Xiang Yin (尹 翔)

n leading-edge economies, high-growth entrepreneurship has declined in recent decades. Why? We explore the role of constraints to firm capabilities using a natural experiment with a Venture Capital (VC) seed fund. We propose that VC due diligence can help entrepreneurs build key capabilities that cannot be bought. Consistent with this hypothesis, we show due diligence selection increases average and top business growth within two years, even for companies that do not join the Fund’s portfolio, partly by leading to technology adoptions and product experimentation. The findings point to a broader role of VC due diligence beyond portfolio companies.

As many ESG rating agencies have flourished to meet rising interests in ESG investing, we examine the information provider role of these rating agencies. We hypothesize that new ratings can add information useful to investors about rated firms besides any changes to the average level and dispersion in ratings. We exploited the empirical setting where the introduction of various ESG ratings in China is staggered over time and across firms. We show that an increase in the number of ratings by different agencies for a given firm will induce more mutual funds’ investments towards that firm. This is unexplained by rating inflation or rating shopping channels. We further show that such effect is more pronounced when incumbent and entrant agents provide complementary information. For different types of funds, we find different sensitivities to the arrival of new agents in accordance with their explicit requirements for ESG mandate. And interestingly ESG funds that track ESG indices are not responsive to new ratings as ESG indices are sticky in choosing the reference rating. We also provide evidence that the documented effects are not due to endogenous actions taken by incumbent agencies or firms. Our paper proviacrossdes interesting and causal evidence of the incremental information from additional ESG ratings which have important implications for the market competition and regulations of ESG rating agencies.

Does the quality of government have real effects on economic activities? I provide micro evidence from the housing market and firms’ borrowing behaviours in London. I focus on a single-dimension and verifiable task of bureaucrats—the permission for development plans of new buildings or house renovations to measure the quality of government. Using a hand-collected dataset of over 2.2 million planning applications from 2000 to 2020 in London, I show there is a causal and positive relationship between the speed of the application approval and the trading and value of both residential and commercial properties. Firms that own properties in London increase their chance of creating collateralized loans when exposed to faster planning approval. The effects arise because the timing of property development is important to households and firms. The delay in planning permission will lead them to abandon the project and change behaviours in housing markets and borrowing. 

Motivated by political incentives, governments may give preferential treatment to suppliers that are their political constituents. In addition, it's unclear if politically incentivized purchases result in more corporate investment or not. To answer the two questions, I construct a novel and granular data set of the purchases of 308 councils in England with corporate suppliers in monthly frequency from 2011 to 2020. First, I document that compared to non-local councils, suppliers receive more specialized contracts from the local council and maintain a more persistent customer-supplier relationship with it. Next, to identify the causal relationship between local sales and suppliers’ outcomes, I exploit exogenous demand shocks jointly with spatial fixed effects on the councils’ boundaries. I find that local sales reduce the uncertainty of firms’ cash flows while keeping expected cash flows unchanged. It implies that the customer-supplier relationship with the local council is not only more persistent but also more exclusive. Consequently, I find local sales result in 9.7% higher annual growth in fixed assets than sales to non-local sales. The results suggest that the reduction in uncertainty provides the main explanation for the positive impacts of politically incentivized purchases on investment. Overall, this paper highlights novel patterns of governments’ favoritism towards local suppliers via differentiation in contract terms and such demand-side characteristics do shape firms’ behaviors in multiple dimensions.