Chinese Market Research Articles

ESG Disclosure, Investor Awareness, and Carbon Risk Pricing: Evidence from the Chinese Market

This article examines the relationship between carbon disclosure, equity returns, and investor awareness in the Chinese A-share market. The study uses firm-disclosed and proprietary vendor-estimated carbon emissions data for A-share listed companies and investigates whether the presentation of carbon risks affects the cross-sectional equity returns of Chinese domestically listed firms. The results indicate that main-board listed companies with higher unscaled carbon emissions tend to earn higher equity returns, even after controlling for factors such as size, book-to-market ratio, momentum, and firm characteristics. Moreover, the observed carbon risk premium associated with carbon-emitting companies decreases as investor awareness improves following the launch of policy agendas promoting carbon neutrality in China. These findings support the research hypothesis that investors seek higher returns for equity investments in carbon-emission-intensive companies to compensate for the higher carbon risks associated with such firms. The study also highlights the importance of carbon disclosure, as companies generally disclose their ESG information when they have improved performance in reducing their carbon emissions.

Quantile volatility connectedness among themes and sectors: Novel evidence from China

Against the backdrop of increasing interest in factor investing, this paper explores volatility connectedness among theme factors and sector indices in the Chinese stock market using the Diebold-Yilmaz approach with quantile factor VAR. Our static analysis reveals significant similarities at extreme quantiles, contrasting with the conditional median. We find that higher connectedness measures at extreme quantiles correspond to improved performance of portfolios based on sectors and themes. Additionally, dynamic analysis indicates a strong link between total connectedness and closely tied risk events in China. Moreover, variations in connectedness between the right and left tails serve as a market-level risk proxy, significantly influencing the performance of both themes and sectors. These findings underscore the importance of understanding volatility connectedness for devising effective investment strategies and enhancing risk management practices in the Chinese stock market.

Volatility-managed portfolios in the Chinese equity market

This paper examines the effectiveness of the volatility-timing strategy in the Chinese equity market. We find that the volatility-managed portfolio (VMP) consistently outperforms its original counterpart. This outperformance is primarily driven by stocks with high arbitrage risks, and is further enhanced when considering the price-limit rule in China. The conditional systematic risks of volatility-managed portfolios are significantly lower during market downturns, serving as a hedge against high volatility. Additionally, the multi-factor portfolio constructed from the individual volatility-managed factors outperforms other multi-factor portfolios, especially during periods of heightened investor sentiment or diminished macroeconomic confidence.

Are pre-opening periods important? Evidence from Chinese market lunch breaks

The Chinese stock market design offers a unique opportunity to examine the impact of pre-open call auctions on price efficiency and price discovery. By comparison, we find that opening prices of morning sessions, as determined by call auctions, are more efficient and informative than prices of the afternoon session, as determined by a continuous auction mechanism. Using corporate announcements to compare the speed of price adjustments in response to overnight information versus lunch break information, we find that prices react much more rapidly to overnight announcements, consistent with pre-open call auctions facilitating price discovery to announcements. Results also suggest that corporate announcements enhance stock liquidity with the effect of overnight announcements on liquidity being stronger than the effects of lunch break announcements. Overall, our evidence highlights the utility of pre-open call auctions.

Impact of controlling shareholders’ equity pledges on firms’ labour investment efficiency

Controlling shareholders in the Chinese capital market are increasingly obtaining pledged loans from financial institutions through equity pledges. This study analyses the relationship between controlling shareholders’ equity pledges and the labour investment efficiency of listed companies using a sample of listed companies from 2009 to 2022. Controlling shareholders’ equity pledges reduce labour investment efficiency by exacerbating capital pressure and refocusing business investment. Furthermore, the inhibitory effect of equity pledges on labour investment efficiency is more pronounced in companies with lower audit quality, lower equity checks and balances and higher degrees of equity pledges.

Green Packaging Material Preferences among Young Chinese Consumers: A Comparative Study of Recycled versus Virgin Papers and Bio-based versus Synthetic Materials

Abstract Increasing the use of recycled paper instead of virgin wood pulp paper and plastic in green packaging has the potential to alleviate the current pressure on wood supplies, reduce the carbon footprint of consumer goods, and improve the sustainable development of the forest industry. Exploring how consumers’ environmental, carbon, and health concerns influence their preferences for different layers of green paper products can provide theoretical guidance for enhancing resource utilization and promoting sustainable development of the forest products market. This study aimed to identify consumer perceptions of green attributes, assess the impact of environmental and carbon concerns on green product preferences, and examine the significance of paper materials in various packaging layers. Utilizing conjoint, factor, and regression analyses, we investigated young Chinese consumers’ green packaging preferences, focusing on their prioritization of packaging types and the choice between recycled and regular paper over fossil-based materials. The results indicate that consumers prefer green attributes in food packaging, such as recycled paper, paper-based substitutes for plastic, and corn fiber substitutes for nylon. However, recycled paper and virgin paper have no significant difference in consumer utility. For different layers, the preference for recycled paper was slightly higher for outer packaging than for inner packaging and packaging in direct contact with food. Cognitive and affective attitudes toward recycled paper material have a positive impact on both recycled paper and paper-based plastic substitutes, while environmental concern directly influences the choice of recycled paper, and carbon concern influences consumer preferences for paper-based plastic substitutes.

