We use a unique quasi-experiment–spillovers from the imposition of purchase restrictions on local housing to nearby unregulated cities–to study the effects of out-of-town housing demand on house prices and consumer spending. While these restrictions effectively stymied the surge in local house prices, they induced capital flight and sharp abnormal increases in house prices in nearby unregulated cities. The effect of the house price increases on consumer spending is positive in the aggregate, but echoing Favilukis and Van Nieuwerburgh (2021), is redistributive, that is, negative for renters and positive for homeowners.

We examine whether adding more founding family members as firm owners and/or managers matters to corporate governance outcomes. Based on a sample of 1242 founder-controlled publicly traded Chinese private-sector firms, we find that more such family involvement is associated with lower volumes of related party transactions suspicious of expropriating shareholder wealth. The curtailing relation is stronger when family members own firm shares and/or serve as managers, and are more arm's-length relatives instead of immediate kin of the founders. The intra-family governance effects are stronger when firms are subject to weaker capital market disciplines or have more free cash under insider discretion. The overall evidence is consistent with founding family members' information advantages and ownership incentives making them more robust monitors of managerial decisions than other formal mechanisms, which help enforce shareholder rights in emerging markets.

The China Accounting and Finance Review (CAFR) was jointly established in 1999 by the Hong Kong Polytechnic University and Tsinghua University. Over the past 22 years, CAFR has published original papers in accounting and finance with a focus on China-related research. In this article, we review the journal’s publishing patterns and the impactful articles it has published, with the aim of better understanding past research on China-related issues and recent publication patterns and trends as well as developing new insight that may inspire future submissions. We divide past CAFR articles by topic into six groups: (i) information disclosure; (ii) auditing; (iii) corporate governance; (iv) market efficiency; (v) corporate finance; and (vi) miscellaneous. We use these categories as the basis of our review for articles published before 2020. We also summarize articles by their regional setting, research methodology, and authors’ university affiliation. We then highlight the contributions of a few impactful CAFR articles that are actively cited in both the Chinese and English literature. We complement the literature review by going over China’s financial stability research in JFS. We also compare CAFR with other major accounting and finance journals in the Asia-Pacific region. CAFR stands out by welcoming research using a diversity of regional settings and research topics. Finally, we discuss the new editorial strategies that began in 2020. Under the new editorial policy, CAFR now publishes more non-China and more cross-disciplinary studies than it used to. We review several recent publications to demonstrate the change. Going forward, we intend to call for the publication of more high-quality papers in accounting and finance that are not restricted to a region, area, or methodology providing new insights into accounting and finance.

Using a two-firm dynamic model, we investigate whether firms’ corporate policies are impacted by the peers’ idiosyncratic technology shocks. A firm hit by the positive idiosyncratic technology shock becomes more productive. Thus, it is better off. As a result, its Cournot competitor is worse off. Therefore, their optimal decisions are opposite to each other, leading to negative correlations between corporate policies across the firms. The empirical analysis using the idiosyncratic technology shocks and, to a lesser extent, CEO sudden deaths supports this prediction. Our analysis suggests that mimicking peers who alter their corporate policies due to idiosyncratic technology shocks destroys shareholder value.

We investigate whether hedge funds (HFs) undertake activism in the corporate bond market. Although there is a growing empirical literature investigating HF activism in the equity market, we know little about the role of HF activists in the corporate bond market. The empirical setting is the active enforcement of bondholders' rights during 2003–2007, triggered by issuers' violation of a standard bond covenant requiring timely financial reporting. Using HF holding data of convertible bonds in Form 13F filings, we identify HF interventions. The patterns of HF ownership suggest that HFs actively purchased convertible bonds to increase their ownership before the issuance of default notices. Relative to other interventions, HF interventions are more likely to target companies with higher levels of cash holdings but less likely to target companies with a greater amount of private debt outstanding. Furthermore, we find that HF interventions are associated with elevated bond trading frequency before late filing notifications and issuances of default notices, as well as a wealth transfer from stockholders and non‐intervening bondholders to intervening bondholders. Taken together, the empirical evidence demonstrates that HFs take actions to force the issuance of default notices in response to delay in financial reporting, suggesting that the primary objective of HF activism in this setting is to extract short‐term profit from bond issuers.

We find that suppliers are more likely to redact mandated disclosures when major customers have proprietary information to protect (in the form of R&D intensity, trade secrets, and nondisclosure agreements), controlling for suppliers' own proprietary cost concerns. Furthermore, the effect on suppliers' redactions is concentrated in subsamples for which customers have greater power, measured by customer size, industry leadership, and the number of suppliers. Additionally, suppliers also curtail operations-related disclosures in the management discussion and analysis (MD&A) and product- and service-related press releases when customers likely have proprietary information to protect. Overall, these findings suggest that dependent suppliers internalize their customers' disclosure incentives and curtail disclosures, catering to customers’ demand for information protection.

This paper investigates the effect of social connections on outside director turnover before stock performance crashes. We find that outside directors who are more connected with managers through social ties are more likely to leave the firm before a crash. The positive association between turnover and outside director connectedness is robust to different model specifications, measures of crashes and turnovers, and sample selection criteria. Moreover, we document that this positive association is moderated by the concentration of the outside directors' social capital within the current firm and the availability of alternative information channels to the outside directors. Our findings contribute to the literature on the supply side incentives of outside directors by revealing information sharing through social connections as a mechanism through which outside directors assess their firms' future performance and make turnover decisions before crashes.

By analyzing a sample of Chinese firms that split their stocks via stock dividends and using proprietary trading data to measure investors' gambling preferences, we find that stock splits raise the stocks' lottery characteristics, making them attractive to gambling investors, who willingly pay higher prices for skewed securities and share firm risk with existing shareholders. Split firms take more risk. Our findings suggest that by attracting gambling investors, stock splits facilitate (large) shareholders to reduce wealth exposures to firm risk and increase the firms' risk-taking capacity. Furthermore, due to the influx of gambling investors and more risk-taking, split firms' return comovement with lottery-like stocks increases, while their market risk decreases, suggesting that stock splits induce fundamental changes to the firms' investor base and risk profile.

This discussion makes several observations regarding the past 25 years of China-related accounting research reviewed in Lennox and Wu (2022). First, we discuss factors of supply and demand that led to the rise of China-related studies and how this growth has contributed to the internationalization of accounting research. We note that the taxonomy of the literature by geographic region rather than topic or methodology is unusual and makes it difficult to formulate a common framework that would help organize the many contributions. Next, we distill distinct patterns in authorship, choice of topics, and asserted contributions of China-related studies. Studies are increasingly shaped by the availability of new data and regulatory reforms. These features should be interpreted carefully, as most reforms are interconnected and reflect the purposeful outcome of a tightly controlled economy. As a result, issues of generalizability arise. Alternatively, researchers could embrace the China setting and strive to identify the local institutional forces that make it special. We see such a more institutional, context-specific view of China-related—or better—international research as an opportunity for the field. We close by presenting five broad themes we view as promising areas for future China-related research.

We model the impact of supply and demand on risk premiums in electricity futures, using daily data for 2003–2014. The model provides a satisfactory fit and allows for unspanned economic risk not embedded in futures prices. Model-implied spot risk premiums and forward biases are large, negative, highly time-varying, and exhibit plausible seasonal patterns. They differ from existing models, especially in periods of market turmoil, have not decreased in size over time, and help predict future returns. Both demand and supply have an economically significant impact on risk premiums. The risk premium associated with supply is characterized by large positive outliers.