higher deal premiums measured by price-to-earnings multiples. We identify two channels through which AI adoption creates value recognized by the M&A market: an efficiency channel, whereby AI reduces agency costs and improves profitability, and an innovation channel, evidenced by increased high-quality patent output. The persistence of these effects over time further suggests that AI adoption generates substantive improvements in firm fundamentals rather than serving as a transitory informational signal. Importantly, we document significant heterogeneity across ownership structures: the positive effects of AI adoption are substantially weaker for State-Owned Enterprises (SOEs) than for non-SOEs. Our findings contribute to the literature on digital transformation and corporate finance by demonstrating that AI adoption serves as a value-relevant firm attribute that shapes outcomes in the market for corporate control.

We examine whether and how mandatory non‐financial disclosure affects corporate cash holdings. Using a panel data set of Chinese A‐share listed firms from 2005 to 2012 and exploiting the introduction of mandatory corporate social responsibility (CSR) disclosure for a subset of firms as a quasi‐natural experiment, we find that firms subject to the mandate significantly reduce their cash holdings relative to unaffected firms. We show that reductions in firm‐specific (idiosyncratic) risk constitute the primary channel through which CSR disclosure affects cash policy, relative to alternative explanations related to systematic risk and corporate governance. Consistent with the precautionary motive of cash holdings, the effect is more pronounced among financially constrained firms. In addition, mandated firms exhibit improved access to external financing and a lower marginal value of cash. Overall, our findings suggest that mandatory CSR disclosure weakens the precautionary demand for cash by enhancing the firm's information environment, highlighting the important role of non‐financial information transparency in shaping corporate financial policies.

Climate change presents increasing operational risks for firms, yet its influence on financial policy remains underexplored. While prior research has examined climate change's effects on capital structure and investment decisions, the role of trade credit, a vital tool for liquidity management, has received limited attention. Drawing on data from US firms between 2001 and 2021, this study investigates how climate change exposure affects suppliers' provision of trade credit. The empirical findings reveal a statistically significant positive relationship between climate exposure and trade credit provision, particularly among firms with greater financial flexibility, weaker performance, or lower reputational standing. Moreover, shareholders respond favorably to such credit expansions. These results suggest that trade credit functions as a risk‐sharing mechanism for climate‐exposed firms, offering novel insights into adaptive financial strategies and stakeholder responses to environmental challenges.

This paper investigates whether and how trade secrets, as an important intellectual property asset of firms, impact trade credit provision. Examining 8044 US firms during the period from 1995 to 2023, we find that firms relying more on trade secrets extend less trade credit to customers. Our findings remain robust across a battery of sensitivity tests and endogeneity tests. Further mediation analysis reveals that this negative association stems from heightened information asymmetry and enhanced market power derived from proprietary knowledge. Finally, we document that trade credit provision partially mediates the relationship between trade secrecy and firm value.

Climate change presents increasing operational risks for firms, yet its influence on financial policy remains underexplored. While prior research has examined climate change's effects on capital structure and investment decisions, the role of trade credit, a vital tool for liquidity management, has received limited attention. Drawing on data from U.S. firms between 2001 and 2021, this study investigates how climate change exposure affects suppliers' provision of trade credit. The empirical findings reveal a statistically significant positive relationship between climate exposure and trade credit provision, particularly among firms with greater financial flexibility, weaker performance, or lower reputational standing. Moreover, shareholders respond favorably to such credit expansions. These results suggest that trade credit functions as a risk-sharing mechanism for climate-exposed firms, offering novel insights into adaptive financial strategies and stakeholder responses to environmental challenges.

Using data on publicly traded U.S. bank holding companies from 1992 to 2019, we examine whether disparities between CEO and non-CEO executive pay affect banks’ liquidity creation. We find that banks with larger CEO pay gaps create more liquidity, but this positive association emerges only after the global financial crisis. A difference-in-differences analysis around the 2011 implementation of the Dodd-Frank Act corroborates these findings: the interaction between post-2011 and the pay-gap measures is positive and significant, implying that post-crisis compensation and governance reforms strengthened the incentive role of pay inequality. The effect is concentrated in on-balance-sheet liquidity creation and in banks with stronger risk-absorbing capacity, low market competition, and sound governance. Together, the results reveal a dynamic link between executive pay structure and bank behavior, suggesting that post-crisis reforms amplified the motivational channel of pay disparity while overly restrictive pay limits could unintentionally dampen banks’ liquidity-creation capacity.

This paper investigates the influence of corporate social responsibility (CSR) report tone on stock price reactions surrounding the announcement of corporate crises. Although prior research highlights the importance of CSR tone in shaping investor responses, its role during crisis events remains ambiguous. Drawing on a sample of Chinese‐listed firms penalized for violations between 2016 and 2022, we find that a more positive CSR tone is associated with lower abnormal returns following the disclosure of such violations. This indicates that a disconnect between a firm's socially responsible image—projected through optimistic CSR disclosures—and its actual misconduct undermines investor trust, resulting in adverse stock price movements. Our findings are robust across alternative variable measurements, empirical models, and controls for endogeneity. Moreover, the impact of CSR tone on stock price responses varies with the firm's information environment and stock liquidity. Specifically, CSR tone exerts a stronger influence in firms with weaker information environments and higher stock liquidity, and a weaker influence in firms with stronger information environments and lower liquidity. These results suggest that both information transparency and market liquidity amplify the effect of CSR tone on investor reactions to crisis announcements. Overall, our study provides empirical support for the impression management hypothesis.