Firms' inflexibility in adjusting output prices to economic shocks exacerbates information asymmetry with respect to firms' profits, but public information on firms' cost structure mitigates this problem. We construct a novel form of public information from economic statistics disclosed by the government and find that such public information significantly reduces inflexible-price firms' bid–ask spreads, the probability of informed trading, and analyst forecast dispersions, but these results do not hold for flexible-price firms. Security analysts seek more cost-related information during conference calls about inflexible-price firms, but such a phenomenon is observed less frequently if a firm's input cost is more publicly observable. In addition, stock markets react more strongly to earning news announced by inflexible-price firms, consistent with our intuition.

We augment the factor-based estimation of treatment effects proposed by Bai and Ng (2021) with easy-to-implement and nonparametric confidence intervals of treatment effects on every treated unit at every post-treatment time. The construction of confidence intervals entails a residual-based bootstrap resampling procedure. This method does not rely on any parametric assumption on the distribution of idiosyncratic errors and it is robust to weak cross-sectional and time-series dependence among idiosyncratic errors. We prove the asymptotic validity of the proposed confidence intervals as the numbers of control units and pre-treatment times go to infinity. We also extend this method to cases where the common factors and covariates (if any) are unit root processes. Monte Carlo experiments show that the proposed confidence intervals are well-behaved in finite samples and outperform confidence intervals based on normal quantiles. Empirical applications with two classical datasets add informative confidence intervals

Announcements of mergers very often discuss the immediate impact of the deal on the acquirer’s earnings per share (EPS). We argue that the focus on EPS reflects the difficulty of evaluating and communicating deal synergy in mergers and acquisitions (M&A) practice and provide supporting evidence. We show that the acquirer's EPS focus affects how deals are structured, the premium that is paid, and the types of deals that are done. EPS-driven M&A decisions are also associated with costly distortions in the acquirer's financial and investment policies.

China has expanded the yearly quota on newly admitted college students by more than seven times since 1999. How did this massive education expansion affect firms' export and innovation choices? I document that after this expansion impacted the labor market, manufacturing firms' innovation increased considerably, especially among exporting firms, accompanied by sizable skill upgrading of exports. I then develop a multi-industry spatial equilibrium model, featuring skill intensity differences across industries and heterogeneous firms' innovation and export choices. Quantitatively, the college expansion explained 72% of increases in China's manufacturing research and development (R&D) intensity between 2003 and 2018 and also triggered export skill upgrading.

Starting from twelve distinct factors from the recent literature, plus twelve principal components (PCs) of anomalies unexplained by the initial factors, a Bayesian comparison of approximately seventeen million models in terms of marginal likelihoods and posterior model probabilities shows that {Mkt, MOM, IA, ROE, MGMT, PERF, PEAD, FIN}, plus the nonconsecutive principal components, {PC1, PC5, PC7} are the best supported risk factors. Pricing tests and annualized out-of-sample Sharpe ratios for tangency portfolios suggest that this asset pricing model should be used for computing expected returns, assessing investment strategies and building portfolios.

This paper examines one million land transactions and firm census data sets to determine the effect of market concentration on entry deterrence in China from 2006 to 2013. We find that a one standard deviation increase in the Herfindahl–Hirschman Index leads to a one standard deviation decrease in local government-designated industrial land sales to nonlocal firms and to a 2.9 standard deviation increase in land cost. Further evidence suggests that firms with high market power lobby their local governments to deter the entry of nonlocal firms.

Using commuting flows derived from cellphone location data at fine geographical levels, this paper presents the first delineation of China’s commuting-based metropolitan areas (MAs). The size distribution of those MAs follows a power law, with larger MAs hosting more skilled workers, more productive firms, and offering higher wage premiums. China’s commuting-based MAs exhibit a few notable features compared to several other large countries. First, commutes are short in both time and distance and rarely cross administrative boundaries. Second, China’s MAs are small relative to the size of the country, with MA sizes highly correlated with the administrative hierarchy. We discuss existing policies that may have contributed to these characteristics. We demonstrate that commuting-based MAs differ substantively from other definitions of Chinese cities. The commuting-based MAs provide a valuable tool for researchers who need to define Chinese cities as local labor markets but are limited by the availability of offic

This paper undertakes a Monte Carlo experiment to evaluate whether the canonical “persistent-transitory” model of income can effectively measure means-tested government transfer policies. First, I show that means-tested transfers (modelled as an income floor) are not well represented by a stationary stochastic process for income with the persistent-transitory structure, since means testing generates age dependence in the autocovariance structure of income. Second, I quantify how this affects inference in a standard life-cycle model with incomplete financial markets. The structural model reveals how including transfers in an exogenous (persistent-transitory) income process affects both consumption and savings decisions, and the estimation of key structural parameters (compared to a model with an income floor). This exercise demonstrates that including transfers implicitly in the income process generally leads to biased estimates of key structural parameters (i.e., the discount factor and coefficient of risk av

Using administrative records of home mortgages in Beijing, we show that dual-income households systematically choose to buy homes that are closer to the wife’s workplace. The wife’s commute from the newly purchased home is on average 11 percent shorter by distance than the husband’s. We estimate a discrete home location choice model and find that households derive substantially larger disutility from the wife’s commute than from the husband’s. Through the lens of a simple collective household model, we show evidence that gender commute gap reflects the intrahousehold division of labor and relative bargaining power.

This paper examines whether state ownership and political connections affect the relationship between customer concentration and cash holdings for Chinese listed manufacturing firms. We show that non-state-owned firms, but not state-owned firms, hold more cash as customer concentration increases. In addition, political connections weaken the positive effect of customer concentration on non-state-owned firms’ cash holdings. Our supplemental analyses further show that for non-state-owned firms with limited access to finance—for instance, firms with low analyst following, low institutional ownership, or low government subsidies—the effects of political connections on weakening the positive association between customer concentration and cash holdings are more pronounced. Additional robustness tests support our arguments.