Using a unique dataset from China spanning 2005 to 2023, we investigate how superstitious beliefs influence mutual fund managers’ risk-taking behavior and how this influence evolves over their careers. We find a significant 6.82% reduction in risk-taking during managers’ zodiac years, traditionally considered unlucky in Chinese culture. This effect is particularly pronounced among less experienced managers, those without financial education backgrounds, and those with lower management skills. The impact also intensifies during periods of high market volatility. Our findings challenge the traditional dichotomy between retail and professional investors, showing that even professional fund managers can be influenced by irrational beliefs early in their careers. However, the diminishing effect of superstition with experience and expertise suggests a gradual transition towards more rational decision-making. Our results provide insights into the process by which financial professionals evolve from exhibiting behavior akin to retail investors to becoming the rational actors often assumed in financial theory.

This paper investigates how transparency in lawsuit information affects capital allocation and aggregate industrial production. Greater transparency enhances the availability of information about firms' fundamentals, which can influence resource distribution. We exploit regional variations in courts' compliance with mandated judicial document disclosures in China, implemented since 2014, as a natural experiment. For firms with initially high marginal revenue products of capital (MRPK), a 10-percentage-point increase in legal transparency results in a 4.4% increase in physical capital and a 7.9% reduction in MRPK, relative to firms with lower MRPK. Additionally, regions with higher transparency experience a rise in aggregate output. Further analysis differentiating firms by ownership type, public listing status, and industry-level contract intensity enhances the robustness of our findings.

We study when CEOs with legal expertise are valuable for firms. In general, lawyer CEOs are negatively associated with frequency and severity in employment civil rights, contract, labor, personal injury, and securities litigation. This effect is partly induced by the CEO’s man- agement of litigation risk and reduction in other risky policies. Lawyer CEOs are further associated with an increase in gatekeepers providing additional legal oversight and a decrease in innovative activities with high litigation risk. Lawyer CEOs are more valuable during periods of enhanced compliance requirements and regulatory pressure and in indus- tries with high litigation risk or better growth opportunities.

This paper explores the widespread perception of insurers as bad payers, often accused of unjustly rejecting legitimate claims. We explore the mechanisms leading to this negative image by examining the strategic “nitpicking” behaviour of insurers. Such behaviour involves an insurer’s effort to find evidence that can help it cut the indemnities of honest claims. Our findings reveal that this nitpicking behaviour only arises in markets with asymmetric information, where policyholders are unable to observe insurers’ nitpicking strategies. Conversely, in markets with symmetric information, insurers lose the incentive to engage in nitpicking. Moreover, our study highlights that nitpicky behaviour leads to a reduction in welfare and Pareto-inefficiency. This is because nitpicking is essentially an overpriced gam- ble that charges lower premiums from policyholders at a no-loss state, but cuts actual indemnities received by policyholders at a loss state.

The use of green finance to slow down global warming in support of sustainable development remains widely discussed. This study examines whether investment structure moderates the impact of green finance on the environment in China, one of the top carbon-emitting nations and the second-largest economy in the world. We primarily used the moments-quantile regression approach with fixed-effect models on panel data from 1992Q1 to 2020Q4. First, the results confirmed that green finance and public and private investments worked synergistically to lower CO2 emissions, especially in Central and Western China. However, there was no proof that green finance and foreign direct investment were complementary in reducing CO2 emissions in China, unlike the Central region. Second, green finance marginally lowered CO2 emissions in all provinces, mainly in Eastern and Western China; this reduction was largely dependent on private investment in the Western region’s most polluting areas and foreign direct investment in Eastern and Western China’s least polluting provinces. Third, the beneficial effect of green finance occurred at varying optimal thresholds and investment-related conditions across Chinese regions at different quantiles. Lastly, we showed that in contrast to the variable impacts of urbanization, oil prices, and economic growth across Chinese regions at different quantiles, renewable energy, and trade openness reduced CO2 emissions. In conclusion, the study makes some policy recommendations for China’s sustainable economic development, an important model from which other countries can tailor their investment strategies and environmentally friendly policies.

The debate on whether legalization or prohibition is more effective in conserving species and curbing illicit black-market trade remains controversial, with insufficient evidence available. Here we investigate the effects of China’s ivory ban on elephant poaching. We find that the enaction of the total ivory ban corresponds with a sharp 50% decrease in poaching and a significant reduction of the number of seizure cases. Further, although China has taken restrictive measures in 2015 and signaled a total ivory ban in 2016, no occurrence of “last minute rush” in smuggling activity was found preceding the implementation of the ivory ban.

This study examines how short-sale constraints affect investors’ information acquisition and thereby shape stock price efficiency. By exploiting two settings that relax short-sale constraints in the US and China, respectively, we find that the removal of short-sale constraints increases investors’ information acquisition in both markets, but the effect is more prompt in China. Investors acquire value-relevant information, especially bad news, and improve their short-selling decisions in both markets. Lastly, information acquisition induced by the removal of short-sale constraints improves price efficiency. Our evidence shows that a reduction in trading frictions promotes information acquisition and improves price efficiency.

How does information sharing affect consumers' usage of FinTech credit? Using a unique dataset of ``Buy Now, Pay Later (BNPL)" users from a large digital platform and exploiting a credit reporting policy change, we document that consumers significantly reduce their usage of BNPL credit when the BNPL lender becomes subject to credit reporting regulation. This reduction is more pronounced among borrowers with previous default records, who also become more disciplined in repayment behaviors, than those without such records. The decrease in BNPL usage also leads to a reduction in online consumption, supporting the financial constraint hypothesis. Our results suggest that information sharing can help alleviate overborrowing and overspending, with stronger effects observed among younger borrowers, those who previously consumed more, or those with credit cards. We also highlight the synergies between BNPL lending and Big Tech platforms' ecosystems, which imperfectly substitute for formal enforcement institutions.

This study empirically investigates the impact of dialect diversity on corporate investment efficiency under different levels of economic policy uncertainty. Our findings reveal that local dialect diversity enhances investment efficiency during stable periods, but this advantage significantly diminishes under high economic policy uncertainty. This reduction primarily arises from underinvestment and overly cautious decision-making by fragmented management during periods of turmoil. Further analysis reveals that this reduction is exacerbated by stronger internal governance, which emphasizes checks and balances, and mitigated by stronger external governance, which focuses on supervisory power. Our results remain robust when using alternative measures of main variables and employing topography as an instrumental variable.

This study investigates how firms respond to restricted access to government information. Specifically, the Stop Trading on Congressional Knowledge (STOCK) Act, which limits the stock trading activities of government officials (hereafter referred to as politicians), reduces the willingness of politicians from federal executive branches to engage with firms. Utilizing this exogenous disruption in private communication, we employ a difference-in-differences approach to demonstrate that firms with significant government customers decrease the frequency of management forecasts more than other firms due to the STOCK Act. This reduction is more pronounced for firms where government sales are crucial to their performance and for those that serve as suppliers and government contractors. Further, the positive impact of the STOCK Act on voluntary disclosures is more significant for firms that ex-ante rely heavily on direct political engagements, as indicated by their discussions of political risk and political contributions, and for those expecting government support, as evidenced by higher competition levels within their industry. Conversely, the STOCK Act does not significantly affect the non-financial disclosures of these firms. Finally, consistent with findings on executive branch officers, our results indicate that congressmen are also involved in corporate communications and are effectively regulated on information exchange by the STOCK Act. Overall, these results justify the powerful supervisory impact of the STOCK Act on the U.S. government and capital market and help to facilitate a new U.S. government information disclosure policy for a fairer investment environment.