1 Banking Deregulation and Investment-Cash Flow Sensitivity   , Dawei Jin, Haizhi Wang, Tianyu Zhao & Xinting Zhen  
Motivation: Prior empirical studies show that there exists a declining pattern of investment-cash flow sensitivity during the banking deregulation period in the United States, but it is still unclear whether such deregulatory reforms that increase competition affect the sensitivity of investment to internally generated cash flows. This research provides empirical evidence to explain banking de- regulation as an important determinant of the documented declining trend of investment-cash flow sensitivity. Premise: This study investigates the important role of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) in explaining the doc- umented declining trend of firms’ investment-cash flow sensitivity. We predict that banking deregulation progress relaxes geographical restrictions on bank expansion and facilitates bank loan issuance as a main source of external financ- ing, and ultimately, reduces the sensitivity of investment to internally generated cash flows. Approach: We implement a difference-in-difference approach to investigate the effects of both the interstate and intrastate banking deregulation on sensitivity of investment to internal cash flow at the firm-year level over the period 1970 to 2006. We also follow the conventional investment literature and apply the Erickson-Whited estimators to control for the measurement error of Tobin’s q. Results: We document that there exists a material drop in the firm’s sensitivity of investment to cash flow following the deregulation of restrictions on interstate and intrastate banking. Particularly, such reduction effects are strong among firms in industries that rely heavily on external finance, and among firms that geographically located in the urban areas. Furthermore, we show that the reduction effects of banking deregulation on investment-cash flow sensitivity is more pronounced for financially constrained firms with low hedging needs than for constrained firms with high hedging needs. Conclusion: Banking deregulation changes improve competition among banks and promote the use of bank loans as external financing, and thus reduce sen- sitivity of investment to internally generated cash flows. Such reduction effects are mainly driven by financially constrained firms with low hedging needs and are more pronounced among urban firms than among small-city and rural-based firms. Consistency: This research provides important implications on the role of fi- nancial market development for corporate investment. By making bank loans a more available external source of financing to firms after deregulation, com- petition-enhancing deregulatory changes reduce the sensitivity of investment to cash flows.  
2 The Leader-Member Exchange (LMX) Influence at Organizations: The Moderating Role of Person- Organization (P-O) Fit , Omer Faruk Derindag, Ozgur Demirtas & Ali Bayram
Motivation: In recent years, leader-member exchange (LMX) has become a widely utilized concept in business management and leadership literature. Ad- ditionally, business professionals and practitioners have been adopting this idea in their day-to-day management practices to ensure the effective performance of their teams.  Premise: This study investigates the influence of LMX on burnout, turnover in- tention, and organizational citizenship behaviors (OCB). In addition, we exam- ined the moderating role of person-organization fit on these LMX influences.  Approach: To address the moderating role of person-organization (P-O) fit on the relationships between the leader-member exchange (LMX) and burnout, LMX and turnover intention, and LMX and organizational citizenship behavior (OCB), a survey was conducted in Kayseri, Turkey’s manufacturing region. The sample consists of 903 employees who have direct relationships with their lead- ers. Frequency analysis, reliability analysis, confirmatory factor analysis, and hierarchical regression analysis were employed in the interpretation of the data obtained.  Results: The results of the study reveal that leader-member interaction has a negative effect on burnout and intention to quit and has a positive effect on organizational citizenship behavior. In addition, person-organizational fit was found to have a moderating role in these relations.  Conclusion: The studies on LMX theory revealed that leaders have the pro- pensity to trust their followers who displayed enthusiasm, and leaders pay less attention to other team members. The LMX theory kept evolving into a new structure concentrating more on the leader–team member relationship. There- fore, leader-member interaction influences burnout, turnover intention, empow- erment, employee performance, and organizational behavior.  Consistency: Regardless of the type of industry, the quality of the relationship and interaction between managers and employees is directly reflected in work out- comes. In this context, especially in risk management and in times of uncertainty, it is vital that the entire team can act in a coordinated and consistent manner. In professional life, stakeholders can adopt LMX as an effective tool for alleviating burnout and turnover intention and increasing OCB in their organizations.   
