This paper develops a two-sector small open economy general equilibrium model. By assuming that rural labors need to pay idiosyncratic costs to get employed in the industrial sector, the paper articulates how technological advancement affects real exchange rate, sectoral wage gap and other endogenous variables in a dual economy, hereby providing a theoretical framework to understand related issues in dual economies such as China. We not only test certain testable predictions of the model using multi-country panel data, but simulate the model to assess its ability to fit Chinese data. It is shown that the model can account for the dynamics of all endogenous variables in the sample period strikingly well, particularly the seemingly weak but fast appreciating RMB-USD real exchange rate, as well as China's ever expanding industry-agriculture wage gap. In every aspect, the model significantly outperforms the classic frictionless Balassa-Samuelson model.

This paper collects the annual panel data of 114 countries from 1995 to 2010. By using ordered logit model, we find that countries with high diversity of export products favor flexible exchange rate regimes while countries with low diversity of export products tend to peg, which contradicts the conventional theory of optimum currency areas. This study further shows that countries with less diversified of export products are more synchronized with the world economy, so they are more inclined to choose a peg. While countries with more diversified of export products and thus less synchronized with the world economy accordingly are more prone to foster flexible regimes. “Neo-Europe” countries and non-colonial countries, however, are now more diversified of export products and thus less synchronized with the world economy, accordingly they are more prone to foster flexible regimes.

This paper constructs a Bayesian mixed frequency VAR (MF-BVAR) model to study the dynamics of China’s macro-economy and to forecast the key macro variables. The MF-BVAR model can nest high frequency macro information (e.g. capital market price) without compromising to the low frequency information (e.g GDP, investment) in economic projection. Empirical evidence shows that the MF-BVAR model dominates other classic models on forecasting key macro indicators such as CPI, RPI and GDP growth. The study further demonstrates that the real estate investment plays a significant role in forecasting China’s economic dynamics, while the stock market is insignificant in macro projection.

Along with the financial market reform, the financial repression has been greatly improved. On one hand, however, the reform is still in a gradual progress and the effects of regulation still exist; on the other hand, understanding of the effect of financial repression to corporate credit and loan is the basic of correctly evaluate the reform's outcome. Therefore, our study focus on the heterization of contract between banks and corporations affected by financial repression before the financial market reform. The results shows that under the background of financial repression, invisible contracts of retained loans exist between banks and corporations. Banks use retained loans to maximize their profit while fulfill regulations. This study theoretically and empirically analyses this phenomena and find out that the occurrence of invisible contract are affected by factors like monetary policy, corporate character etc. Such invisible contracts are acting as overt market interest rate. Further study suggest that this invisible contract negatively affected firm value. Our paper enriches the literary of macro policy and micro corporate behavior, connect with the studies of invisible contract, enhance the comprehension of bank and corporation relationship under financial repression and could provide policy suggestion to the reform of financial institutions.

Using the number and capital of microcredit companies to measure the development of informal finance in the macro-level and dialect diversity to measure culture diversity, this paper examines the effects of cultural diversity on the development of informal finance. The results show that the dialect diversity has a significant negative effect on the number and capital of microcredit companies. The mechanism is that cultural identity and the social capital, which are represented by dialect, help to mitigate private lending transaction costs and default risks. We further use the performance of 438 microcredit companies in Shandong Province to measure the development of informal finance in micro-level and find that the dialect diversity reduces the profitability and loan size, but increases the operating risks. This provides the micro foundation for the effects of cultural diversity on the development of informal finance in macro-level.

In the process of interest rate liberalization and the rapid development of Internet finance, great changes have taken place in the Chinese money market fund (MMF), the MMF market became more and more concentrated.Based on 2010-2016 years' money market fund data, this paper investigates the impact of money market fund market concentration on the risk taking of money market funds. This paper found that (1) the risk-taking of money market funds and market concentration is negatively related, and the risk-taking has nothing with heterogeneity, but loose monetary policy will lead to the incensement of fund risk-taking. (2) By using the difference-in-difference method, we found that internet-MMF take more risk than traditional MMF. (3)The scale-chasing of fund and the performance championships still make the money market fund taking more risk actively.

