• 详情 Does Competition Reduce Moral Hazard in the Credit Market? Evidence from China's Rural Commercial Banks
    We examine the dynamic connection between competition and bank risk within the credit market through the lens of moral hazard affecting banks and borrowers. By combining the perspectives of “competition-fragility” and “competition-stability”, we reveal the intricate influence that competition exercises over bank risk in this financial landscape. Our research scrutinizes these theoretical constructs empirically, drawing upon a dataset comprising 236 rural commercial banks in China from 2012 to 2020. The findings indicate a curvilinear relationship between competition and bank risk, as an inverted U-shape. Furthermore, competition plays a dual role - it improves borrowers’ moral hazard dilemma while exacerbating it for banks. This highlights both riskshifting and risk-margin effects within the competitive dynamics. Ultimately, the nonlinear association between competition and bank risk emerges due to the intricate interplay between the moral hazard factors affecting borrowers and banks.
  • 详情 Does Corporate Social Responsibility Affect Stock Liquidity? Evidence from China
    This study investigates whether and how corporate social responsibility (CSR) affects stock liquidity. Utilizing panel data from 3,366 Chinese enterprises spanning 2010 to 2021, empirical findings suggest that CSR endeavors facilitate an uplift in stock liquidity. Specifically, a 1% increase in CSR score will improve stock liquidity by 0.128%. The research further reveals that media coverage and corporate operations are crucial channels for CSR to affect stock liquidity, with the former playing a more dominant role. Notably, the bolstering effect of CSR on stock liquidity is amplified during periods of increasing economic policy uncertainty. Heterogeneity analysis reveals that the influence of CSR on stock liquidity is particularly salient in state-owned enterprises. Additionally, different CSR subcategories (shareholder responsibility, employee responsibility, and social responsibility) vary in their effect on stock liquidity. Shareholder and employee responsibilities both enhance stock liquidity, with the impact of shareholder liability being particularly pronounced.
  • 详情 Can social credit system construction improve enterprise innovation? Evidence from China
    The progression of the social credit system is crucial for fostering enterprise innovation and elevating the quality of economic development. Based on the quasi-natural experiment of establishing demonstration cities for the social credit system, this study delves into whether the construction of a social credit system can indeed foster enterprise innovation. Our findings indicate that the establishment of demonstration cities for social credit system promotes enterprise innovation and improves the quality of innovation. Furthermore, mechanism test shows that it alleviates financing constraints faced by enterprises, leading to an increase in the scale and maturity of corporate loans, ultimately fostering corporate innovation. Further analysis of heterogeneity highlights that this positive impact is particularly evident in non-state-owned enterprises and those facing severe financing constraints. These findings present insights that the pivotal role of informal institutions, such as the social credit system, in facilitating the upgrading of industrial structures and augmenting the quality of economic development.
  • 详情 Are Trend Factor in China? Evidence from Investment Horizon Information
    This paper improves the expected return variable and the corresponding trend factor documented by Han, Zhou, and Zhu (2016) and reveals the incremental predictability of this novel expected return measure on stock returns in the Chinese stock market. Portfolio analyses and ffrm-level cross-sectional regressions indicate a signiffcantly positive relation between the improved expected return and future returns. These results are robust to the short-, intermediate-, and long-term price trends and other derived expected returns. Our improved trend factor also outperforms all trend factors constructed by other expected returns. Additionally, we observe that lottery demand, capital states, return synchronicity, investor sentiment and information uncertainty can help explain the superior performance of the improved expected return measure in the Chinese stock market.