3 The Real Effect of Financial Reform: Evidence from Bond Market in China   , Xian Gu, Lu Yun & Shangwei Hao
Motivation: There has been rich literature on the relationship between equity market liberalization or overall financial development and economic growth, however, very few studies focus on the private bond market. It is difficult to identify the causal effect of liberalization on the real economy because of the potential endogeneity problem. This paper provides new insights by explaining the real effect of financial reform on the private bond market, i.e., the corporate bond market, and tackling the endogeneity problems.  Premise: This study aims to examine the real effect of China’s bond issuance re- form in 2015 on the cost of debt and debt choices. We use this reform to address endogeneity concerns because this policy shock only targets on the corporate bond market, not on the enterprise bond market.  Approach: We employ a difference-in-difference method to investigate the effects of liberalization of the private bond market on the cost of debt and debt structure from both the bond-level and listed-firm level. The bond-level dataset covers 689 enterprise bonds and 1,295 corporate bonds issued from 2007 to 2016. The listed firm–level dataset covers almost all the public firms on China A-share market from 2013 to 2016, including 2,500 firms across 17 industries.  Results: The bond-level results show that the reform reduces the cost of bond financing in terms of bond yield spread by approximately 29.4 percent and enhances the bond issuance volume by approximately 1.7 percent. At the list- ed-firm level, the reform reduces the cost of total debt by around 7.4 percent, enhances the public debt issuance instead of the private debt, and shortens the debt maturity. Additional robustness tests show that the above results are more pronounced for state-owned companies.  Conclusion: The liberalization of the private bond market reduces the cost of debt and alleviates financial constraints. Furthermore, with less frictions in the public debt market, firms issue more public debt, i.e., bond, instead of private debt, i.e., bank loan. The effect is more significant for politically connected firms with more concentrated ownership, indicating that they may use it as a way to insulate from bank monitoring.  Consistency: This research provides important implications on the role of financial reform for the private bond market. Liberalization of the private bond market reduces the cost of debt and further raises the public debt over bank loans, which may help reduce the exposure to liquidity shock during economic downturns. The paper sheds light for policy makers who aim to alleviate financial constraints and improve real growth through liberalizing capital markets.   
4 Work Environment and Employee Performance: Evidence from Sell-Side Analysts   , Shuya Liu & Kevin Sun
Motivation: While there is ample evidence that work environment quality is positively related to firm performance, there is limited evidence on whether the positive relation between work environment and firm performance is due to the claim that employees’ satisfaction with their work environment increases their job performance. We attempt to fill in this void by investigating how stock analysts’ rating of work environment is related to their job performance.  Premise: We examine whether analysts in a better-rated work environment ex- pend more efforts, are more capable, and have high-quality stock recommendations.  Approach: We use Glassdoor ratings as a proxy for employee satisfaction of work environment. Glassdoor.com is a website where current and past employees can rate their overall work environment and provide feedback about their firms. We regress analysts forecast accuracy, forecast frequency, and stock market reaction to analysts’ buy/sell recommendation on Glassdoor ratings, and the squared term of Glassdoor ratings.  Results: We find that in better-rated brokerage firms, analysts issue more frequent and more accurate earnings forecasts, and their stock recommendations produce a larger stock market reaction. The coefficient on the squared term of Glassdoor rating is negative, indicating a concave relationship between work environment quality and job performance. We also find that this nonlinear relationship only exists after an analyst works for a brokerage firm for at least two years. In addition, highly rated brokerages have better analyst retention and a lower percentage of employee turnover.  Conclusion: We find that out of five subcategories of work environment ratings, Career Opportunities and Culture & Values have consistently demonstrated their positive impact on analyst job performance. Our research demonstrates long-term benefits of investing in employees.  Consistency: Our research contributes to the literature on environment, sustain- ability, and governance (ESG) and labor economics. The findings indicate the need to spend on improving work environments that may improve employee performance.   
