Collateral Constraints and Asset Prices: Evidence from the Chinese Structured Funds (Oct. 2024), with Gregory Phelan and Yongqin Wang, New Version Coming Soon with Interesting Updates!!!
What's New (Jan. 2026): We offer some new tests on how belief disagreement affects collateral value and find evidence in line with Simsek (2013)! That's something I have always wanted to do!
Abstract: We test the asset-pricing implications of collateralizability using structured funds. The funds constitute a unique setting for allowing leveraged and unleveraged trading of the same set of assets, with continuous exogenous variations in leverage. Given the same fundamentals, we find that leveraged prices are higher than unleveraged prices. The difference is the collateral value, amounting to 6.4% of the leveraged price given an average leverage of 2.1. Furthermore, higher collateralizability leads to higher asset prices. Higher demand for leverage strengthens this impact and significantly contributes to collateral value. The findings provide causal evidence for collateral-based asset-pricing models.
Conference and Seminar Presentations: 2025 EW2025 ESWC, 2024 China Economist Society (CES) Annual Conference, 2023 Asian Meeting of Econometric Society (AMES Beijing), 2023 Asian Meeting of Econometric Society (AMES Singapore), 2023 China Financial Research Conference (CFRC), 54th Annual Conference of Money, Macro, and Finance, the Office of Financial Research (OFR), Zhejiang University, ShanghaiTech University, Peking University, and NYU Shanghai.
Riding the Waves: Geographic Diversification and Bank Responses to Local Funding Shocks (Dec. 2025), with Mingmei Liu and Dolly (Yang) Yu
Abstract: How resilient are banks to local funding shocks? We exploit a segment of Chinese wealth management products (WMPs) funded locally but backed by national assets, allowing us to isolate banks' strategic responses to local funding pressures. Using city-level inflation to characterize investor demand shift, we find that banks pass through approximately 60% of these shocks to WMP yields. Large, geographically diversified banks respond more actively, by raising yields and contracting issuance in shock-hit markets more sharply than smaller banks. They then hedge by expanding the issuance of lower-yield WMPs in unaffected regions. Our findings reveal that for large banks, geographic diversification is not a tool for passive insulation but a mechanism enabling active, high-frequency liability management through their internal capital markets.
Conference and Seminar Presentations: 2025 EWMES, The 2025 Sydney Banking and Financial Stability Conference
The Real Cost of Machine Readability (Aug. 2025), with Yun Shi and Qinglu Jin
Abstract: The rise of machine processing encourages machine-friendly financial filings. Despite the improvement in market efficiency, we emphasize the potential deterioration in real efficiency induced by higher machine readability. Specifically, it improves the revelatory efficiency of fixed investments but hampers that of R&D. Value firms benefit, whereas growth firms are hurt. This divergence stems from machine readability enhancing learning about assets-in-place while crowding out growth-related information, evidenced by shifts in the informational composition of stock prices. The deteriorated managerial learning generates real economic outcomes including weakened investment efficiency and patent quality, highlighting the overlooked downside of machine-readable filings.
SIBR 2024 Osaka Conference on Interdisciplinary Business and Economics Research, the 5th Greater China Area Finance Conference, 2025 JCF Milan
When Shareholder Protection Hurts: Shareholder Governance, Debt Overhang, and Bond Pricing (Jan. 2026), with Chang Li and Yi Xue
Abstract: Enhanced shareholder governance can adversely affect debtholders and reduce firm value when shareholder–creditor interests diverge. Exploiting a minority shareholder protection policy, we examine its impact on debtholders using a difference-in-differences design. We find that bond spreads increase and borrowing terms tighten following the reform. We develop a conceptual framework showing that while shareholder governance curbs private benefit diversion, it also weakens investment incentives. The latter effect dominates and treated firms experience persistent investment declines, particularly among firms more exposed to debt overhang and controller tunneling. Our findings highlight an unintended cost of enhanced shareholder governance.
