Although the pay gap between executives and employees has received considerable attention, its economic consequences remain unclear due to the unavailability of data. In this study, we examine the effects of the pay gap on firm innovation by using data from Chinese listed firms. We show that: 1) the first-order effect of pay gap on firm innovation is significantly positive, supporting the tournament theory; 2) however, when pay gap is relatively high, the importance of comparison theories increases; 3) high management pay premiums provide incentives for management to devote to innovation activities, while pay premiums for ordinary employees impede firm innovation; and 4) both the employee's human capital and state ownership play significant roles in the negative effects of employee pay premiums on firm innovation. Overall, we provide critical insights and a serious challenge for regulators in China.The policy implications of this study could be of interest to regulators who intend to encourage firm innovation.

We quantify the causal effects of the coronavirus disease 2019 (COVID-19) on air quality in the context of China. Using the lockdowns in different cities as exogenous shocks, our difference-in-differences estimations show that lockdown policies significantly reduced air pollution by 12% on average. Based on the first lockdown city, Wuhan, we present three underlying mechanisms driving our findings: anticipatory effects, spillover effects, and a city’s level of connection with Wuhan. Our findings are more pronounced in cities whose population was more willing to self-isolate or more susceptible to anxiety, or whose government faces less pressure to stimulate economic growth. Overall, this study contributes to the literature by evaluating the unintended consequences of the COVID-19 outbreak for air quality, and provides timely policy implications for policymakers.

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Using data from publicly traded firms in China, we examine the relationship between media attention and firms’ environmental protection efforts. We show that: (1) media attention induces firms to exert more effort in environmental protection, (2) state-owned firms are more responsive to media attention than non-state-owned firms regarding environmental protection and (3) firms are more responsive when faced with local media attention and negative media reports. The results are robust to the subsample of heavily polluting industries. Overall, this study illustrates the use of media attention to regulate corporate behavior.