We estimate real losses arising from the cross-sectional misallocation of financial liabilities. Extending a production-based framework of misallocation measurement to the liabilities side of the balance sheet and using manufacturing firm data from the United States and China, we find significant misallocation of debt and equity in China but not the United States. Reallocating liabilities of firms in China to mimic U.S. efficiency would produce gains of 51% to 69% in real value-added, with only 17% to 21% stemming from inefficient debt-equity combinations. For Chinese firms that are large or in developed cities, we estimate lower distortionary financing costs.

We use administrative registration records with information on the owners of all Chinese firms to document the importance of “connected” investors, defined as state-owned firms or private owners with equity ties with state-owned firms, in the businesses of private owners. We document a hierarchy of private owners: the largest private owners have direct investments from state-owned firms, the next largest private owners have equity investments from private owners that themselves have equity ties with state owners, and the smallest private owners do not have any ties with state owners. The network of connected private owners has expanded over the last two decades. The share of registered capital of connected private owners increased by almost 20 percentage points between 2000 and 2019, driven by two trends. First, state owned firms have increased their investments in joint ventures with private owners. Second, private owners with equity ties to state owners also increasingly invest in joint ventures with other (smaller) private owners. The expansion in the “span” of connected owners from these investments with private owners may have increased aggregate output of the private sector by 4.2% a year between 2000 and 2019.

This study investigates the nexus between investor protection and dividend policy for 517 listed non-financial firms operating in Asian countries between the 2008- 2017 period. The dynamic panel data model (System-GMM) reveals that stronger investor protection is associated with higher dividend payouts, and firms increase dividends, specifically in response to the rise of the extent of disclosure and director liability and also ease of shareholder suits. Besides, the results highlight that firms pay out fewer dividends in cases of growth opportunity particularly in environments with stronger investor protection, more developed financial market, and common-law system. Results are robust when alternative specifications are implemented.

Using a new case-level dataset we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chi- nese cities affected insolvency resolution and the local economy. For identification, we compare bankruptcy cases handled by specialized versus traditional civil courts within the same city and filed in the same year. We find that specialized courts decrease case duration by 36% relative to traditional civil courts. We provide evi- dence consistent with court specialization increasing efficiency via selection of better trained judges and higher judicial independence from local politicians. We docu- ment that cities introducing specialized courts experience a relative reallocation of employment out of zombie firms-intensive sectors, as well as faster firm entry and a larger increase in average capital productivity.

Deregulation may increase bank stability. Employing China’s loan-to-deposit ratio (LDR) reform in 2015, we show that the deregulation of the LDR increases the stability of banks. Specifically, the deregulation of the LDR alleviates banks’ deposit competition, and decreases reliance on customer deposit funding. By doing so, it improves the loan structure among banks with a high LDR, which, in turn, increases the on-balance-sheet stability of these banks. Meanwhile, the deregulation of the LDR curbs high-LDR banks’ impulse to issue principal-floating wealth management products, a form of shadow banking, which thus increases their off-balance-sheet stability.

The inelastic markets hypothesis states that the aggregate stock market price elasticity of demand is small, implying that flows have large impacts on prices. We exploit demand shocks created as investor funds are frozen and unfrozen during Chinese IPOs to estimate the impact of demand shocks on the Chinese stock market. Using brokerage account records, we observe the selling and buying as investors raise cash to subscribe for IPOs and then reinvest the funds that supported unsuccessful subscriptions. Using an instrumental variables estimator we find that a 10 bps demand shock increases stock prices by between 30 and 48 bps.

To construct the foreign exchange market defense line, I propose the following methods: (1) Compete for market focus, improve verbal intervention and news tactics (2) Quickly create several market-leading data that is in our control (3) Update the foreign exchange regulatory strategy, replace the original routine intervention with segmented intervention. (4) Use the anchor antidote in defending The U.S. launched the exercise as early as March 2009 organized by a team composed of the U.S. Department of Defense, the Department of Commerce, the Department of Energy, the RAND Corporation, the Peterson Institute, and Wall Street people. They took China as an imaginary enemy to conduct drills as possible conflicts would happen in the derivative and foreign exchange market in the future. If we hesitate in the construction of the foreign exchange market defense line, the damage may be on the overall situation.

Using novel data from a stock forum, we analyze return extrapolation in the cross-section. Our findings indicate that extrapolators overreact to the returns but underreact to the fundamentals. The post-earnings-announcement drift (PEAD) is more pronounced among firms with a high firm-level degree-of-extrapolation (DOX). Additionally, investors ask fewer questions about high-DOX firms’ fundamental information on official online interactive platforms. Extrapolation reduces the informativeness of stocks due to investors’ inattention to fundamentals. Furthermore, extrapolators’ overreaction to returns and underreaction to fundamentals increase stock price crash risks. These findings support explanations of extrapolation based on limited asymmetric attention.

Using the staggered introduction of regional specialized debt recovery courts as a quasi-natural experiment, we estimate the causal effect of law enforcement on financing cost of corporate bonds in China. With primary market issuing data, we show that the introduction of specialized courts reduces issuers’bond financing cost by 15%. The analysis of secondary market trading data confirms the results that the yield spreads of existing bonds reduce significantly. Exploring regional-, firm- and bond-level heterogeneity, we find the effects to be much stronger when ex-ante default risk is high. Our case-level analyses further support that enforcement cost reduction in debt dispute resolution is a channel for the reduction of cost of bond. Our paper has important policy implications in light of the recent bond default wave in China, suggesting that creditors protection through highly efficient law enforcement is important for bond market development and will eventually benefit bond issuers as well.

The finance–growth nexus has been a central question in understanding the unprecedented success of the Chinese economy. With unique data on all the registered firms in China, we build extensive ownership networks, reflecting firm-to-firm equity investment relationships, and show that thesenetworks have been expanding rapidly since the 2000s, with more than five million firms in at least one network by 2017. Entering a network and increasing network centrality, both globally and locally, are associated with higher firm growth. Such positive network effects tend to be more pronounced for high productivity and privately owned firms. The RMB 4 trillion stimulus, mostly in the form of newly issued bank loans and launched by the Chinese government in November 2008 in response to the global financial crisis, partially ‘crowded out’ the positive network effects. Our analysis suggests that equity ownership networks and bank credit tend to act as substitutes for state-owned enterprises, but as complements for privately owned firms in promoting growth.