Real Earnings Management and ESG Performance in China: The Mediating Role of Corporate Innovations

ABSTRACTThis study addresses whether the positive consequences of corporate innovation can mitigate the negative repercussions of earning management practices on corporate sustainability. Specifically, it investigates the impact of real earning management (REM) practices on corporate environmental, social and governance (ESG) performance. Likewise, it explores the mediating role of corporate innovation inputs and outputs in this relationship. The study uses a sample of the A‐share listed firms in the Chinese stock market from 2011 to 2021. We measure REM activities as a comprehensive index of corporate abnormal cash flows, abnormal production costs and abnormal discretionary expenses. The Chinese firms' ESG performance is based on Huazheng's ESG rating. Corporate innovation is categorised into innovation input (i.e., R&D expenditure) and innovation output (i.e., patent applications). The study finds that REM practices inversely affect corporate ESG performance and its various pillars. Likewise, firms that engage in higher REM practices are less likely to allocate resources to innovation (i.e., lower R&D expenditure) and have a low innovation output (i.e., fewer patent applications). Nevertheless, firms with higher innovation input and/or higher innovation output exhibit higher ESG performance. Finally, the corporate innovation input and output mediate the relationship between REM practices and ESG performance, suggesting that the positive influence of innovation on ESG performance helps to mitigate the negative consequences of earnings management practices. These results underscore the significance of ethical financial practices and innovation‐driven strategies in enhancing corporate ESG performance.

Market Integration of Domestic and International Cotton Prices

Market integration is perceived as a precondition for effective market reform in developing countries. The current study on cointegration analysis was taken up to analyse how different spatially separated cotton markets are inter-connected and impact the price change in one market on other markets. Monthly prices for the period January 2010 to February 2024 from the markets viz., Cotlook-A Index, Chinese spot market, Rajkot in Gujarat, Hinganghat in Maharashtra, Adilabad and Warangal in Telangana were used for the analysis. Augmented Dickey-Fuller (ADF), Johansen's multivariate Cointegration approach, Granger causality test, and Vector Error Correction Model (VECM) were used to test the study the long-run spatial integration. The study confirmed the presence of market cointegration. The pair-wise Granger causality test identified the bidirectional and unidirectional relationship between markets chosen. Cotlook A- Index, China and Adilabad markets affected most of the markets unidirectionally and acted as lead markets. The VECM inferred that China, Rajkot and Hinganghat markets attained equilibrium rapidly in short run. Thus, the cotton markets were highly integrated in India. Thus, Stabilizing the prices in one market would influence the other markets improving competitiveness and market efficiency.

Research on the Application of Chinese GPT based Generative Artificial Intelligence AI in Tourist Consumption

Information technology has brought dramatic breakthrough to the tourism industry. The pre-trained generative transformer AI mata model utilizes intelligent technology to optimize tourism information search, which is the key to travel planning. Although its progress brings surprising experiences, there is still a gap between user expectations and experiences. This project focuses on the Chinese market and examines the experience of tourists using relevant AI models in tourism route planning. It provides reference for enterprises to improve models and optimize services based on AI models, and also provides guidance for tourists to choose and improve the effectiveness of model use.

The return predictability of technological links: evidence from the Chinese STAR Market

ABSTRACT This paper examines the predictive power of technology-linked returns in the Chinese Science and Technology Innovation Market (STAR Market). Using a sample from August 2019 to June 2023, we construct technology-linked returns based on patent portfolio similarities among firms. Our findings indicate that these returns significantly predict future stock returns, with a long-short strategy yielding weekly excess returns between 0.50% and 0.53%. Analysis of trade sizes reveals that institutional investors are more likely to drive this predictability, as the direction of large trades aligns with technology-linked returns. This study explores how technology-peer information affects stock returns in an emerging, technology-intensive market, highlighting the significant role of traders with large capital in leveraging technology-peer information.

The Effect of Product Selection in Live Streaming on Firm Performance: The Roles of Interaction, Scenario, and Brand-Consumer Congruence

ABSTRACT Purpose Live streaming e-commerce is an emerging e-commerce model within the realm of the mobile Internet, based on video-centric social media interaction. However, there is currently a lack of in-depth research on live streaming from a business perspective and the impact of product selection in live streaming on firm performance. To fill these gaps, the current study investigated how brand – consumer congruence moderates the influence of product selection in live streaming on firm performance and how this effect varies across retailers. Methodology/approach The model and hypotheses were tested by applying partial least squares regression to data collected from 302 online retailers in the Chinese live streaming market. Findings Product selection in live streaming had a significant positive impact on firm performance. Brand – consumer congruence in live rooms partially mediated the relationship between product selection and firm performance. Live room scenario matching and live room interaction had significant positive moderating effects on the main effect of product selection in live streaming on firm performance. Research implications The literature has focused on the impact of live streaming on customer purchase behavior. Few studies have explored the value of live streaming from a business-to-business marketing perspective. Our findings offer theoretical insights into the relationship between product selection and firm performance. Originality/value/contribution This is the first study to examine the value of product selection in live streaming. In addition, it reveals how product selection affects firm performance through brand – consumer congruence. Practical implications This study has implications for online retail managers based on the effect of product selection in live streaming on firm performance and the roles of brand – consumer congruence, interaction, and scenario in live streaming of business-to-business marketing.

