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Panda Games: Corporate Disclosure in the Eclipse of Search

Kemin Wang, Xiaoyun Yu, Bohui Zhang, Sep 26, 2018

We conduct a textual analysis and exploit an exogenous event — Google’s 2010 surprising withdrawal from the Chinese mainland — which significantly hampered domestic investors’ ability to access foreign information. Following Google’s exit, Chinese firms’ announcements concerning their foreign transactions become more bullish in comparison to similar announcements prior to the exit and to those that involve only domestic transactions. This finding suggests that firms strategically alter their disclosure behaviors when the channel to transmit information is severed.

Does Good Luck Make People Overconfident? Evidence from a Natural Experiment in China

Huasheng Gao, Donghui Shi, Bin Zhao, Aug 01, 2018

We find that retail investors who win an allotment for an IPO subscription subsequently become more overconfident relative to retail investors who do not have an allotment. The former group subsequently trades more frequently and loses more money. Overall, our evidence indicates that the experience of good luck makes people more overconfident about their prospects.

Bright Side of Government Credit: Evidence from a Superbank in China

Hong Ru, May 09, 2018

This study traces the heterogeneous effects of government credit across different levels of the supply chain. I find that China Development Bank's industrial loans to state-owned enterprises crowd out private firms in the same industry but crowd in private firms in downstream industries. Moreover, China Development Bank's infrastructure loans crowd in private firms. It is important for policy makers to disentangle these opposing effects of government credit.

Is the Wife A Risk Mitigator? Evidence from Family Firms in China

Yue Pan, Jinli Xiao, Vincent W. Yao, Jian Zhang, Jun 06, 2018

Firm-level decisions are largely made by corporate executives whose preferences and attitudes can be shaped by historical traits and what is happening inside their households. We investigate how the involvement of a founder’s wife through marital ownership influences the family firm’s level of risk-taking and explore the underlying mechanisms.

Trends and Cycles in China’s Macroeconomy

Chun Chang, Kaiji Chen, Daniel F. Waggoner, Tao Zha, Jun 27, 2018

China’s spectacular growth over the 2000s has slowed since 2013. The driving force behind the country’s growth was investment, so the key to understanding the slowdown lies in understanding what sustained investment in the past. This column shows how a preferential credit policy promoting heavy industrialisation explains the trends and cycles in China’s macroeconomy over the past two decades. This policy was not without negative consequences, particularly in terms of the distortions it introduced for business finance. Going forward, China needs to focus on creating the right incentives for banks to make loans to small productive businesses.