  • 详情 From Credit Information to Credit Data Regulation: Building an Inclusive Sustainable Financial System in China
    A lack of sufficient information about potential borrowers is a major obstacle to access to financing from the traditional financial sector. In response to the need for better information to prevent fraud, to increase access to finance and to support balanced sustainable development, countries around the world have moved over the past several decades to develop credit information reporting requirements and systems to improve the coverage and quality of credit information. Until recently, such requirements mainly covered only banks. However, with the process of digital transformation in China and around the world, a range of new credit providers have emerged, in the context of financial technology (FinTech, TechFin and BigTech). Application of advanced data and analytics technologies provides major opportunities for both market participants – both traditional and otherwise – as well as for credit information agencies: by utilizing advanced technologies, participants and credit reporting agencies can collect massive amounts of information from various online and other activities (‘Big Data’), which contributes to the analysis of borrowing behavior and improves the accuracy of creditworthiness assessments, thereby enhancing availability of finance and supporting growth and development while also moderating prudential, behavioral and conduct related concerns at the heart of financial regulation. Reflecting international experience, China has over the past three decades developed a regulatory regime for credit information reporting and business. However, even in the context of traditional banking and credit, it has not come without problems. With the rapid growth and development of FinTech, TechFin and BigTech lenders, however, have come both real opportunities to leverage credit information and data but also real challenges around its regulation. For example, due to fragmented sources of borrower information and the involvement of many players of different types, there are difficulties in clarifying the business scope of credit reporting and also serious problems in relation to customer protection. Moreover, inadequate incentives for credit information and data sharing pose a challenge for regulators to promote competition and innovation in the credit market. Drawing upon the experiences of other jurisdictions, including the United States, United Kingdom, European Union, Singapore and Hong Kong, this paper argues that China should establish a sophisticated licensing regime and setout differentiated requirements for credit reporting agencies in line with the scope and nature of their business, thus addressing potential for regulatory arbitrage. Further, there is a need to formulate specific rules governing the provision of customer information to credit reporting agencies and the resolution of disputes arising from the accuracy and completeness of credit data. An effective information and data sharing scheme should be in place to help lenders make appropriate credit decisions and facilitate access to finance where necessary. The lessons from China’s experience in turn hold key lessons for other jurisdictions as they move from credit information to credit data regulation in their own financial systems.
  • 详情 Who Deserves Credit? Banks for the Virtuous in Rural China
    While cities piloting China’s Social Credit System attract attention, rural areas in China are experimenting with reputation-based credit systems called ‘banks of virtue’. These local institutions unlock cheap loans and other benefits for citizens who prove virtuous character. Based on empirical data, this article investigates how banks of virtue combine techniques of metrics known from capitalist credit systems with an inherently localized and personal evaluation procedure. As hybrid forms of organizing access to credit, this article argues, banks of virtue of er an alternative, rural answer to the ‘right to credit’ that emerged in debates concerning capitalist economies. While they combine multiple goals of the national rural revitalization and Social Credit System strategies, such as the creation of a ‘civilized’ rural society and the allocation of credit to small businesses and households, their reliance on citizen participation casts doubts over their capacity to achieve these goals.
  • 详情 The Real Return of Mutual Fund Investors
    This paper finds that reported fund returns do not necessarily represent the returns of mutual fund investors, especially over long investment periods. We show that mutual fund’s reported returns are calculated using NAV and represent the mutual fund manager’s skill in extracting value from the capital market. However, the real returns earned by mutual fund investors depend not only on the mutual fund manager’s skill but also on the subscription and redemption activities. Using the inflow and outflow information reported in the mutual funds’ semi-annual reports in China, we are able to calculate mutual fund investors’ real returns. We further derive the adjusted gain coefficient (AGC) to capture the difference between the reported mutual fund returns and the mutual fund investors’ real returns. We find that the AGC is significantly lower than 1, which suggests that the real returns of mutual fund investors are significantly lower than reported mutual fund returns in China. The underperformance of mutual fund investors relative to the mutual fund managers they invest in is very persistent and is stronger in more recent years. A further investigation reveals that this underperformance is largely attributed to investors’ poor timing skills and additional fees incurred as a result of excessive subscription and redemption activities. We also identify skilled mutual fund investors using AGC and find that fund managers can benefit from investors’ timing skills. Skilled mutual fund investors flow in when the mutual fund managers have good investment opportunities and flow out when the mutual fund managers have extra cash. The synchronization of the mutual fund investors’ flow and mutual fund managers’ investment strategies can reduce the need for liquidity management and improve mutual fund performance. Using Chinese mutual funds data, we show that a 1% increase in AGC can increase fund riskadjusted return by 0.2% in the next six months.
