Using a proprietary granular database of a major Chinese stock exchange, we examine heterogenous investors’ trading dynamics around one of the most important macro announcements of the Chinese central bank, the monthly release of monetary aggregates data. Exploiting the trading heterogeneity across assets and across investor types, we find that before announcements, institutional investors reduce their aggregate stock exposure while over-weighing riskier stocks of smaller caps, whereas retail investors provide liquidity by increasing their aggregate stock exposure and avoiding the riskier stocks. Large retail and institutional investors become more informed before announcements and trade in correct directions consistent with the news surprises after announcements, while smaller retail investors trade in opposite directions. While the institutional investors accumulate positive returns with risk compensated, the market realizes sizable pre-announcement equity premium.

While it is generally believed that pressure from peers induces employees to improve their efficiency and performance, little is known about whether employees' improved performance is detrimental to the interests of others. Based on a granular dataset at the individual-month level of investment advisors' and customers’ accounts from a large retail bank in China, we find that peer pressure, as measured by the performance of advisors relative to their colleagues in the previous month, can induce the advisors to sell more financial products, but can also exacerbate misselling, resulting in a significant increase in sales of poor-quality financial products ("high-risk-low-return" products). The causal link is identified with an exogenous change of peer size. The peer pressure effects are pronounced among poor performance advisors, and client complaints play a monitoring role in curbing misselling. By exploring the correspondence between advisors and clients, we find that misselling occurs mainly between female advisors and male clients, and between advisors who lack work experience and clients who lack investment experience.

This paper uses the China Household Income Project 2018 dataset to estimate returns to education for various Hukou-migration subgroups. We overcome the endogeneity problem of years of schooling using an instrument based on the Great Expansion of Higher Education policy. Our results indicate that the highest returns are for urban native workers (27.4%), followed by urban Hukou-converted (25.0%) and rural native workers (14.7%). In contrast, the returns to education for rural-urban migrant workers are insignificant. Further analyses suggest that Hukou conversion significantly increased the returns to education for rural-origin people by enabling them access to better job opportunities.

As China’s population ages, more older workers are participating in the labor market, including a significant number of older migrant workers moving to urban areas. However, surprisingly little research has been done on their destination city and employment patterns. This paper addresses this gap by investigating the impact of city-level and industry specialization on the employment prospects of older migrant workers. Using both individual- and city-level data, we find that unlike prime-age migrant workers, older migrant workers have higher employment probabilities in relatively less-developed lower-tier Chinese cities than in better-developed high-tier cities like Shanghai, Beijing, Shenzhen, or Guangzhou. This phenomenon is driven by industry specialization, particularly in the construction sector, which fosters a dense labor market and facilitates higher job-finding rates. Additionally, construction firms and real estate developers in lower-tier cities are more willing to offer better wages than those in high-tier cities, which aligns with older migrant workers’ relatively moderate education profile and wage preferences over housing costs.

With China being a large developing economy, the trading in China’s stock market is dominated by retail investors, and its government actively participates in this market. These features are quite different from those of typical developed markets, and This review focuses on two important questions: how do retail and institutional investors trade in China and why? We have three main findings after reviewing 100+ previous studies. First, small retail investors have low financial literacy, exhibit behavioral biases, and not surprisingly, negatively predict future returns; whereas large retail investors and institutions are capable of process information, and they positively predict future returns. Second, the macro- and firm-level information environment in China is slowly but gradually improving. Finally, the Chinese government actively adjusts their regulations of the stock market to serve the dual goals of growth and stability, with many of them being effective, while some may not generate intended consequences.

Recent sociological research suggests that culturally tight environments enforce strong social penalties for mistakes. I find that such culturally tight environments incentivize managers to suppress negative information, increasing stock price crash risk. Opaque financial disclosure is a channel through which cultural tightness affects managerial bad news hoarding. Labor and capital market pressures strengthen the positive effect of cultural tightness on crash risk. The instrumental regressions using labor-intensive agriculture and ethnic homogeneity as instruments confirm a positive tightness-crash relationship. Finally, changes in environments because of headquarters relocations affect managerial tendencies to withhold bad news, resulting in changes in crash risk levels.

Green finance has drawn increased worldwide attention from policymakers as a financial mechanism that could potentially encourage corporations to actively engage in sustainable activities. However, despite a growing body of studies investigating the economic outcomes of green financial policies, there is still a lack of research that systematically quantifies the social welfare implications of green finance. Hence, this study aims to fill this research gap by establishing the causal effect of green finance on corporate environmental responsibility. Exploiting the "bottom-up" enforcement of the green finance pilots in 2017 in China as a quasi-natural experiment and the difference-in-difference-in-difference identification strategy, we find that green finance significantly enhances corporate environmental responsibility performance in high-polluting industries relative to their counterparts, and this evidence continues to survive a battery of robustness checks. Moreover, we explore three underlying mechanisms that possibly explain this beneficial effect: risk-taking, external governance and financing channels. Furthermore, we uncover that corporate environmental responsibility serves as a plausible non-economic channel that combines green finance with economic benefits by stimulating green innovation, promoting total factor productivity and expanding market share. Overall, our study offers new insights on both the economic and non-economic consequences of green finance on business performance.

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 how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that VCs include more investor-friendly covenants in contracts when EPU increases. Our findings hold across a battery of robustness checks, including addressing endogeneity concerns and using alternative EPU measures. Our mechanism analysis shows that higher investment risk and increased VCs’ bargaining power might be plausible reasons why EPU positively affects the presence of investor-friendly covenants in VC contracts.

This research examines the impact of foreign shareholder on executives’ pay stickiness by analyzing China’s listed companies from 2007 to 2021. The analysis finds that foreign shareholder ownership leads to an increase in executive pay stickiness. This is evident in the increased upward pay sensitivity. The individualistic cultural tendency of foreign shareholders and executives’ power play a crucial role in this mechanism. Additionally, the positive impact of foreign ownership on executive pay stickiness is more significant in the sample where foreign shareholders are the actual controllers and the internal and external monitoring is weak. Furthermore, the hypothesis regarding the positive effect of executive pay stickiness is validated by identifying the increasing role of executive pay stickiness in firm innovation and value.