We posit and demonstrate that, in China’s retail-dominated market, quantitative trading over-relies on non-fundamental signals, thereby crowding out fundamental information from stock prices and increasing crash risk. Using trading data from quantitative mutual funds and Chinese A-share firms during 2009-2023, we find that greater exposure to quantitative trading is associated with higher future crash risk. Mediation analysis further reveals that reduced information efficiency constitutes a key channel through which quantitative trading elevates crash risk. The effect is stronger for stocks with more retail investors, consistent with our proposed mechanism. Overall, we identify a novel potential risk of quantitative trading in underdeveloped emerging markets.

This study investigates how venture capital (VC) reputation affects initial public offering (IPO) exits in the Chinese VC market using a two-sided matching mechanism. Research that distinguishes the sorting and influence effects of VCs in the Chinese market is lacking. To address this gap, Chinese VC transaction data, comprising 3,606 VC firms and 8,173 investment transactions, was used to construct a structural econometric model. The Markov Chain Monte Carlo Bayesian estimation techniques were employed to identify the sorting and influence effects of VC reputation. We demonstrate that the likelihood of IPO exits is considerably increased by VC reputation, whereas historical investment experience has a dampening effect on exit outcomes. The IPO success rates are significantly higher for firms in the biotechnology, electronics, medical, and late-stage industries. The difficulty of IPO exits increases with investment age. Compared to influence effects, sorting effects were the dominant mechanism. VCs with a high reputation systematically selected firms with potential advantages, such as high-quality management teams, to promote IPO success. This study’s novelty lies in its application of an endogenous two-sided matching solution to the Chinese VC market. Using a structural model, we discovered the importance of the reputation sorting effect in the Chinese VC market and refined the VC’s investment preferences in high-tech industries. This study’s practical significance lies in the findings that enterprises must pay attention to the sorting capabilities of VC institutions, the government can guide capital flows to efficient exit industries, and VC institutions should optimize the resource allocation structure.

Prevailing research, assuming developed financial markets, concludes that Chinese firms heavily rely on “short-term credit for long-term investment.”We challenge this view, arguing that China's vibrant informal financial system provides crucial alternative funding. Consequently, the severity of this maturity mismatch is likely overestimated. To investigate this, we examine strategic alliances as a representative informal institution. Our analysis confirms that such alliances significantly mitigate maturity mismatch, revealing that they enhance information sharing and reduce transaction costs. This provides initial evidence of informal institutions' critical role in addressing this issue. Given the prevalence of similar arrangements in China—like private lending and inter-corporate financing—our findings highlight the need to look beyond formal systems. This perspective not only recalibrates the understanding of corporate financing in China but also opens ample avenues for future research on informal finance's role in emerging economies.

This paper examines whether mandatory ownership disclosure aligns incentives or distorts in-vestor beliefs. Using a sample of 1,436 Chinese equity-oriented mutual funds from 2012 to 2023,we find that higher managerial and senior ownership are significantly associated with larger in-flows, suggesting that investors treat ownership as a quality signal. However, we find no evidencethat ownership forecasts superior future returns or risk-adjusted alphas. Mechanism tests showthat the ownership-flow effect is much stronger in low-marketing funds and that managers increaseownership after weak flows, a countercyclical pattern inconsistent with overconfidence and consis-tent with strategic remedial signaling. Overall, ownership disclosure appears to operate primarilythrough investor perception rather than information about managerial ability, weakening the linkbetween capital allocation and true skill in the mutual fund industry.

This paper documents that the physical appearance of CEOs, specifically excess body weight, is priced in the capital market. In the absence of explicit health disclosures,market participants interpret obesity as a proxy for latent health risks and potential managerial disrupts, thereby demanding a compensation premium. Our analysis reveals that (1) IPOs of firms with obese CEOs have lower first-day performance, (2) these firms achieve a lower valuation, (3) the stocks of these firms have lower liquidity and (4) they provide higher stock returns thereafter. A quasi-natural experiment based on the invention of anti-obesity medications provides supporting causal evidence.

We document a striking anomaly in international capital flows that we term "sanction arbitrage": U.S. investors exploited the 2014 sanctions on Russia by significantly increasing holdings in Russian equities while Rest-of-World (ROW) investors fled. We rationalize this behavior through a simple game-theoretic model where the sanctioning government faces a trade-off between geopolitical objectives and domestic welfare, effectively creating a protective shield for domestic investors and driving out ROW investors. Empirically, we confirm that pre-sanction U.S flows negatively predicted subsequent sanction designations. Consequently, U.S. investors internalized this protection to act as opportunistic buyers, absorbing fire-sale assets from exiting foreign investors and capturing significant excess returns from Russian stock holdings. These findings reveal that "smart" sanctions designed to preserve market access can inadvertently generate wealth transfers from foreign to domestic agents.

I study whether workplace smoking bans change how bond investors assess firm risk. Using staggered state adoption across U.S.\ states from 2002 to 2012 and a heterogeneity-robust difference-in-differences design, I find that smoking bans increase six-month cumulative abnormal bond returns by about 90 basis points. The average effect is only the starting point: the response is much larger for speculative-grade issuers and firms with low interest coverage, indicating that investors reprice the policy where downside operating risk matters most for debt values. Mechanism tests point most clearly to improved operating performance and lower worker turnover, while broader financial-constraint, liquidity, and duration channels remain close to zero. Alternative estimators, placebo diagnostics, and geographic spillover checks all support the interpretation that workplace smoking bans trigger targeted credit-risk reassessment rather than a generic regional shock. My findings connect public-health regulation to capital-market outcomes and show how non-financial policy shocks can reveal economically meaningful information about corporate credit risk.

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.

We exploit a unique financial regulatory tool with data-governance functions as a quasi-natural experiment to explore the determinants of bank risk-taking. The paper finds that Examination Analysis System Technology (EAST) reduces bank risk-taking. This result is more pronounced in banks with higher capital adequacy ratios and higher liquidity levels. We also find that the inhibitory effect of EAST on bank risk is more significant for banks in eastern regions and listed banks. Our findings highlight the positive impact of data regulation on promoting financial stability.

The flow-performance relation in China’s mutual fund market differs from that in developed markets (e.g., the U.S.). We find that investors actively allocate capital to poorly performing funds, generating a negative relation at the bottom of return distribution. These flows are driven mainly by increased purchases rather than reduced redemptions. We then examine the mechanisms behind this anomaly. First, investors act on rational expectations of performance reversals, with this pattern being more pronounced among funds with higher activeness. Second, product differentiation attracts heterogeneous investors when performance is weak. Third, marketing and fund family effects serve as simple signals that amplify inflows. Overall, our study provides new empirical evidence on fund investor behavior and its economic consequences in an emerging market context.