5 The Moderating Impact of COVID-19 Attitudes on Customer Brand Engagement and Loyalty , Yanni Ping & Alexander Buoye
Motivation: The COVID-19 pandemic has changed consumer behaviors spanning all areas of life and signaled a profound and long-term challenge to businesses. Understanding the impact of customers’ attitudes toward COVID-19 on the estab- lished positive association between customer engagement and customer loyalty is essential for firms’ engagement initiatives during this unprecedented time. Premise: This research creates a new vision for the relationship between custom- ers’ COVID-19 attitudes and engagement construct and their moderating effects toward customer brand engagement on customer loyalty. Approach: Based on designed surveys, three dimensions of COVID attitude: COVID anxiety, COVID reaction, and COVID trust were extracted using Prin- cipal Component Analysis (PCA) and included in Hierarchical Cross-Classified regression models. Results: COVID anxiety and trust are found to moderate the effect of customer brand engagement on customer loyalty, while consumers’ reaction to govern- ment COVID policies has a direct effect on customers’ likelihood to recommend e-commerce platforms. Conclusion: This research furthers the theoretical development of contextual in- fluence on customer engagement effects and makes contributions to both the ac- ademic and practitioner literature on customer engagement and the COVID-19 pandemic. Consistency: This research provides insights into an updated framework for dig- ital engagement to help businesses improve customer brand relationship and create loyalty outcomes under the unprecedented impact of COVID-19, which is consistent with the purpose of this journal. Keywords: COVID-19 attitudes, customer engagement, customer loyalty, Net Promoter Score (NPS) JEL Classification Codes: C2, I1, M3
6 The Impact of COVID-19 on Global Import and Export Trade , Rui Wang & Yanying Mo
Motivation: This article discusses the impact of COVID-19 on import and ex- port trade, and what roles the degree of epidemic spread, the degree of malig- nancy, and the governments’ epidemic prevention and control responses have played in the waves of COVID-19 infections. Premise: Since the beginning of 2020, COVID-19 has had a huge impact on the world health system and has profoundly affected the global economy and im- port and export trade. The volume of import and export trade in most countries around the world has experienced a significant decline. The global supply chain system has suffered huge challenges due to the epidemic, its management, and each country’s governmental response. Approach: This article describes the spread and development of COVID-19 and its phased impact on international trade. This article also discusses the impact mechanism of the epidemic on international import and export trade and the global supply chain system. The study uses trend analysis and fixed effects mod- els to analyze the influence factor on import and export trade of nine major economies (the United States, China, the United Kingdom, Germany, Italy, Ja- pan, Canada, India, and Australia) in 2020. Results: This study explores COVID-19’s effects on international import and export trade. It estimates the impact of COVID-19 on the import and export trade of each country, discussing the relationship between the whole epidemic situation, the number of epidemic infections and deaths, and how governments responded to international trade in this epidemic. The study also groups nine countries from four aspects and analyzes the differences in the impact of import and export trade among different groups. Conclusion: This study has found that for most countries, the COVID-19 epi- demic had greater impact on the import trade than export trade. The number of deaths caused by the epidemic had a greater impact on import and export trade than the number of epidemic infections. Each government’s epidemic preven- tion and control policy had a negative impact on the import and export trade. Discovering appropriate policies that could reduce the impact on the economy while preventing and controlling an epidemic is of great importance. The further impact of COVID-19 might change the global industrial layout in the future, but the global supply chain system will not experience huge changes in the short term. Consistency: This research explores the fluctuations and the recovery cycles of the international trading system. The quantitative analysis finds out the negative effects of regional control policies and mobility restriction policies in different countries. It contributes to the business for coping with sudden risks in interna- tional supply chain system. Keywords: COVID-19, government response, import and export trade JEL Classification Codes: F14, F17
7 Features of the Termination of Their Activities by Entrepreneurs in 2020 , Iuliia S. Pinkovetskaia
