This article examines the link between foreign institutional holdings and firms’ efficiency in labor investment in the setting of Chinese markets. We find that foreign institutional investors enhance firms’ labor investment outcomes primarily through mitigating asymmetric information and by strengthening internal governance. Specifically, the influence of foreign institutional investors on a firm’s labor investment efficiency is stronger when the firm faces greater labor adjustment frictions. This effect is more evident when foreign institutional investors are originated from countries or areas with stronger cultural connections to China, stronger governance quality, common law traditions, or stronger bargaining power in the firms’ governance. Our paper contributes to the literature in that it documents the monitoring role of foreign institutional investors from the perspective of firms’ labor investment decisions, and adds to the literature on the drivers of firms’ labor investment choices.

We investigate the stock market reaction in China to Trump’s tariff policy announcement on April 2, 2025. We find that the tariff policy reduced stock prices of Chinese firms except those in the agricultural sector. Large-cap stocks, value stocks, stocks of high profitability firms, and stocks of state-owned enterprises experienced smaller negative impacts. Stocks with higher institutional holdings by mutual funds and Social Security Funds exhibited higher resilience, possibly due to these investors' superior capability in selecting stocks and forecasting trade war risks. In contrast, stocks held by Qualified Foreign Institutional Investors (QFII) did not exhibit such resilience.

This paper investigates how foreign institutional investors, specifically Qualified Foreign Institutional Investors (QFIIs), influence the investment strategies of Chinese mutual fund management companies (FMCs) in which they hold shares. By analysing panel data from 1,766 mutual funds managed by 44 foreign-invested FMCs in China between 2005 and 2021, we explore whether QFII-invested FMCs (Q-FMCs) learn more from their domestic counterparts (D-FMCs) than other foreign-invested FMCs (NQ-FMCs). Our findings show that Q-FMC-managed mutual funds exhibit portfolio allocations more closely aligned with local DFMCs than those managed by NQ-FMCs. This imitation is particularly pronounced when selecting new stocks, enhancing portfolio performance, but not when rebalancing existing positions. Additionally, Q-FMCs trade more actively than NQ-FMCs. Robustness checks confirm these results across various ownership structures, fund characteristics, market conditions, and regulatory changes. These findings highlight the dual role of QFIIs as both investors and learners in China’s evolving financial landscape, offering insights into how foreign capital integrates into emerging mutual fund markets, informing regulatory policy aimed at fostering cross-border financial development.

In this article, we analyse investment preferences of domestic and foreign institutional investors to the management quality of Chinese listed firms. We find that foreign institutional investors hold higher shareholding in firms with greater numbers of executive officers with MBA degrees, having served as vice president or higher prior to joining the firm and sitting on multiple boards. Foreign institutional investors in China also show preference over investee firms with larger board size. However, they pay no attention to whether directors are independent from the firm management and meet often. Domestic institutional investors show preference to all management quality indicators that are associated with foreign institutional ownership. In addition, domestic institutional investors invest more in firms where the executive officers are certified public accountants (CPA) and are longer tenured in their current position. Furthermore, domestic institutional investors pay more attention to corporate governance of investee firms than foreign institutional investors. Finally, we find that domestic institutional investors show a strong preference to firms that have been invested by at least one Qualified Foreign Institutional Investor (QFII), even after controlling for QFII’s preference for management quality. This indicates that the QFIIs’ international reputation has been used by domestic institutional investors as a positive signal for investment opportunities.

This paper studies the links between fundamental value and market price of the companies listed in both mainland A-share and Hong Kong H-share markets. As the valuation model has been inadequately applied in the literature, this study theoretically clarifies that the dividends discount model (DDM) and it derivatives are suitable for firms, but not for general consumers and investors, to evaluate equity fundamental values. Thus, using DDM and its derivatives to determine the market price of equity, which has been done in many other studies, is problematic. This paper also empirically studies how accounting data determines fundamental values of equities using a pooled-data vector autoregressive method. It indicates that although fundamental value can be a benchmark for investors to price equity, prices of equity may deviate from fundamental values substantially for a long time due to differences in preference and the extent of risk aversion between A-shares and H-shares. Correlation between equity price and its fundamental value for H-shares is larger than the correlation for A-shares. This paper also explains why there has been a big price gaps between A-shares and H-shares with exactly the same yields rights. The estimates of fundamental value for each company help investors make rational investment decisions. It suggests that, in the long run, healthy development of Chinese securities markets will depend on the progress of privatisation and marketisation of the Chinese economy. Measures such as the Qualified Foreign Institutional Investors (QFII) and Qualified Domestic Institutional Investors (QDII) programmes should be adopted to improve the efficiency of financial resources utilisation in mainland China, despite the short-run pressure that may put on A-share markets.

Stock market liberalization is a decision to allow foreign investors to purchase domestic shares. This paper is an event study on market reactions around the announcement of the Qualified Foreign Institutional Investors (QFII) scheme in China. We find no significant abnormal returns in market indices in the short-term period leading up to the announcement, negative abnormal returns in the short-term period following the announcement, and no significant abnormal returns in the long-term period thereafter. The findings do not comply with the prediction of international asset pricing models. The QFII scheme may not help much in reducing the cost of equity capital and risk premium of China companies.