Although implicit guarantees are widely used in the shadow banking system, we know very little about its qualitative and quantitative properties. In this paper, we use a micro-level data set on China's shadow bank products to quantify the risk of implicit guarantees. We find a robust empirical fact that banks extend more implicit guarantees to their shadow bank debt (i.e., wealth management products) when their own default risks increase. Our result shows that this effect is particularly stronger when riskier banks plan to issue certificates of deposits in the interbank market. A simple model that is based on a signaling game is proposed to rationalize this fact. The key mechanism of the model is that as a bank's reputation becomes worse, it has stronger incentives to send positive signals to the market, i.e., to boost the realized returns of its shadow bank obligations, although it has no obligation to do so. Our findings show that implicit guarantees have nonlinear negative effects on bank fundamentals and the risk-weight of off-balance-sheet exposure should be increasing in banks' default risks.

Shadow banking in China constitutes a dual-track interest rate reform that adds a new market track beside the controlled formal banking track. Shadow banking leads to Kaldor-Hicks improvement if the gains from financing the underfunded private enterprise (PE) and reducing bank capital idleness caused by ultrahigh reserve requirements outweigh the losses from shadow banking risk. Pareto improvement is feasible as the state-owned enterprise (SOE), a potential reform loser, participates in shadow banking to transfer credit to the more productive PE. Full interest rate liberalization, which removes formal banking controls after the dual-track reform, does not warrant additional profit gain if bank credit misallocation favoring the SOE and SOE's low productivity persist.

In this paper, I build a continuous-time macro-finance model in which firms can access both bond credit and bank credit. The model captures the simple idea that the presence of bond financing increases the price elasticity of demand for bank loans. I find that the optimal capital adequacy ratio is quantitatively sensitive to the presence of bond financing and that models would overstate the banking sector's recovery rate if they omit bond financing. Furthermore, the model highlights that an economy's optimal capital requirement highly depends on the efficiency of its bankruptcy procedure and the risk profile of its real sector.

China frequently suffers from weather related natural disasters and is a source of wide-spread systemic risk throughout large swaths of China. During these periods farmers crops are at risk and for a largely poor population few can afford the turmoil to livelihoods that goes along with drought. Throughout the developing world there is serious interest in index-based weather insurance for agriculture, and in China the China Insurance Regulatory Commission is investigating the insurability of weather related risk. Beyond that little formal research has appeared on either the demand, use or design of index insurance in China. This paper provides a preliminary assessment of farmers’ willingness to pay for drought insurance. Based on a survey of over 890 farm households in Shaanxi and Gansu provinces the results show that while there is significant demand, price may be an issue. Our results show that the majority of farm households would transition from a no-demand state to a demand state as prices fall. This suggests that in order to gain wide gain adoption there may be a need for governmental intervention.

Researchers have recently studied the interactions between corporate and government bond issuances in a variety of countries. Some conclude that government bonds compete with private bond issuances, while others conclude the opposite. We study here the special case of China’s 2017 issuance of two sovereign bonds denominated in U.S. dollars. We find that corporate bonds experienced a decline in yield spreads, bid-ask spreads, and price volatility around the time this sovereign issuance was first announced. The results are particularly strong for corporate bonds with maturities similar to those of the USD sovereigns. We conclude that these new bonds served as useful reference instruments that helped investors price and hedge the risks impounded in Chinese corporate bonds.

This paper examines the efficiency of prediction markets by studying the markets for catastrophe (CAT) bonds, compared to previous studies of prediction markets that used small-scale observational field data or experiments. We collect actual catastrophe loss data, match the defined trigger events of each CAT bond contract, and then employ an empirical pricing framework to obtain the excess CAT premiums in order to represent the market-based forecasts. Our results indeed show that the market-based forecasts have more significantly predictive content for future CAT losses than professional forecasts that use natural catastrophe risk models. Although the predictive information for CAT events is specialized and complex, our evidence supports that CAT bond markets are successful prediction markets that efficiently aggregate information about future CAT losses. Our results also highlight that actual CAT losses in future periods can explain the excess CAT bond spreads in the primary market and provide evidence of market efficiency when pricing CAT risk.

We study non-performing loan (NPL) transactions in China using proprietary data from a leading market participant. We find these transactions – driven by tighter financial regulation – are consistent with banks concealing non-performing assets from regulators as (i) transaction prices do not compensate for credit risks; (ii) banks fund the NPL transactions and remain responsible for debt collection; and (iii) 70% of NPL packages are re-sold at inflated prices to bank clients. These results imply NPL transactions do not truly resolve NPLs. Recognizing the hidden NPLs implies the total NPLs in China is two to four times the reported amount.

本文发现，股票回报与公司的气候变化暴露水平之间存在可预测的关系。投资者并没有充分利用公司的气候变化暴露信息；那些暴露水平更高的公司，未来的回报更低。基于此构建的多空组合，能产生0.5%的因子调整后回报。本文排除了对冲气候变化风险、碳风险定价以及对ESG风险的担心等一系列替代解释。本文发现，公众的气候变化意识在近期的提高，削弱了这种可预测关系的幅度。

我们发现，股市泡沫和信贷市场中的信用风险存在因果关系。我们分析了来自人人贷（国内头部P2P众筹平台）的超过45万笔贷款数据，时间为2015年，当时A股正经历非理性的大起大落。随着上证综指突破3500点，散户们积极进入股市，并通过P2P平台融资，我们发现，此时P2P平台贷款的违约率以及违约程度都有了大幅提高。对于低质量贷款以及过分自信的贷款者，这种效应更加显著。其他一系列P2P市场状态指标，也都出现恶化。总之，我们认为，金融科技的发展会扩大金融风险，促使风险在不同市场之间蔓延。

We document that firms' strategic reactions could hamper the effectiveness of RegTech. Our paper focuses on one RegTech innovation in China—online platforms launched by stock exchanges for investors to communicate with listed companies. We find that firms provide a number of no-answer replies—answers without clear, specific, or useful information—to investors' questions. Consistent with strategic information hoarding, no-answers are shown to be associated with subsequent unfavorable news. Moreover, firms with higher no-answer rates tend to have lower price efficiency, higher return volatility, and higher stock price crash risk. The evidence suggests regulators' objective of enhancing investor protection is not fully fulfilled.