Motivation: Due to the significant impact of the COVID-19 pandemic on the exit of entrepreneurs from their businesses, the study of this problem in different countries is relevant. Purpose: The aim of the study is to assess the reasons for the exit of entrepreneurs from their businesses in national economies in 2020. Approach: The assessment of five indicators characterizing the opinions of entrepreneurs who have left their businesses about the positive and negative rea- sons was considered. In addition, an assessment was made of the share of entrepreneurs who stopped working due to the influence of COVID-19 in the total number of economically active population in 2020. The initial data were the results of a survey of the economically active population in 39 countries during the implementation of the Global Entrepreneurship Monitoring project. Five indicators were evaluated using the density functions of the normal distribution. Results: It is proved that the share of people who stopped entrepreneurial activity in 2020 amounted to about 6 percent of the total economically active population on average in the countries under consideration. It is shown that 0.7 percent of the total economically active population stopped entrepreneurial activity for positive reasons. It is proved that about five out of every six entrepreneurs who have gone out of business have stopped their activities for negative reasons. It is shown that about one-third of entrepreneurs who left their business in 2020 for negative reasons did so due to the consequences of the coronavirus pandemic. Conclusion: The results of our research have a certain theoretical and practical significance for governments, entrepreneurs, and the economically active population. The methodological approach presented in the article can be used to assess the impact of the COVID-19 pandemic on the exit of entrepreneurs from their businesses in 2021. Consistency: The pandemic has significantly increased the risks and uncertainty in the activities of entrepreneurs, so the new knowledge gained is of interest to a wide range of government organizations and entrepreneurs in various countries. Keywords: COVID-19 pandemic; economically active population; entrepreneurs who have gone out of business; normal distribution functions JEL Classification Codes: C31, L26, M20
8 Rethinking Business Model for Drug Discovery, Post-COVID , Bud Mishra Qianru Qi
Motivation: The COVID pandemic underscores the need for fair access to health care. The unequal access to needed but patented, expensive medicines will exac- erbate existing disparities among disadvantaged populations. For example, can- cer gene therapy costs range from $373,000 for a single dose of CAR-T therapy Yescarta to $2.1 million for Zolgensma. Premise: In this paper, we propose a peer-to-peer business model for drug dis- covery that democratizes the drug discovery process and reduces drug prices by cutting the intermediaries between biomedical researchers and future patients. Note that in this market microstructure, the underrepresented group can take advantage of medical advances by selling their data for research. Approach: We devise a market microstructure in which a group of project man- agers, who are usually “star” scientists or CEOs of biotech firms, will select in- dividuals at disease risks and researchers, raise funds by selling non-fungible to- kens (NFTs) based on their future patents, and control risks by the rating system, due diligence, and financial engineering. Employing a signaling game-theoretic mechanism, our analysis not only elucidates how the stakeholders strategically interact in this market using deception, adverse selection, and moral hazards, but also how to tame their interactions to improve the overall performance. In particular, we suggest and rigorously evaluate an embodiment built on a scalable implementation of NFTs. Results: Using extensive simulations, we show that in the NFT megafund, both senior and junior tranche investors get their principals fully repaid 99.9 percent of the time. Conclusion: This market micro-structure can help reduce health disparity in the following three ways. First, by participating in the drug discovery process, the underrepresented population can accelerate drug discovery for diseases unique to themselves. Historically, such diseases are understudied due to a lack of fund- ing and resources. Second, cutting out the middleman can significantly reduce drug-development costs, which will increase access to medicine. Finally, retail investors can also benefit from investing in drug discovery because the risk asso- ciated with the NFT is managed down to the level of debt.
9 The Economic Worth of the Firm’s Interorganizational Relationships in Acquisitions: A Social Network Perspective, Dawei Jin, Yin-Chi Liao, Haizhi Wang, and Zehui Wang
Motivation: We treat the network position of target firms as a source of value creation in mergers and acquisitions (M&As), and intend to gauge the associ- ated economic value. Premise: We adopt the social network methodology to capture the target firms’ network position and relate it to abnormal returns experienced by the acquiring firms on the announcements. Approach: We use a sample of 728 completed acquisitions in the United States from 1990 to 2011 and employ social network analysis and event study meth- odology to conduct our analysis. Results: We document that the stock market responds positively to the target’s centrality. We also find that the combined centrality and the relative centrality of the acquiring firm and the target firm enhance the performance of a particular acquisition. Furthermore, the positive effects of the target firm’s centrality on the acquirer’s shareholder value creation are stronger when the acquisitions are related deals or the acquirer has prior experience in the target’s industry. Conclusion: This study offers a systematic analysis of whether and how a target firm’s network position leads to the shareholder value creation of the acquirer. It demonstrates that the externally derived network position and resources of the target firm can influence the stock market’s valuation of M&A deals. Consistency: This study provides implications for practitioners with respect to how the acquiring firms assess the targets to create shareholder value in M&A transactions.
