The real value of China’s stock market Carpenter, Jennifer N.; Lu, Fangzhou; Whitelaw, Robert F.
Journal of financial economics,
03/2021, Volume:
139, Issue:
3
Journal Article
Peer reviewed
Open access
What capital allocation role can China's stock market play? Counter to perception, stock prices in China have become as informative about future profits as they ate in the US. This rise in stock ...price informativeness has coincided with an increase in investment efficiency among privately owned firms, suggesting the market is aggregating information and providing useful signals to managers. However, price informativeness and investment efficiency for state-owned enterprises fell below that of privately owned firms after the postcrisis stimulus, perhaps reflecting unpredictable subsidies and state-directed investment policy. Finally, evidence from realized returns suggests Chinese firms face a higher cost of equity capital than US firms.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
We document a negative relation between air pollution during corporate site visits by investment analysts and subsequent earnings forecasts. After accounting for analyst, weather, and firm ...characteristics, an extreme worsening of air quality from “good/excellent” to “severely polluted” is associated with a more than 1 percentage point lower profit forecast, relative to realized profits. We explore heterogeneity in the pollution-forecast relation to understand better the underlying mechanism. Pollution only affects forecasts that are announced in the weeks immediately following a visit, indicating that mood likely plays a role, and the effect of pollution is less pronounced when analysts from different brokerages visit on the same date, suggesting a debiasing effect of multiple perspectives. Finally, there is suggestive evidence of adaptability to environmental circumstances – forecasts from analysts based in high pollution cities are relatively unaffected by site visit pollution.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
The paper aims to understand various concepts and dimensions of financial literacy by using literature-based analysis. The reviews included various parameters, such as the financial literacy of young ...people, employees, women and college students, and the impact of financial literacy on well-being and investment decisions. Secondary information was gathered from many publications, websites, research papers, and articles. In the context of India, there is still much work to be done in the domain of financial literacy. Numerous studies have revealed low levels of financial literacy among India’s different demographic segments and some studies have revealed moderate levels. Financial literacy is a difficult topic to describe and quantify. The definition and measurement of this idea are the focus of numerous investigations. Policy changes must be made to improve financial literacy at both the fundamental and advanced levels so that people can save and invest money more sensibly in the various market opportunities.
We study how foreign bank penetration affects financial sector development in poor countries. A theoretical model shows that when domestic banks are better than foreign banks at monitoring soft ...information customers, foreign bank entry may hurt these customers and worsen welfare. The model also predicts that credit to the private sector should be lower in countries with more foreign bank penetration, and that foreign banks should have a less risky loan portfolio. In the empirical section, we test these predictions for a sample of lower income countries and find support for the theoretical model.
Full text
Available for:
BFBNIB, FZAB, GIS, IJS, INZLJ, KILJ, NLZOH, NMLJ, NUK, OILJ, PNG, SAZU, SBCE, SBMB, UL, UM, UPUK, ZRSKP
We study how monetary policy in China influences banks’ shadow banking activities. We develop and estimate the endogenously switching monetary policy rule that is based on institutional facts and at ...the same time tractable in the spirit of Taylor (1993). This development, along with two newly constructed micro banking datasets, enables us to establish the following empirical evidence. Contractionary monetary policy during 2009–2015 caused shadow banking loans to rise rapidly, offsetting the expected decline of traditional bank loans and hampering the effectiveness of monetary policy on total bank credit. We advance a theoretical explanation of our empirical findings.
Full text
Available for:
BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, ODKLJ, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
Market-wide attention-grabbing events — record levels for the Dow and front-page articles about the stock market — predict the trading behavior of investors and, in turn, market returns. Both ...aggregate and household-level data reveal that high market-wide attention events lead investors to sell their stock holdings dramatically when the level of the stock market is high. Such aggressive selling has a negative impact on market prices, reducing market returns by 19 basis points on days following attention-grabbing events.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
Abstract
This article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the ...dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.
China is an important counterexample to the findings in the law, institutions, finance, and growth literature: Neither its legal nor financial system is well developed, yet it has one of the fastest ...growing economies. While the law–finance–growth nexus applies to the State Sector and the Listed Sector, with arguably poorer applicable legal and financial mechanisms, the Private Sector grows much faster than the others and provides most of the economy's growth. The imbalance among the three sectors suggests that alternative financing channels and governance mechanisms, such as those based on reputation and relationships, support the growth of the Private Sector.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This study adopts a spatial econometric model to explore the impact of digital financial inclusion on CO2 emissions covering 284 prefecture-level cities in China. The results demonstrate that digital ...financial inclusion positively impacts CO2 emissions of local cities, but negatively impacts neighboring cities. In addition, we analyze the effect of the three dimensions of digital financial inclusion on urban CO2 emissions, suggesting that the breadth of coverage and depth of use significantly correlates with CO2 emissions. Specifically, the direct effect of digital financial inclusion is significantly positive in China of the eastern, western and northeastern cities. By analyzing the mediation impact mechanism, we confirm that digital financial inclusion have an influence on city-level CO2 emissions through industrial structure and economic growth, respectively. Overall, these findings help in the evaluation of the social benefits of digital financial inclusion policies and in effectively addressing environmental problems.
•Investigate the impact of digital financial inclusion (DFI) on CO2 emissions in China.•We use a spatial econometric model based on a panel dataset covering China's 284 prefecture-level cities.•The mediation impact mechanism between DFI and CO2 emissions is explored.•DFI positively impacts CO2 emissions of local cities, but negatively impacts neighboring cities.•DFI affects China's CO2 emissions through industrial structure and economic growth, respectively.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
PDF
