We examine the economics of independent directors’ resignation decisions by taking advantage of a natural setting: The revised Securities Law of the People’s Republic of China, which took effect on March 1, 2020 (hereafter New Securities Law or NSL), and the first successful class-action securities lawsuit on November 12, 2021. We argue that by increasing 18-fold the penalties to directors of firmsthat misreport, NSL reduces by the same factor the maximum probability of getting caught at which director positions remain economically viable. We predict and find that in the short run when director compensation is fixed, NSL leads to more frequent voluntary resignations, particularly in firms that have a higher ex-ante likelihood of financial misreporting, and in firms where director compensation is lower. We also find that independent director dissent that arises primarily as a result of directors’ inability to establish whether their firms’ financial reports are reliable is a significant antecedent to voluntary resignations post NSL. Finally, analyzing the fraction of Chinese publicly traded firms that purchase director and officer liability (D&O) insurance, we find that independent directors are less likely to resign pre NSL but more likely to resign post NSL. Thisfinding suggeststhat firms with higher misreporting risk self-select pre NSL into such contracts. Given directors’ valuable monitoring role, we expect to observe in the long run both increased independent director compensation and increased D&O insurance coverage.

本文开创性地实证研究了中国私募股权母基金的投资绩效，探讨基于中国特色的不同类别母基金的绩效差异及形成原因。研究发现，母基金绩效差于直投基金。母基金背景有限合伙人（简称 LP）的绩效优于政府背景 LP，但差于企业背景 LP 和金融机构背景 LP。政府引导基金绩效差于市场化母基金，且同时差于国有背景市场化母基金和民营市场化母基金。非聚焦投资的母基金绩效优于其他各类聚焦投资的母基金。模拟抽样的结果显示，合成母基金绩效优于真实母基金，说明我国私募股权母基金不具备筛选优质子基金的能力，这与政府引导基金筛选能力较差有一定关联。本文的研究结果有利于了解当前母基金的生存状况和绩效运作，有效推动了相关领域的研究前沿。同时也为母基金，特别是政府引导基金提升配置水平和提高基金遴选能力提供一定的指导与帮助。

Direct experience of a peer’s punishment might have a sobering effect above and beyond deterrence (information about punishments). We test this mechanism in China studying the reactions to listed state-owned enterprises’ (SOEs) punishments for fraudulent loan guarantees by firms in the same location or industry (peers) and non-peer firms, across SOEs and non-SOEs. After experiencing SOEs’ punishments, peer SOEs cut their loan guarantees by more than non-peer SOEs and peer non-SOEs, even if information is common to all firms. The reaction is stronger for peer SOEs whose CEOs have higher career concerns or face lower costs of cutting guarantees.

This paper dissects the lottery-like anomaly in Chinese A-share stocks by decomposing total stock returns into overnight and intraday returns. Our findings indicate that the negative overnight returns are concentrated among lottery-like stocks, and the lottery-like anomaly is mainly driven by the overnight returns component. Considering the unique Chinese institutional features, our mechanism analysis reveals that the overnight returns induced lottery-like anomaly is more pronounced in stocks with high retail investors' gambling preference and high limits of arbitrage. Overall, our results suggest that investors optimism and trading constraints have a substantial impact on market efficiency in China.

This paper examines how globalization process shapes the corporate ESG efforts in emerging markets. Using a staggered difference-in-difference model based on the gradual inclusion of China's A-shares in the MSCI index, we find that public companies improved their ESG performance and disclosure quality after being included. The results are robust to propensity score matched sample. Notably, the impact on ESG disclosure was significantly greater than on ESG performance, and the effect is more pronounced for non-SOEs and firms with weak governance. The inclusion also leads to significant increasesin foreign holdings, the proportion of women directors, and analyst attention, which have promoting effects on corporate ESG performance and disclosure ratings. This study sheds light on the macro-level determinants of corporate ESG engagement.

Firms in China increase green innovation following a mandate that requires them to regularly disclose their corporate social responsibility (CSR) activities. Further analyses show that the CSR disclosure mandate leads to higher media coverage of disclosing firms' environmental issues, and the increase mainly comes from negative environmental news. By contrast, voluntary CSR disclosure does not affect corporate green innovation, and it increases positive but not negative environmental media coverage. These findings suggest that (1) it is the mandatory feature of the mandate, not the act of disclosure, that matters most for the positive effect on corporate green innovation; and (2) the negative media coverage induced by mandatory CSR disclosure plays a disciplinary role and promotes green innovation, while the positive media coverage induced by voluntary CSR disclosure does not.

In this paper, we identify cross-sectional anomalies in excess returns of industrial bonds at the issuer and secondary market levels, and find that liquidity, risk, and historical return variables can generate cross-sectional excess returns that cannot be explained by traditional bond factors. We also introduce a risk premium factor that is economically and statistically significant in industrial bonds based on the risk characteristics prevalent in credit bonds and that cannot be explained by long-standing bond market factors. We show that the newly identified risk factor outperforms the other anomalies considered in this paper in explaining the cross-sectional returns of industrial bonds.

The China-U.S. trade frictions and COVID-19 pandemic have caused unprecedentedly high economic policy uncertainty since 2017. To resist this high uncertainty, investors may prefer large stocks over small stocks, thereby damaging the size effect. To test this inference, we apply data from China to show that the size effect becomes insignificant after 2017. However, a significant size effect re-emerges among stocks with low valuations or low volatility, and this is positively associated with the increment of the economic policy uncertainty index. We also find that when uncertainty increases, institutional investors increase their holdings in small stocks before 2017, but hold more large stocks after 2017. Our findings consistently suggest that high policy uncertainty may change investors' preferences for firm size and cause the disappearance of the size effect, and only among stocks with low risk, size effects may show up due to low-risk small firms' similar function in resisting market uncertainty as large firms. Other mechanisms, such as the quality premium, unexpected profitability shock, shell value, or M&A option value, are not applicable in explaining the findings in China. Our study contributes to proposing a new mechanism for the time-variability of the size effect.

Against the backdrop of the United Kingdom's withdrawal from the European Union (BREXIT), this study examines predictability in the stock markets of sixteen European countries, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa) by analyzing how their returns predict the returns of sixteen commodities at different quantile levels. The study builds upon existing literature on predictability and extends it by investigating the impact of the BREXIT crisis on these markets. The findings suggest that investors can hedge their portfolios with various commodities during times of the BREXIT crisis, but caution is advised, and the trend of both equities and commodities should be closely monitored before making investment decisions.

The objective of this study is to create optimal two-asset portfolios consisting of stocks from Western Europe, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa), as well as sixteen commodity types during the BREXIT period. We utilized dynamic variances and covariances from the GARCH model to derive weights for the two-asset portfolios, with each portfolio consisting of one equity factor and one commodity factor. Subsequently, hedge ratios were calculated for these various assets. Our findings indicate that portfolios consisting of European stocks do not require the inclusion of commodities, whereas the other equities do.