We propose a unique measure of information share based on the factor modeling of the price innovations, which we refer to as the Factor Information Share (FIS). We show that the proposed FIS is improved over two widely used measures by providing meaningful rationale and unique identifiability. Our simulation study suggests that FIS also leads to more accurate estimates of the market-specific contribution in the process of price discovery. The empirical results include both static and dynamic FIS of cross-listed Chinese banks traded on A-shares and H-shares. By incorporating the news sentiment, we find that positive news has a larger influence on A-shares’ FIS than negative news.

Ameliorating global warming has been touted as one of the most pressing issues of our time. We investigate whether there are mutual fund families that purposefully decrease their portfolios’ exposure to greenhouse gas emissions, and find families that sign the Principles for Responsible Investment (PRI) have significantly lower portfolio emissions after signing the initiative than do non-signatory families. There are two mechanisms via which this reduction occurs: access to the resources offered by the PRI (networks, information, education, etc.), and families with pro-environmental stakeholders. Families that reduce their emissions experience significantly increased fund flow.

We investigate the stock price reactions of industry competitors to IPOs in China. Contrary to findings in the U.S., we document a positive valuation effect of Chinese IPOs from 2002 to 2013. This finding is robust to alternative rival definitions, investor reaction measurement, and sample selection criteria. Based on the existing theories and institutional setup of the Chinese stock market, we propose three non-competing hypotheses: the signaling hypothesis (i.e., IPOs could convey positive industry-related information), the collusion hypothesis (i.e., rival firms can benefit from the increasing likelihood of collusion), and the substitution hypothesis (i.e., rival stocks can substitute for IPO stocks as an appealing investment). With a series of tests, we demonstrate that the substitution hypothesis can explain this phenomenon. Furthermore, we find that the spillover effects of IPOs decline with the increase in investment choices after 2014.

We argue that vertical integration creates operational links between divisions in a conglomerate, which aligns divisional interests, thereby reducing internal competition between divisions. As a result, vertical integration improves the capital allocation efficiency of the internal capital market (ICM). We measure ICM efficiency by innovation output and capital expenditure (CAPX) deviation, and present evidence that higher levels of vertical integration are associated with higher ICM efficiency. Our results are robust to a number of endogeneity tests and the use of alternative measures of vertical integration and ICM efficiency.

This paper studies whether stock market liquidity has a causal effect on real earnings management. We introduce a new and cleaner identification of liquidity shock - the 2016 Tick Size Pilot Program - to show that firms with less liquid stocks are more likely to engage in real earnings management. We provide direct evidence that stock liquidity helps to deter real earnings management via enhancing governance by long-term institutional investors through trading and direct intervention, and via facilitating short selling to discipline managers. The effect is stronger in firms that do not pay dividends.

We investigate the influence of financial and political factors on peer-to-peer (P2P) platform failures in China's online lending market. Using a competing risk model for platform survival, we show that large platforms, platforms with listed firms as large shareholders, and platforms with better information disclosure were less likely to go bankrupt or run off (platform owners abscond with investor funds). More importantly, failing platforms were much less likely to run off in advance of major political events, but more likely to declare bankruptcy or run off after such events. These effects are more pronounced for politically connected platforms, platforms operating in provinces where local officials have close ties with central government, and in provinces with better local financial conditions. Our study highlights the role of political incentives on government regulatory intervention in platform failures.

Liquidity restrictions on investors, like the redemption gates and liquidity fees introduced in the 2016 money market fund (MMF) reform, are meant to improve financial stability. However, we find evidence that such liquidity restrictions exacerbated the run on prime MMFs during the COVID-19 crisis. Our results indicate that gates and fees could generate strategic complementarities among investors in crisis times. Severe outflows from prime MMFs led the Federal Reserve to intervene with the Money Market Mutual Fund Liquidity Facility (MMLF). Using MMLF microdata, we show how the provision of “liquidity of last resort” stabilized prime funds.

This paper proposes and estimates an interactive fixed effects model of executive compensation, which allows for time-variant pay premiums for unobserved manager attributes. We find that two managerial traits can explain executive compensation over time: talent and conservatism. The market premium for talent is higher in bull markets, as the higher marginal productivity of human capital during these periods increases the demand and thus the price for talents. Such pay premium is concentrated among top talented managers, who earn a premium about five times that of median talented managers. The pay premium for conservatism is linked to the equity market risk premium, with conservatism being discounted (compensated) during the low (high) risk premium periods. We show that risk-taking managers are rewarded during the early period of our sample. However, after the periods characterized by higher risk premium, such as the financial crisis, conservatism becomes a more desirable trait.

We find that contrary to popular belief, CEOs with long compensation duration do not make better long-term investment decisions. Using a comprehensive pay duration measure, we find that acquisitions conducted by CEOs with long compensation duration receive more negative announcement returns, and experience significantly worse post-acquisition abnormal operating and stock performance, compared with deals conducted by CEOs with short compensation duration. The negative correlation between compensation duration and mergers and acquisitions (M&A) performance is driven by long-term time-vesting plans, not by performance-vesting plans. The results suggest that extending CEO pay horizons without implementing performance requirements is insufficient to improve managerial long-term investment decisions.