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 article presents a comprehensive examination of technical trading rules in the Chinese yuan-based foreign exchange market. The investigation employs daily data spanning seven years for 14 developed and 10 emerging market currencies. The analysis encompasses a vast universe of 41,660 trading rules, representing a significant expansion over the previous studies. The stepwise tests, which was employed to address the data-snooping bias, discover excess profitability in at least half of the developed and emerging currencies, implying the heterogeneous market efficiency across currencies. Our results are robust to sub-sample analysis and different parameter values of the stepwise tests.

Testing the household Euler equation with consumption data faces econometric challenges caused by large measurement errors in the data and a short time span. We adopt a framework to test the Euler equation with stock market data to alleviate the measurement error and short time span issues. Utilizing a data-driven group panel data method, we identify a heterogeneous pattern of Euler equation failure among different groups of listed firms. The identified degree of Euler equation failure is significantly related to firm characteristics that are associated with famous stock anomalies. We show that the correlations between the degree of Euler equation failure and firm characteristics provide a new set of stylized facts that can help us distinguish between different economic theories on Euler equation failures and asset pricing anomalies, and identify challenges facing current theories.

Digital transformation (DT) is an ongoing and costly process that requires careful planning and the motivation of top executives (CEOs). This research analyze the CEOs compensation as a motivation to embrace DT by reducing agency issue. We determine the extent of DT through a textual analysis method and utilize data from Chinese publicly traded companies spanning the period between 2007 and 2020. Our study findings are threefold, (a) we observe a positive relationship between CEOs' pay gap and DT, highlighting the significant role CEOs compensation plays in encouraging CEOs to adopt digitalization, (b) we find that managerial shareholding significantly enhances this relationship, (c) we note that the relationship between CEOs pay gap and DT is more pronounced in state-owned enterprises compared to non-stateowned enterprises. Additionally, we discover through channel analysis that agency cost and audit quality mediate the relationship between CEOs pay gap and DT potentially by reducing the agency problem between CEOs and shareholders. These findings are vital for comprehending the pay practices and behaviors of corporate executives regarding digitalization in China. Importantly, the study results remain robust when considering instrumental variables (IV), propensity score matching (PSM), and alternative techniques.

The healthy operation of the stock market relies on sound liquidity. We utilize the semantic information from disclosure texts of listed companies on the China Science and Technology Innovation Board (STAR Market) to construct a daily corporate network. Through empirical tests and performance analyses of machine learning models, we elucidate the relationship between the similarity of company disclosure text contents and the temporal and spatial correlations of stock liquidity. Our liquidity indicators encompass trading costs, market depth, trading speed, and price impact, recognized across four dimensions. Furthermore, we reveal that the information loss caused by employing Minimum Spanning Tree (MST) topology significantly affects the explanatory power of network topology indicators for stock liquidity, with a more pronounced impact observed at the document level. Subsequently, by establishing a neural network model to predict next-day liquidity indicators, we demonstrate the temporal relationship of stock liquidity. We model a liquidity predicting task and train a daily liquidity prediction model incorporating Graph Convolutional Network (GCN) modules to solve it. Compared to models with the same parameter structure containing only fully connected layers, the GCN prediction model, which leverages company network structure information, exhibits stronger performance and faster convergence. We provide new insights for research on company disclosure and capital market liquidity.

Compared to previous literature on external FinTech, this paper is more interested in the role played by bank FinTech. Based on panel data from Chinese commercial banks spanning 2010 to 2021, this paper investigates the impact of digital transformation on bank soundness and its potential mechanisms. The empirical findings demonstrate a positive association between digital transformation and bank soundness, driven primarily by strategic and management digitization. Mechanistic analysis indicates that digital transformation improves bank soundness by mitigating risk-taking behavior and promoting diversification. The positive effect of digital transformation is more pronounced in state-owned and joint-stock banks, banks with higher liquidity mismatch as well as in sub-samples with greater levels in external FinTech development and economic policies uncertainty. Additional analysis suggests that digital transformation can still enhance bank soundness even in the presence of relatively easy monetary and macroprudential policies, highlighting the harmonization and complementarity between internal innovation from digital transformation and external regulatory policies in maintaining banking stability. Overall, this paper contributes to the literature on bank FinTech, factors influencing bank stability. And it also provides a novel explanation for the relationship between financial innovation and financial stability.

This paper examines the effectiveness of preemptive rights in protecting minority shareholders, drawing on new issuances by Chinese listed firms spanning from 2006 to 2022. The evidence reveals that, on average, only 62% of shareholders exercise their preemptive rights despite an 18% issuance discount, resulting in wealth losses of 6% of issuance amount for non-participating shareholders. More importantly, minority shareholders suffer greater wealth losses because they lack sophistication and face extra constraints in exercising their rights compared to controlling shareholders. These findings call for additional policy safeguards, such as rights transferability and controlling shareholders’ pre-commitment, to enhance minority shareholder protection.

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.

This paper investigates how domestic policy uncertainty stemming from discretionary fiscal policy disrupts the efficient capital allocation across firms. While fiscal policy represents the government’s reaction to economic conditions, its volatility presents firms with considerable uncertainty about conditions affecting their future profitability and consequently disrupts firms’ decisions on investment in the presence of capital adjustment costs. Using firm-level data from Chinese manufacturing industries spanning from 1998 to 2007, we find that reducing fiscal policy volatility leads to a decrease in the dispersion of marginal revenue product of capital, accounting for 8.9 percent of the observed improvement in capital allocation during the sample period. In addition to various fiscal reforms to curb fiscal policy volatility directly, policies contributing to lower capital adjustment costs and lower reliance of firms on government expenditure can alleviate the adverse effects caused by fiscal policy volatility.

Recent research indicates that the relationship between state ownership, firm size, and technological innovation outcomes in Chinese firms is a complex and intriguing topic. However, we propose a new perspective based on institutional complexity and examine the combined effects of these two factors. By considering the interplay between the economic efficiency rationale and the institutional logic associated with state ownership and firm size within the context of Chinese firms, we argue that the effects of state ownership and firm size can counterbalance each other. In order to test our hypotheses, we analyze a sample of 385 publicly listed firms spanning the period from 2015 to 2019. The findings reveal that while state ownership and firm size individually exert a negative influence on both exploratory and exploitative innovation in Chinese firms, their interaction actually yields a positive impact. This study contributes to our comprehension of how state ownership influences exploratory and exploitative innovation in the presence of competing institutional logics, as well as the contingent effect of firm size.