International Journal of Financial Studies

In recent years, the impacts of the new scientific and technological revolution on the industrial system and production modes have begun to emerge. Digital transformation is gradually being integrated into the production behaviors of manufacturing enterprises and has become a component of the micro-economy. We aim to find better methods for measuring digital transformation and to analyze its impact on both market performance and innovation performance within manufacturing enterprises. To achieve our goals, we employ an empirical study to examine the influence of digital transformation on market and innovation performance using panel data for Chinese listed manufacturing enterprises from 2012 to 2021. We emphasize digital transformation efficiency and affirm its role in relieving financing constraints. Our study shows that digital transformation effectively improves both the market and innovation performance of manufacturing enterprises. Moreover, it mitigates the financing constraint dilemma, resulting in performance enhancement. Heterogeneity analysis indicates that digital transformation has a more significant promotional effect on the market and innovation performance of large-scale and mature enterprises. Our research offers fresh perspectives for better understanding digital transformation, enriching the body of work on the impact of digital transformation in manufacturing enterprises and its underlying mechanisms.

In typical executive compensation structures, higher corporate ranks are associated with greater pay. However, the reform of state-owned enterprises (SOEs) in China introduced strict salary caps for top executives, while lower-tier managers continued to receive market-based compensation, resulting in a phenomenon of pay-rank inversion—where subordinates earn more than their superiors. Leveraging this anomaly as a quasi-natural experiment, this study investigates the specific impact and underlying mechanism of pay-rank inversion on mergers and acquisitions (M&A) decisions and subsequent value realization within Chinese SOEs, thereby addressing the broad academic discourse on optimal executive compensation design. Employing a difference-in-differences (DID) approach with panel data spanning from 2007 to 2022, our analysis reveals that pay-rank inversion significantly reduces firms’ M&A intentions. Mechanistic analysis suggests that this negative effect arises primarily from diminished executive risk-taking. Furthermore, we find that the adverse impact is attenuated when CEOs possess longer tenures or receive equity-based incentives, but it ultimately undermines the realization of value post-M&A. These findings highlight the unintended consequences of high-level compensation reforms and emphasize the critical role of a well-structured pay hierarchy in sustaining executive incentives for strategic decision-making. Despite providing robust evidence, this study is subject to limitations, including its focus on measuring inversion only between the first and second management tiers. Future research should extend the analysis to the pay inversion between the listed firm and its controlling SOE group and explore alternative causal pathways beyond risk-taking, such as CEO work motivation, to deepen the understanding of high-level executive behavior.

This paper asks whether debt among affluent consumers reflects rational leverage, comparable to firms, or the influence of cognitive biases. Using survey data on Brazilian bank clients, we combine logistic regressions with a finite-mixture-inspired, rule-based classification and a test based on a ten-business-day overdraft grace period to identify heterogeneity in borrowing behavior. In the high-income subsample, Cognitive Reflection Test scores are unrelated to debt incidence, diverging from prior evidence in mixed-income populations. Among indebted affluent respondents, most borrowing is cost-sensitive and consistent with deliberate leverage (about 80 percent), while a minority displays patterns consistent with optimism bias and overconfidence (about 20 percent). The institutional feature of a temporary grace period lowers the effective cost of short-term credit and is associated with a marked reduction in overdraft use, reinforcing the leverage interpretation. Overall, consumer debt is heterogeneous; for the affluent, it largely aligns with leverage, though behavioral biases persist at the margins. Policy for high-income borrowers should prioritize targeted measures that address optimism bias and overconfidence while preserving deliberate leverage management through clear disclosures and monitoring of sensitivity to short-term credit costs.