10 The Competitive Effects of IPOs on Industry Peers’ Finance Contracting: Evidence from Bank Loans, Ning Ren, Qiang Wu and Bill B. Francis
Motivation: Incumbent literature focuses on motivation, post–initial public offer- ing (IPO) stock performance, and post-IPO operation performance. Few investi- gate how successful IPOs impact industry peers’ performance. This paper is the first to study the competitive effects of IPOs on industry peers’ bank loan terms. Premise: Our paper investigates how a successful IPO impacts the incumbent companies’ bank loan terms, including price and non-price terms. We assume that the successful IPO will affect industry peers’ bank loans via escalated prod- uct market competition and financing market competition. Approach: We select the largest IPO event in the surrounding six years in the industry to avoid contamination from other IPOs. We implement ordinary least squares (OLS) regressions on 13,075 facility-firm loan observations from 1989 to 2011. To alleviate endogenous concerns, we use difference-in-difference meth- odology to prove the causality between IPO competitive effects and industry peers’ bank loan terms. Results: We find that after the successful IPO, bank loans initiated for the in- dustry’s incumbent firms have significantly higher loan spread, higher likelihood of employing performance pricing provisions, and higher commitment fees. We also find that the syndicate loan structure for industry incumbents becomes more concentrated after successful IPOs in the industry: the number of lenders declines while lead bank share increases. We further show that successful IPOs’ competitive effects increase as the level of industrial product competition and financing competition increase. Conclusion: Successful IPOs impact peers’ bank loan terms, including price and non-price terms. The IPO competitive effects are more pronounced among firms in more intensive industrial competition and with higher levels of information asymmetry. It implies that IPO competitive effects impact the peers’ bank loan terms via product market competition and financing market competition. Consistency: This paper shows that the new player in the market has a compet- itive advantage over incumbent firms. This finding has important implications to investors and creditors since incumbent firms comprise the majority part of capital market.
11 Understanding Convertible Bond Issuances of Chinese Listed Firms , Liuling Liu, Hao Shen, Peng Wang and Lin Zhang
Motivation: This paper investigates why Chinese firms issue convertible bonds. Premise: Unlike their counterparts in the United States and the European Union, most convertible bonds issued by listed firms in China from 2003 to 2014 are converted to equity before the maturity date. This indicates that the convertible bond in China is used as a backdoor equity financing instrument. Approach: By using a sample of 77 convertible debt, 655 straight debt, and 1,089 seasoned equity issues in China from 2003 to 2014, we employ a multinomial logit model. Results: Our regression results show that firms are more likely to issue convert- ible bonds rather than straight debt when the debt-related cost is low and stock price run-up is high while, compared to seasoned equity issuers, firms issue con- vertible bonds when the risk-free rate is low. Conclusion: The overall results suggest that while listed firms in China still seek equity financing first, they issue convertible bonds to take advantage of the inter- est rate deduction with the assurance to their investors that the convertibles can be converted to equities. In addition, most convertible bonds were underpriced on the offering date, suggesting convertible bond issuers do not exploit the local investors in China. Consistency: Our understanding on the convertible bond issuance is mainly based on firms in developed markets. Little is known about Chinese firms in this regard. In this paper, we study why firms issue convertible bonds in China by investigating 77 convertible bonds, 655 straight debts, and 1,089 seasoned equities issuances from 2003 through 2014. We find that the average of the ex post actual conversion rate of convertible bonds is 96.18 percent, indicating that almost all convertible bonds in Chinese stock markets were eventually converted to equities, which is a strong indication that convertibles are used as delayed eq- uity. This motivation is reflected with the equity-like design of most convertible bonds in the Chinese market.