  • 详情 Institutional Innovation of China's Wealth Market Regulation
    The development of the wealth management market is based on the needs of investors. The logic of market regulation should also be based on the interests of investors. On the basis of summarizing the regulatory experience of the global wealth management market, suggestions are put forward to improve the system of China's wealth management market . The fundamental driving force for the establishment of a regulatory legal system for the wealth management market comes from the needs of the development of the wealth management market. Moreover, the structure and process of this institutional construction are also closely related to the structure and development of market demand. China's current wealth management market has become a huge financial sector, and the deepening of the market and the diversification of participants all put forward requirements for the construction of a fair and scientific regulatory system. Wealth management business is different from traditional financial business in many aspects such as function, business standard and business model, and its basic legal relationship is also far from traditional business. The commonality of business in China's current wealth management market is in line with the basic elements of the legal relationship of trust. From the perspective of the realistic basis and the nature of the industry, it is appropriate to define the basic legal nature of wealth management business as a trust relationship. Due to factors such as information asymmetry and economic scale, financial investors are in a serious imbalance and imbalance when they trade with financial institutions. Therefore, the financial supervision system should grasp this core contradiction, give investors the status of consumer protection, and establish the concept of protecting wealth consumers. The regulation of wealth management operators should grasp the requirements of the basic trust relationship, take the basic principle of supervising the performance of trustee duties by financial management institutions, and implement a series of rules for trustees to be loyal and prudent in financial management. These rules should focus on risk prevention, and include establishment of access standards for wealth management business, supervision of independent development of wealth management business, supervision of full performance of prudent management duties by wealth management institutions, and guidance for healthy development of wealth management institutions. The experience in the supervision of developed wealth management markets such as the United States, the United Kingdom, Japan, and Singapore shows that the establishment of a legal system for the protection of wealth management consumers is an inevitable result of the development of the financial market, and it is necessary to set up special institutions and mechanisms to implement the concept of wealth management investor protection, and emphasize wealth management products. Providers' fiduciary obligations to investors, and functional supervision based on a unified system in the regulatory system can be used as a reference for China . China's wealth management market regulatory system include inconsistent rules, weak protection, biased guidance, and lack of independence. Due to the separate regulatory system, different game rules apply to homogeneous wealth management business operated by different types of financial institutions, resulting in rule conflicts and market injustice. However, the substantive rights of wealth management investors still exist in a vacuum that cannot be confirmed. At the same time, the status of consumers is far from being officially confirmed, and the consumer protection mechanism cannot truly achieve justice. As regulatory guidance still favors the concept and tools of supervising traditional businesses, wealth management institutions mainly expand extensively by selling products, and wealth management products also present serious "bond-like" characteristics. The "non-neutral " positioning of financial regulatory agencies has externalized into phenomena such as rule conflicts, "policy following suit" and "excessive maintenance of stability". Constructing and continuously improving China's wealth management market supervision system is: the purpose of supervision is to restore the effective operation of the market mechanism. The basic legal relationship in China's wealth management market should be recognized as a trust relationship. This is not only an essential requirement of the wealth management market, but also a practical need to integrate regulatory chaos. It is the trend of financial and economic development that the regulatory system positions the position of wealth management consumers. It should start with legislative policies, make key breakthroughs around consumers' substantive rights and protection mechanisms, and gradually improve investor protection mechanisms. The regulatory system should focus on supervising financial institutions to fulfill their fiduciary obligations, and establish sound access rules, business independence rules, prudent management rules, and strict market exit mechanisms. China's wealth management market supervision system should be based on unified legislation and gradually implement functional supervision in order to achieve effective management and harmonious development of the wealth management market.
  • 详情 Rating of Equity Crowdfunding Platforms in China
    This paper examines the impact of the rating of equity crowdfunding platforms in China on funding campaign success. We gather information from 2014 to 2021 on 583 fund raising campaigns. Our results suggest that campaign success is positively correlated with the reputation of the platforms but especially for the most reputable one. We also show that the level of technological intensity of the industries and services is positively correlated with the amount raised. Overall, our paper suggests that platform ratings provide a valuable signal to investors, especially when projects are risky and when information asymmetry is high.
  • 详情 Dynamics and Impact Mechanisms of China'S Stock and Real Estate Market Correlation in Different Economic Cycle Period
    This paper aims to empirically explore the cyclical attributes of dynamic correlation shifts between the stock and real estate market, and the factors that influence this correlation during different periods of the economic cycle. Our research uncovers a significant structural shift in the correlation towards the end of 2012. By taking into account macroeconomic growth, regulatory policies, financial market conditions, and developments within both the stock and real estate markets, we investigate the time-varying characteristics of these factors' influence. The results highlight the pronounced cyclical asymmetry of these influential factors. Currently, the wealth effect in China's stock and real estate markets has significantly diminished, and the credit-price effect has vanished. A marked seesaw relationship is evident between the two markets. This outcome supports that various restrictions imposed on the real estate market have reduced its investment appeal.