Under the China's New Normal Economy, it is crucial that Chinese commercial banks should at present actively promote the transformation and development of banking sector with endogenous power. This paper applies the multi-directional efficiency analysis (MEA) to measure the endogenous efficiency of 114 Chinese commercial banks covering the period over 2004 to 2015, and further analyzes the individual efficiency of each input and output variable. The results show that insufficient non-interest income and excessive non-performing loans are the main sources of banking inefficiency. The city commercial banks have lower efficiency than state-owned commercial banks and joint-stock commercial banks, while city commercial banks have the most potential improvement in non-interest income. This paper also compares traditional directional distance function (DDF) with the MEA approach, and it is found that the result in DDF significantly overestimates bank efficiency, whereas that in MEA is more meaningful.

Using the data set of listed firms from 2006 to 2015 in China, this research examines the impact of Social Security Fund (SSF) on Corporate China's earnings quality. We use financial restatement as a direct measure of bad earnings quality. Overall, we find that being held by SSF is associated with less financial restatements and credit it to increased corporate earnings quality. This effect is more pronounced in state-owned enterprises, firms with weaker corporate governance practice and firms from regions with less developed markets mechanism. After controlling for possible endogeneity issues with a difference-in-differences approach and some placebo tests, the above results still hold robust. We further find that a less occupation of fund and more institutions' site visits are among possible underlying channels through which Social Security Fund affects corporate earnings quality and thus firms' financial restatement. This research has obvious yet important policy implications, which calls for the monitoring from more powerful large minority shareholders, including China's Social Security Fund, to increase the governance standard for China's listed firms.

In recent years, the controlling shareholder's share pledge of listed companies has become very popular in China capital market. The government encourages firms' innovation, and it has become the inevitable choice for China's economic restructuring and upgrading. This study investigates the impact of the controlling shareholder's share pledge on firms' innovation investment. We find that: (1) the controlling shareholder's share pledge has negative impact on firms' innovation investment. This negative relationship is much stronger in the firms of low share proportion of controlling shareholder and firms which CEO and board chair is the same people. (2) Furthermore, only when the ratio of share pledge is high or stock price near “liquidation line” can controlling shareholder's share pledge reduce innovation investment.

There are significant differences among the review of literature on the tax since the tax was taken into corporate governance framework. This paper tries to study the roles of tax from its impacts on corporate product market performance. Based on samples of Chinese A-share listed firms, we find increasing tax avoidance will improve corporate competitive power significantly, one standard deviation increase in corporate income tax avoidance in relation to rivals leads to a 1.9% gain in future market share. In addition, such an impact is concentrated in firms facing tighter financing constraints, while such an impact does not affected by information asymmetry, agency conflict and ownership structure. Finally, the impact of tax avoidance on product market performance can persist. Conclusions of this paper extend current literature and have policy implications.

This paper investigates the impact of “Shanghai – Hong Kong Stock Connect” scheme on idiosyncratic return volatility. We find that the implementation of the scheme could significantly reduce the idiosyncratic return volatility of target stocks with the difference-in-difference (DID) model. Further studies show that the above effect is more pronounced for stocks with “the top ten active trading stocks” and information quality is improved after the scheme. Our study implies that the “Shanghai – Hong Kong Stock Connect” scheme plays an important role in improving capital market stability and contributes to the implementation of “Shenzhen – Hong Kong Stock Connect” scheme.

Sell-side analysts play important roles as the information intermediaries in the capital market. Based on the theories of limited attention and information competition, our study examines whether the effects of attention distraction exist in market reaction to analyst recommendations. We find that the concentrated announcements of analyst recommendations cause investors to under-react to relevant recommendations, while market reaction is measured by both abnormal return and trading volume. In particular, the number of analysts' recommendations on other companies announced on the same day is negatively associated with the immediate market reaction to the announcement of the relevant recommendation, while positively associated with the post-recommendation announcement drift. And our results are robust after considering endogeneity issues. In addition, the distraction effect is stronger on firms that receive positive recommendations, compared with those receiving negative recommendations. Our cross-sectional tests show that the effects are more pronounced for companies with less institutional holders, more within-industry competition and less visibility.