12 A Cross-Country Study of Interbank Loans: The Effects of Regulations, Market Structure, and Institutions, Liuling Liu, Mingsheng Li, Haizhi Wang, Jianrong Wang
Motivation: Long-term bank-to-bank loans have become an increasingly im- portant type of funding for banks. However, the literature does not examine whether and how banks’ funding costs vary with cross-country factors. Premise: In this paper we examine the factors that determine the financial con- tracts between banks. Approach: Using a sample of 1,854 syndicated loans issued to 530 commercial banks from 1995 to 2009 in 42 countries, we conduct both country-level and borrower-level fixed effect estimations. To further ameliorate the endogeneity concern, we estimate our models using instrumental variable analysis and a dif- ference-in-difference analysis. Results: We find that the pricing of bank-to-bank loans is significantly influenced by bank regulations, market structure, institutional qualities, and their relative differences in borrower and lead lender countries. The results further demonstrate that prudential bank regulations are effective in reducing banks’ funding costs, especially when the borrowers are relatively risky or when the banking industry is highly concentrated, or the country has weak institutional system. Consistency: Consistent with this journal’s purpose, this basic research on how banks manage the cost of funding and engage with global factors has important implications to the policy makers.
13 Audit Firm Mergers and Low Balling, Wenjun Liu, June Cao
Motivation: This paper investigates whether audit firm mergers affect audit fee discounts in the initial year. The numerous mergers of audit firms in China’s cap- ital market provide a quasi-natural experiment to investigate this issue. Premise: The merger of audit firms can increase the firm size, thereby improving quasi-rents that are required by auditors. Therefore, we argue that the merger of audit firms will improve the auditor independence, thereby reducing the behav- ior of low balling. Approach: We select samples from 43 cases of audit firm mergers that occurred between 2005 and 2013 in China and use ordinary least squares (OLS) regres- sions on 5,552 listed firm-years observations during the period from two years before to two years after the merger. Results: We find audit firms would offer an initial fee discount to the clients, and the merging of audit firms can dramatically reduce the discounts on audit fees for new clients. We also show the treatment effect is more pronounced for non–state-owned enterprises (non-SOEs) and the merger between large audit firm and small ones. Conclusion: The results suggest that low balling exists in China’s audit market. The merger of audit firms can curtail low balling, but only exists in non-SOEs. Moreover, the restraining effect of audit firm mergers on the low balling lies in the merger between large audit firms and small ones. Consistency: The findings in this paper can advance the understanding of the recent strategy raised by related regulators attempting to enhance audit quality.
14 Female CFOs and Stock Price Crash Risk, Iftekhar Hasan, Trung Nguyen, Jong Chool Park
Motivation: Extant literature suggests that female leaders tend to exhibit greater risk aversion in their decision-making process than male leaders. However, more empirical evidence is needed to shed light on the potential impact of executive genders on stock price crash. Premise: This study explores whether female chief financial officers (CFOs) are less likely to withhold negative information from investors, which mitigates stock price crash risk. Approach: To test the central prediction, we perform multivariate regression analyses on a sample of 14,846 firm-year observations over the 1994 through 2015 period. The sample has 1,108 unique firms, 286 unique female CFOs, and 3,377 unique male CFOs. We also employ the propensity score matching ap- proach to address endogeneity, and the textual analysis to investigate the risk disclosure quality of the 10-K filings. Results: Female CFOs are negatively associated with stock price crash risk. Firms with female CFOs tend to exhibit greater risk disclosure quality. Conclusions: Female CFOs are less likely to hoard bad news and they exhibit a higher level of transparency, leading to lower future stock price crash risk. Consistency: This research highlights the significance of the gender of CFOs in corporate financial reporting. The evidence also emphasizes the essential role of the CFOs, besides that of the CEOs, in corporate decision-making processes. Furthermore, this study suggests a useful implication to investors who want to incorporate crash risk in their portfolio and risk management decisions.