This study identifies an incentive-compatible mechanism to foster individual environmental engagement. Utilizing a dataset comprising 100,000 randomly selected users of Ant Forest—a prominent personal carbon accounting platform embedded within Alipay, China's leading BigTech super-app—we provide causal evidence that individuals strategically engage in eco-friendly behaviors to enhance their credit limits, particularly when approaching borrowing constraints. These behaviors not only illustrate the green nudging effect of BigTech but also generate value for the platform by leveraging individual green actions as soft information, thereby improving the efficiency of credit allocation. Using a structural model, we estimate an annual green value of 427.52 million US dollars generated by linking personal carbon accounting with BigTech credit. We also show that the incentive-based mechanism surpasses green mandates and subsidies in improving consumer welfare and overall societal welfare. Our findings highlight the role of an incentive-aligned approach, such as integrating personal carbon accounts into credit reporting frameworks, in addressing environmental challenges.

We introduce a novel perspective on private information, specifically microstructure-based private information, to unravel how institutional investors predict stock returns. Using tick-by-tick transaction data from the Chinese stock market, we find that in retail-dominated markets, institutional investors positively predict stock returns, consistent with findings from institution-dominated markets. However, in contrast to the traditional view that institutional investors primarily rely on value-based private information, our results indicate that microstructure-based private information contributes almost as much to their predictive power as value-based private information does, with both components jointly accounting for approximately two-thirds of the total predictive power of institutional order flow. This finding reveals that retail investors’ trading activities significantly impact institutional investors, naturally forcing them to balance firm value information with microstructure information, thus profoundly influencing the price discovery process in the stock market.

With the increasing executive-employee pay disparity in recent years, research on executive compensation has grown exponentially. This paper reviews all articles on executive compensation published between 2000 and 2022 in the six accounting journals with the highest impact index in South Korea and China (five journals in China), and evaluates and analyzes the research in both countries. The analysis results are organized as follows: First, the research on executive compensation started earlier in South Korea than in China; second, the focus of the research on executive compensation differs between the two countries; then, the study on the determinants of executive compensation varies between the two countries; forth, the proxies for firm performance are mostly the same in the two countries; and finally, most of the studies in the two countries assert that executive compensation has a positive impact on firm performance. Based on the above research, this paper confirms that the agency theory, which has been widely validated in Western countries, is also valid in Asian countries. In addition, it provides an essential reference for future research on executive compensation in Asian countries.

Software and accounting advances have led to a rapid expansion in and proliferation of loyalty tokens, typically bundled as part of product price. Some tokens, such as in the airline industry, already account for tens of billions of dollars and are a major contributor to revenues. An open question is whether, as technology evolves, firms will have a strong incentive to make loyalty tokens tradable, raising regulation issues, including with monetary and banking authorities. This paper argues that for the vast majority of tokens, issuing firms have a strong incentive to make them non-tradable. The core incentive for token issuance here is that an issuer can earn a higher rate of return on the ``float'' (tokens issued but not yet used) than its retail customers can, much like a bank. Our main finding is that an issuer earns higher revenue by making tokens non-tradable even though the consumer would be willing to pay a higher price for tradable tokens. We further show that an issuer with stronger market power tends to allow more frequent token redemption, and its revenue is more token-dependent. We test the model's predictions with data on airline mileage and hotel reward programs and document consistent empirical results that align with our theory.

We examined reference point adaptation following gains or losses in security trading using participants from China, Korea, and the US. In both questionnaire studies and trading experiments with real money incentives, reference point adaptation was larger for Asians than for Americans. Subjects in all countries adapted their reference points more after a gain than after an equal-sized loss. When we introduced a forced sale intervention that is designed to close the mental account for a prior outcome, Americans showed greater adaptation toward the new price than their Asian counterparts. We offer possible explanations both for the cross-cultural similarities and the cross-cultural differences.

This paper provides new evidence on the predictive power of retail trading for future stock returns using tick data from the Chinese stock market. We explore sources of the predictive power from the novel perspective that sophisticated retail investors may exploit predictive information by observing limit order book and inferring institutional trading intentions. Employing a two-stage decomposition approach, we decompose the retail order imbalance into four components and find that the component related to retail investors’ perception of institutional trading intentions significantly contributes to the predictive power of the retail order imbalance for future returns, accounting for more than 15%.

We examine the performance of actively managed Chinese mutual Funds over the period 2002-2020. Using the bootstrap-based false discovery technique, we find that 19.25% of Chinese actively managed mutual funds produce positive-alpha, which contrasts with existing studies documented by others in developed markets. Our findings survive a battery of robustness tests. Unlike in developed markets, equilibrium accounting may not hold in China as the Chinese stock market is dominated by retail investors instead of mutual funds, and thus the mutual funds in China can be more skilled at the expense of the retail investors. We find supportive evidence of the applicability of the bootstrap-based false discovery rate method by conducting simulations.

In this paper, we show that only the systematic component of exchange rate expectations of professional investors is a strong predictor of the cross-section of currency returns. The predictability is strong in short and long horizons. The strategy offers significant Sharpe ratios for holding periods of 1 to 12 months, and it is unrelated to existing currency investment strategies, including risk-based currency momentum. The results hold for forecast horizons of 3, 12, and 24 months, and they are robust after accounting for transaction costs. The idiosyncratic component of currency expectations does not contain important information for the cross-section of currency returns. Our strategy is more significant for currencies with low sentiment and it is not driven by volatility and illiquidity. The results are robust when we extract the systematic component of the forecasts using a larger number of predictors.

This paper employs a difference-in-differences approach to study whether a Chinese audit firm improves its competencies through organizational learning after one of its audit teams has a client cross-listed in the US. Among a group of companies that are only listed in China, we define those audited by Chinese audit firms that are not international Big 4 affiliates and have cross-listed clients as the treatment group, and companies audited by other audit firms as the control group. We find an improvement in audit quality for the treatment group after their audit firms have cross-listed client experience in the US, and this improvement is not attributable to the effect of joining an international accounting firm network, registration with the PCAOB, or the consolidation in the audit market. A survey of auditors corroborates these findings and provides evidence on audit firms’ specific actions to facilitate learning. Our findings shed light on the benefits of auditing cross-listed clients in the US and its positive externality on improving the audit quality of non-US-listed companies in China.

This study focuses on the unexplored informational role of labour dividend in the municipal corporate bond (MCB) market given China’s distinctive institutional origins. We aggregate the annual employments of public firms to the prefecture-city level and find that the firms’ employments aggregated are positively associated with contemporaneous scale of the MCB, whereas negatively associated with the issuing rate of the MCB. In the further analyses, we find that this information externality is conditional on the attributes of the employment characteristics (i.e., education, functional departments, and ownership nature). Mechanism analyses indicate that information accessibility, processing, dissemination, and efficacy are important channels through which the aggregate labour intensity is mobilized. And such information externality is reinforced after an institutional change enhancing the authenticity of employment information. This paper echoes previous studies of the macro value of aggregate accounting information and enriches the literature in labour and finance by highlighting that the labour dividend still exists and triggers MCB issuance in China.