Economic and Political Studies, a China-focussed academic journal recently published its issue 2 vol. 6, 2018
The full texts are available online at www.tandfonline.com/reps
Unpacking the patterns of corporate restructuring during China’s SOE reform
Xiaojun Li and Jean C. Oi
State-owned enterprises (SOEs) in China have undergone significant restructuring since the mid-1990s. To date, scholars have devoted considerable attention to the constraints upon and motives for corporate restructuring in China. Yet the majority of the existing studies treat restructuring as a simple ownership transfer from the state to non-state entities without considering the resulting ownership structure of the firm. Consequently, we know relatively little about why otherwise similar SOEs were restructured at different times and through different means. This study intends to fill this gap by examining the determinants of both the timing and the methods of restructuring in a unique longitudinal survey of 145 SOEs over an 11-year period. Using a competing-risks model, we demonstrate that political as well as
economic factors determine the possibility, nature and speed of restructuring. In particular, we show that political constraints on employee retention increase the likelihood that a SOE will be restructured as shareholding as opposed to its ownership being directly transferred to private hands. These findings shed new
light on the economic and political logic of corporate restructuring in China.
Explaining the state-owned enterprise wage premium in China: is it unobserved heterogeneity?
State-owned enterprises (SOEs) in China pay higher wages than private firms. Is it because SOEs pay their workers wage premium or because they employ high-quality workforce? Using the latest methods and data, this paper accounts for the unobserved heterogeneity and estimates the SOE wage premium for the period 1995–2013. It is found that the wage premium has diminished since 1995 and has become insignificant since 2000. The significant wage gap between SOEs and non-SOEs can be explained by the fact that SOEs recruit high-quality workforce in correlation with SOEs’ industrial composition. This paper also evaluates the instruments used in the previous studies and rejects them through validity tests. The evidence suggests that the labour market in China is not segmented by ownership.
Modelling energy efficiency in China: a fixed-effects panel stochastic frontier approach
Feng Song and Yihua Yu
This paper combines energy demand modelling with stochastic frontier analysis to investigate the changing trends, variations and determinants of energy efficiency for 27 Chinese provinces over the period 1995 to 2014. An aggregate ‘frontier’ energy demand function and an efficiency function are estimated simultaneously. We obtained several findings. First, the energy intensity is not a particularly good indicator of energy efficiency. Second, the
energy efficiency levels for all the provinces improved during the sample period, but the current efficiency levels are still low, implying great potential for energy saving. In addition, the energy efficiency gap among the provinces seems to have widened over the past 20 years, as the variance has increased by almost three times. Finally, technological progress driven by new investment and the development of market mechanisms are two important drivers of energy efficiency improvement.
Conditional dependence between oil price and stock prices of renewable energy: a vine copula approach
Hanene Mejdoub and Ahmed Ghorbel
The paper focusses on the co-movement between oil prices and renewable energy stock markets in a multivariate framework. The vine copula approach that offers a great flexibility in conditional dependence modelling is used. More specifically, we investigate the issue of the average dependence and co-movement between oil prices (West Texas Intermediate [WTI]) and renewable energy stock prices (Wilder Hill New Energy Global Innovation Index [NEX], Wilder Hill Clean Energy Index [ECO] and S and P Global Clean Energy Index [SPGCE]) by applying the vine copula based threshold generalised autoregressive conditional heteroskedasticity (TGARCH) model. Over the period 2003–2016, empirical findings reveal significant and symmetric dependence between the considered markets. Therefore, there is symmetric tail dependence, indicating the evidence of upper and lower tail dependence. This means that movements in oil prices and renewable energy indices are coupled to the same direction. These empirical insights are of particular interest to policymakers, risk managers and investors in renewable energy sector.
Does development of financial markets help firm innovation? Evidence from China
Jianbo Song, Zihao Su and Xiaoqun Nie
This paper examines the impact of financial market development on firm R&D investment. Using hand-collected R&D investment data of 221 high-tech firms listed in China’s small and mediumsized board in the period of 2009–2015, we find that equity financing, particularly internal cash flow, is the main source for
R&D investment of high-tech firms. Mature firms make more use of debt financing than young ones and are faced with less severe financial constraints. The development of financial markets relieves the dependence of R&D investment on internal capital, and the effect is more recognisable in young firms than in mature ones. However, the constraint of debt financing is not alleviated as much as that of equity financing by financial deepening, which suggests that debt markets still need developing, and more favourable policies are necessary for innovative firms.
The impact of bond rating downgrades on common stock prices in China
Bo Huang, Lin He, Shanshan Xiong and Yirui Zhang
In this paper, we examine how bond rating downgrades affect common stock prices in China by using the data of all the bond rating downgrades in China during the period from 1 January 2008 to 30 May 2016. To provide empirical evidence for the theory in Goh and Ederington (1993), we classify the samples according to the downgrade reasons and the bonds’ time to maturity and examine the abnormal returns of each group in different windows. The empirical results show that the downgrades due to deteriorating financial prospects have a negative effect on stock prices and that this effect lags behind. The downgrades due to leverage changes have no significant effect on stock prices. Meanwhile, the variation in the decrease in stock prices due to rating downgrades of bonds that will mature within three years is significantly larger than that of those which will mature after more than three years.
Review of research on property income in China
Guangjie Ning and Yuhao Jiang
In recent years, the property income of Chinese residents has increased rapidly. However, a huge gap in property income has emerged and its effect on the total income inequality has become evident. Thus, the study on property income is of great significance. This article reviews and evaluates the existing literature on property income in the aspects of its estimation, characteristics, functions, causes and dynamic evolution. We also try to point out possible directions for future research.