We examine how mutual funds form stock market expectations and the implications of these beliefs for asset returns, using a novel text-based measure extracted from Chinese fund reports. Funds extrapolate from recent stock market and fund returns when forming expectations, with more recent returns receiving greater weight. This recency tendency is weaker among more experienced managers. At the aggregate level, consensus expectations positively predict short-term future market returns, both in and out of sample. At the fund level, expectations are positively related to subsequent fund performance in the time series. In the cross-section, however, superior performance arises only when funds accurately forecast market direction and adjust their portfolios accordingly. This effect is stronger for optimistic forecasts and among funds with greater exposure to liquid stocks. Our findings highlight the conditional nature of belief-driven performance, shaped jointly by forecasting skill and the ability to implement views in the presence of execution frictions such as short-selling and liquidity constraints.

This paper provides evidence that some seasoned equity offerings are motivated by public information. We test this channel in the supply chain setting, where supplier managers are more attentive than outside investors to customer news. We find that supplier firms are more likely to issue seasoned equity when their customer firms have negative earnings surprises. The results are mitigated when there is common scrutiny on the customer-supplier firm pairs by outside investors and analysts. Furthermore, long-run stock market performance appears to be worse for firms that issue seasoned equity following the negative earnings surprise of their customer firms.

We study the influence of investor attention on mutual fund investors' fund selection and fund managers' portfolio choice. Using the Google Search Volume Index to measure investor attention on individual stocks, we find fund investors tend to direct more capital to mutual funds holding more high-attention stocks; fund managers tend to perform window-dressing trading to increase the portfolio holdings of high-attention stocks displayed to investors. Our results suggest that funds, particularly those with strong incentives, strategically trade on stock attention to attract investor flows. This strategic trading behaviour is also associated with fund underperformance and leads to larger non-fundamental volatility of holding stocks.

This study explores how Chinese mutual fund managers’ degrees of disagreement (DOD) on stock market returns affect investor capital allocation decisions using a novel text-based measure of expectations in fund disclosures. In the time series, the DOD neg-atively predicts market returns. Cross-sectional results show that investors correctly perceive the DOD as an overpricing signal and discount fund performance accordingly. Flow-performance sensitivity (FPS) is diminished during high dispersion periods. The ef-fect is stronger for outperforming funds and funds with substantial investments in bubble and high-beta stocks, but weaker for skilled funds. We also discuss ffnancial sophisti-cation of investors and provide evidence that our results are not contingent upon such sophistication.

Why do firms appoint expired independent directors? How do expired independent directors affect corporate governance and thus impact investment decisions? By taking advantage of the sharp increase in expired independent directors’ re-employment in China caused by exogenous regulatory shocks, Rule No. 18 and Regulation 11, this paper adopts a PSM-DID design to test the impact of expired independent directors on CSR performance. We find that firms experience a significant decrease in CSR performance after re-hiring expired independent directors and the effect is stronger for CSR components mostly related to internal governance. The results of robustness tests show that the main results are robust to alternative measures of CSR performance, an extended sample period, alternative control groups, year-by-year PSM method, and a staggered DID model regarding Rule No. 18 as a staggered quasi-natural experiment. We address the endogeneity concern that chance drives our DID results by using exogenous regulatory shock, an instrumental variable (the index of regional guanxi culture), and placebo tests. We also find that the negative relation between the re-employment of expired independent directors and CSR performance is more significant for independent directors who have more relations with CEOs and raise less objection to managers’ decisions, and for firms that rely more on expired independent directors’ monitoring roles (e.g., a lower proportion of independent directors, CEO duality, high growth opportunities, and above-median FCF). The mediating-effect test shows that the re-employment of expired independent directors increases CEOs’ myopia and thus reduces CSR performance. In addition, we exclude the alternative explanation that the negative relation is caused by the protective effect brought by expired independent directors’ political backgrounds. Our study shows that managers may build reciprocal relationships with expired independent directors in the Chinese guanxi culture and gain personal interest.

Using “the Measures for the Administration of Bank Wealth Management (henceforth BWM) Funds Sales” as an exogenous shock in fund distribution channels in Chinese BWM industry, we investigate the impact of non-affiliated distribution on fund performance. We find that the adoption of non-affiliated distribution brokers has a positive effect on BWM fund performance. We further find that the effect is more pronounced when the non-affiliated distribution broker has more market power and when the fund issuer has better governance. We interpret our findings to indicate that non-affiliated distribution brokers alleviate the agency problems of fund managers by introducing both ex-ante and ex-post monitoring, highlighting the role of non-affiliated distribution brokers as an external governance mechanism in wealth management industry.

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.

We examine the effect of minority shareholder voting rights on labor investment efficiency using a sample of Chinese firms. Taking advantage of the difference-in-difference setting, our study reveals that the expansion of minority shareholder voting rights has a detrimental effect on labor investment efficiency. Through analysis of holding period and a managerial shortsightedness index based on textual analysis, we find that this outcome can be attributed to the fact that minority shareholders typically prioritize short-term gains over long-term corporate growth. Moreover, the impact of voting power is more pronounced in determining the investment efficiency of rank-andfileemployees. Our results are more significant for firms that face severe financial constraints, are non-state-owned enterprises, exhibit lower levels of internal control, possess fewer female managers, demonstrate lower human capital quality and higher labor intensity. Taken together, our paper suggests that minority shareholders could be myopia in making labor decisions.

This paper investigates the effect of exchange-traded funds (ETFs) on the ESG performance of their underlying firms. Using data from China, we find that ETFs enhance the ESG performance of their underlying firms. This finding remains consistent after several robustness and endogeneity tests. Further, we show that the effect is more pronounced for non-SOEs, firms in low-polluting industries, and firms at growth and maturity stages. Studying the mechanisms behind these results, we find that ETFs mitigate the corporate agency problems, enhance the willingness of managers to invest in ESG, and improve the ESG performance.

Site visits allow visitors to physically inspect productive resources and interact with onsite employees and executives face-to-face. We posit that, by allowing visitors to acquire investmentrelated information and monitor the management team, site visits offer disciplinary benefits for corporate investments. Using mandatory disclosures of site visits in China, we find that corporate investments become more responsive to growth opportunities as the intensity of site visits increases, consistent with the notion that site visits yield disciplinary benefits. We also find that the positive association between site visits and investment efficiency is more pronounced when visitors can glean more investment-related information and when they have stronger incentives and greater power to monitor managers. This positive association is also stronger among firms with more severe agency problems and higher asset tangibility. The overall evidence supports the notion that site visits serve as a unique venue for institutional investors and financial analysts to acquire valuable information and serve a monitoring function, which generates disciplinary benefits for corporate investments.