Collateral and Credit Creation during the Crisis: Evidence from China (Apr. 2024), with Suhua Tian and Yongqin Wang
2022 Early Stage Chinese Economy Workshop, 2022 Spring China Bank and Corporate Finance Forum (CBCF), 2022 Asian Finance Association Annual (Asian FA), 2022 China Financial Research Conference (CFRC), 2022 China International Risk Forum (CIRF)
The Empirical Information Sensitivity of Treasury Bonds and Stocks (Jan. 2022), with Tri vi Dang and Yongqin Wang
The Role of Relationships in the Repo Market, the Good, the Bad, and the Ugly: Evidence from China (Oct. 2023), with Hanming Fang and Yongqin Wang
2020 CIRF & CFRI Joint Conference, the 20th Chinese Financial Annual Meeting (Best Paper Award), Tongji University
The Real Economic Impacts of Relaxed Price Limits: Evidence from a Quasi-Natural Experiment on the Chi-Next Board (Jan. 2026), with Fengyuan Xi and Siying Lin (in Chinese)
Leveling the Playing Field: How Investors Respond to Relaxed Trading Restrictions (Jan 2026), with Fengyuan Xi
Interdealer Market Structure: Evidence from the Chinese Treasury Market, with Yongqin Wang and Shengxing Zhang
Monetary Policy Transmission in the Chinese Interbank Market
Less is more? Information Disclosure and Price Efficiency, with Yi Xue and Yan Zheng
Exciting new projects coming soon!!!
Government Stock Purchase Undermines Price Informativeness: Evidence from China’s “National Team” (2024), with Tri vi Dang and Yongqin Wang, Journal of Financial and Quantitative Analysis, Volume 59, Issue 5, August 2024, pp. 2340 - 2374.
This paper was originally circulated as "Managing China's Stock Markets: The Economics of the National Team." Note that the published version has been substantially refined and incorporates a more comprehensive set of tests.
Abstract: We use the 2015 Chinese stock market crash to study the effects of government stock purchases. The Chinese government purchased stocks to stabilize the markets through state-owned financial institutions known as the “National Team.” We find that the intervention led to reduced volatility and price informativeness. These impacts are driven by the disclosure of government portfolios. Consistent with investors having a stronger incentive to acquire government intervention information instead of fundamental news, we find reduced information production and information asymmetry following intervention disclosure. The article suggests that government stock purchases involve a trade-off between stability and informational efficiency.
Global Monetary Policy Shocks and the Adaptation of Supply Chains (2025), with Chang Li and Yuhui Shao, China Economic Review, Volume 94, Part B, December 2025, 102535.
Abstract: This paper examines how global monetary policy shocks (MPS) transmitted through trade networks affect supply chain adaptation of Chinese firms. When exposed to higher supplier-side MPS, firms experience significantly higher separation rates and lower foreign entry rates. Our findings remain robust across a range of alternative MPS measures. In response, firms shift their sourcing from high-interest-rate countries to low-interest-rate countries, but they do not re-shore. We show that trade credit and price adjustment by suppliers are important for explaining the restructuring. The disruption is more likely driven by customer decisions. Moreover, heterogeneities show that firms with stricter credit constraints are more sensitive to MPS, while longer-duration supply chain relationships show greater resilience. The supply chain adaptation induced by MPS also leads to adverse real economic outcomes for imports, exports, and profitability.
Dealership and Stock Market Liquidity: Evidence from the Chinese STAR Market Reform (2025), with Fengyuan Xi, The Journal of World Economy (世界经济), Volume 48, May 2025, pp. 128-159.
Tax Incentives, Supply Chain Transmission, and Trade Credit: A Quasi-Natural Experiment Analysis Based on the Tax Credit Refund Policy (2023), with Lianxing Yang and Qiushuo Wang, Economic Research Journal (经济研究), Volume 12, December 2023, pp. 41- 58.
How Do Zombie Firms Affect Innovation? Evidence from China's Industrial Firms (2018), with Yongqin Wang and Yun Dai, Economic Research Journal (经济研究 ), Volume 11, pp. 99 - 114.
Channel and Investor Channel of Monetary Policy (Jun. 2024), with Chao He