In 2024, China’s Company Law reinstated stricter paid-in capital rules, reversing the 2013 shift to a subscribed capital system. This study investigates the real economic consequences of the 2013 subscribed capital system on corporate creditors in China. Using a comprehensive panel dataset of A-share-listed firms from 2010 to 2023 and a difference-in-differences (DID) empirical strategy, we find robust evidence that the subscribed capital system significantly weakens creditors’ interests. We identify three key channels: weakened creditor protection, deteriorated corporate governance, and distorted capital allocation. The adverse effects are more pronounced in non- state-owned firms, short-term-oriented management, firms with weak banking relationships, and enterprises located in regions with higher government intervention and lower levels of informatization. Furthermore, we provide novel empirical evidence that the subscribed capital system exacerbates over-indebtedness and impairs innovation output, suggesting broader implications for economic dynamism and financial stability.
We discuss the role of fiduciary duty in financial economics. We first demonstrate that there are different levels of depth of engagement with the content of the definition of fiduciary duty in the financial literature. Most contributors tacitly presume a narrow definition of fiduciary duty or merely mention it in passing. Only some authors provide more detailed definitions. And very few authors explicitly discuss the values at play in different definitions of fiduciary duty. The concept of fiduciary duty, while a key normative assumption underlying investment practice, seems to hide in plain sight in the current debates. We argue that deeper engagement with the concept of fiduciary duty is desirable. Such deeper engagement improves conceptual clarity, comparability across analyses, and transparency about normative assumptions. Doing so also contributes to responsible financial economics understood as the obligation to make normatively consequential assumptions explicit.
Since the 1990s China has largely adopted the Singapore SOE model, which relies on private-like corporatization and the pursuit of profit. This paper replays the political and economic chess to answer why the Singapore model was chosen. To this end, it demonstrates how the transformation through corporatization, under a newly founded legal system called the “State- Owned-Assets management,” was gradually embraced by Chinese administrative bureaucrats even though the change faced serious institutional obstacles. This article concludes with a critique of how the transformation of China’s SOEs has now mutated to resemble a system of Crown property.
Recent expansions in privatization of government programs mean that the constitutional paradigm of a sharp separation between public and private is increasingly at odds with the blurred public-private character of modern governance. While substantial scholarship exists addressing the administrative and policy impact of expanded privatization, heretofore little effort has been made to address this disconnect between constitutional law and new administrative reality. This Article seeks to remedy that deficiency. It argues that current state action doctrine is fundamentally inadequate to address the constitutional challenge presented by privatization. Current doctrine is insufficiently keyed to the ways that privatization involves delegation of government power, and simultaneously fails to allow governments sufficient flexibility in structuring public-private relationships. This Article proposes instead a new constitutional analysis of privatization that reformulates state action in private delegation terms. Under the proposed analysis, the critical question is whether delegations of authority to private entities are adequately structured to enforce constitutional constraints on government power. Central to this approach is the recognition that mechanisms other than directly subjecting private entities to constitutional scrutiny can satisfy the demands of constitutional accountability, and can do so without intruding unduly on government regulatory prerogatives. Where such mechanisms are lacking, however, grants of government authority to private entities represent unconstitutional delegations. To implement this approach, the Article advocates a two-step inquiry that first singles out private delegations creating agency relationships between private entities and the government for special scrutiny, and then asks whether adequate alternative accountability mechanisms exist.