Recent theoretical studies (Aggarwal and Wu,2006; Mei,Wu and Zhou,2004) show that trade-based stock price manipulation is a possible source of the momentum effect. This paper proposes three sets of testable hypotheses and provides empirical evidence for a manipulation-based explanation of momentum.Using weekly data on 14 CITIC industries in the Shanghai A-share market from 1997 to 2006, our analysis of industry momentum shows that cumulative returns first increase then decrease across holding periods, and the returns monotonically decrease across formation periods. This return pattern is consistent with a so-called”pump and dump”scheme,where momentum is created by manipulators and chased by speculators. We attribute the source of momentum to the positive own-autocorrelation, which dominates the cross-autocorrelation effect of industry returns. We also find that momentum profits are higher in the bull than in bear market, and most of the profits come from the gains of winning industries rather than the losses of losing industries. These empirical results,when related to some well-documented behavioral biases of Chinese speculators,tell us a possible stock-market manipulation story of momentum.

This paper investigates what drives the price disparity to vary in the “twin” shares (A shares traded largely by domestic investors while B- and H- shares traded mainly by foreign investors) in China. Extending the variance decomposition framework of Vuolteenaho (2002), we decompose the unexpected price disparity into two terms: difference in expected return news and difference in cash flow news. Our results show that difference in expected return news overwhelmingly dominates difference in cash flow news in driving the variation of the price disparity. This suggests that to a large extent, market or macro news, rather than firms’ specific news, moves the price disparity of the twin shares.

This paper studies the optimal scale and asset allocation of Sovereign Wealth Fund (SWF), taking China’s SWF as an example. We use the AR (1) process to simulate the future foreign exchange earnings of China and generate three patterns of the future earnings. With these three scenarios and based on Deaton’s precautionary saving model, we find that the optimal scale and asset allocation of China’s SWF mainly depend on the expected trend and fluctuation of the future foreign exchange earnings and expected yields that SWF can get. When foreign exchange earnings shows an upward trend, the scale of SWF should not be expanded even the expected investment yield is very high, and ratio of risky assets should be kept stable and high. When foreign exchange earnings is stabilized as its growth rate slows down, the scale of SWF has the positive correlation with the degree of earnings fluctuation and expected yield of investment, and also ratio of risky assets is generally lower. When foreign exchange earnings decrease, the scale of SWF should be expanded even the expected investment yield is not so high, and the ratio of risky assets is dependent on the characteristics of expected investment yields. We also conclude that investment policy of China’s SWF should follow Temasek’s investment model, under the current trend of China’s foreign exchange trend, and strive for high yield investment chances.

We empirically examine the role of venture capital in VC-backed listed firms in Mainland China. It is found that the VC-backed firms experience higher underpricing as the investors in the second market are too optimistic about the prospect of the VC-backed firms, but not about the lower pricing in the primary market. In addition, the pre- and post-IPO operating performance of VC-backed firms are found to be significantly better than that of non VC-backed ones. The result supports the monitoring model. Meanwhile, there is no evidence to support the certification model. Furthermore, it is consistent with the grandstanding model proposed by Gompers that high-reputation VC-backed firms have a better post-IPO operating and market performance compared to low-reputation VC-backed ones.

由于过多的资金流入会使基金的规模变大从而难以有效地管理，基金公司暂停旗下某只基金申购的现象越来越多。基金公司暂停申购的公告中大多宣称是为了控制基金规模，使前期表现好的基金可以维持其良好的业绩表现，从而保护投资者的利益。但是，我们对国内暂停申购的开放式基金进行实证研究后发现，暂停申购的基金未能维持其良好表现，暂停申购未能保护投资者利益。做出暂停申购的决定更可能是基金公司为了得到溢出效应（spillover effect）：基金公司通过关闭旗下的一只基金来引起投资者注意并促使其投资于公 司旗下的其他基金。有证据表明这种暂停申购的策略能有效的引起更多的资金流入该基金公司。

We study corporate philanthropy using an original database that includes firm-level data on cash giving, political connection, and institutional environment in corporate contribution after Sichuan Earthquake at 12, May, 2008. Results provide support for the theory that political connection enhances corporate philanthropy, as firms with political connection tend to adopt giving practices to generate insurance-like protection of relational wealth; meanwhile firms that condition high levels of law enforcement environment and low risks of loss political connection give less to charity. However, much of our evidence indicates that mangers adopt corporate philanthropy to maintain personal political connection with governments which mask their personal benefits from philanthropic contribution and philanthropy insurance-like protection theory combined with agency costs play a prominent role in explaining corporate giving. Firms with political connection, larger boards of directors and higher interest conflicts among controlling shareholders and other investors are associated with significantly more cash giving. The empirical work considers the impact of institutional environment as well as risks of loss political connection on corporate giving and the relationship between political connection and corporate social responsibility.

We examine whether the gains from incentive realignment have driven corporations out of the public security market. It is shown that going private transactions are due to the reduction in the diversification gains from the public market. The anticipated gains from incentive realignment are likely to be lowest among firms whose managers own most equity and the leverages are high. Avoiding the high cost of being public is the primary consideration for managers to take a firm private. Such firms go private because of financial distress and dwindling profitability. These kinds of going-private activities are counter-cyclical. On the other hand, a less distressed firm with diffused ownership has high anticipated incentive gains. The gain from incentive realignment is the dominant factor for these going-private transactions. Such firms go private because of an increase in profitability or an improvement in financial distress. We show that these going-private activities are pro-cyclical.

Standard principal-agent theory predicts that the pay-performance sensitivity (PPS) decreases in the risk of the firm. An alternative literature argues that entrenched executives as in weakly governed firms use compensation contract to extract the rent, which renders risk irrelevant in determining PPS. This paper uses event study approach to test both principal-agent model and CEO power theory by studying changes in executives’ compensation contract around litigation events. Consistent with principalagent model prediction, we find that, after the initiation of litigation, PPS drops, compensation shifts from performance-sensitive component (equity) to performanceinvariant component (cash). In addition, all the changes reverse themselves after litigation settlements. To test CEO power theory, we further partition the event firms into firms with good and bad corporate governance. We find that the PPS in firms with bad corporate governance increases after lawsuit and decreases after the settlement. This suggests that litigation brings the bad compensation practice of poorly governed firms to the limelight and forces firms to discipline their CEOs temporarily during the litigation period (so called “limelight effect”), which lends indirect support to CEO power theory. Our results are robust to a battery of sensitivity tests including two endogeneity tests.

The debate among various market partic-ipants on the short-selling of securities continues today. Opponents of short-selling argue that it disrupts orderly mar-kets by causing panic selling, high vola-tility, and market crashes. So this paper investigates what the impact of short sell-ing on the volatility and liquidity of Hong Kong stock market is, and the results in-dicate that short selling volumes do not Granger-cause market volatility, but volatility Granger-cause short selling volumes. Moreover Granger causality tests show that there is a double direc-tional causality relationship between short selling volumes and market liquidity.

In this paper, we pay attention to the relationship between stock index and increments of trading accounts in A, B share market and funds. We show that there exists bilateral relationship between A, B index and their trading accounts increments. However, Granger causality only exists from stock index to increments of funds accounts. Regressions show that the investors’ sentiment will be easily driven by the index in the same direction, which imply momentum strategy in a very short period. In comparison, when using weekly data, only increments of funds accounts Granger cause the stock index. These uncover the differences between fund managers and small investors while investing on stock market. We also analyse the relationship between index volatility and trading accounts volatility.