Effect of consumer brand involvement on brand advocacy: a moderated mediation model

ABSTRACT This study explored the mechanisms and contexts through which consumer brand involvement can influence brand advocacy. A moderated mediation model was empirically tested with a random sample of 387 Chinese consumers in Hong Kong. The results indicated that consumer brand involvement exerts a direct impact on brand advocacy and an indirect influence through a positive interaction between relation motivational orientation and affective brand commitment, and task motivational orientation and normative brand commitment. The findings contribute to the brand advocacy and customer brand engagement literature. This study also makes a theoretical contribution to the involvement – commitment model. Practical implications of the findings are discussed.

Learning A-Share Stock Recommendation from Stock Graph and Historical Price Simultaneously

The Chinese stock market, marked by rapid growth and significant volatility, presents unique challenges for investors and analysts. A-share stocks, traded on the Shanghai and Shenzhen exchanges, are crucial to China’s financial system and offer opportunities for both domestic and international investors. Accurate stock recommendation tools are vital for informed decision making, especially given the ongoing regulatory changes and economic reforms in China. Current stock recommendation methods often fall short, as they typically fail to capture the complex inter-company relationships and rely heavily on financial reports, neglecting the potential of unlabeled data and historical price trends. In response, we propose a novel approach that combines graph-based structures with historical price data to develop self-learned stock embeddings for A-share recommendations. Our method leverages self-supervised learning, bypassing the need for human-generated labels and autonomously uncovering latent relationships and patterns within the data. This dual-input strategy enhances the understanding of market dynamics, leading to more accurate stock predictions. Our contributions include a novel framework for label-free stock recommendations with modeling stock connections and pricing information, and empirical evidence demonstrating the robustness and adaptability of our approach in the volatile Chinese stock market.

Forecasting Maritime and Financial Market Trends: Leveraging CNN-LSTM Models for Sustainable Shipping and China’s Financial Market Integration

With the acceleration of economic globalization, China’s financial market has emerged as a vital force in the global financial system. The Baltic Dry Index (BDI) and China Container Freight Index (CCFI) serve as key indicators of the shipping sector’s health, reflecting their sensitivity to shifts in China’s financial landscape. This study utilizes an innovative CNN-LSTM deep learning model to forecast the BDI and CCFI, using 25,974 daily data points from the Chinese financial market between 5 May 2015 and 30 November 2022. The model achieves high predictive accuracy across diverse samples, frequencies, and structural variations, with an R2 of 97.2%, showcasing its robustness. Beyond its predictive strength, this research underscores the critical role of China’s financial market in advancing sustainable practices within the global shipping industry. By merging advanced analytics with sustainable shipping strategies, the findings offer stakeholders valuable tools for optimizing operations and investments, reducing emissions, and promoting long-term environmental sustainability in both sectors. Additionally, this study enhances the resilience and stability of financial and shipping ecosystems, laying the groundwork for an eco-friendly, efficient, and sustainable global logistics network in the digital era.

A Parallel Monte Carlo Algorithm for the Life Cycle Asset Allocation Problem

Life cycle asset allocation is a crucial aspect of financial planning, especially for pension funds. Traditional methods often face challenges in computational efficiency and applicability to different market conditions. This study aimed to innovatively transplant an algorithm from reinforcement learning that enhances the efficiency and accuracy of life cycle asset allocation. We synergized tabular methods with Monte Carlo simulations to solve the pension problem. This algorithm was designed to correspond states in reinforcement learning to key variables in the pension model: wealth, labor income, consumption level, and proportion of risky assets. Additionally, we used cleaned and modeled survey data from Chinese consumers to validate the model’s optimal decision-making in the Chinese market. Furthermore, we optimized the algorithm using parallel computing to significantly reduce computation time. The proposed algorithm demonstrated superior efficiency compared to the traditional value iteration method. Serial execution of our algorithm took 29.88 min, while parallel execution reduced this to 1.42 min, compared to the 41.15 min required by the value iteration method. These innovations suggest significant potential for improving pension fund management strategies, particularly in the context of the Chinese market.

Generalist CFO and corporate debt finance: evidence from the Chinese market

PurposeThis study examines the relationship between chief financial officer (CFO) general ability and corporate debt financing, using all Chinese listed companies as the sample. It has significant implications for corporate shareholders and investors. Companies aiming to increase the proportion of external capital should prioritise the CFO's general ability. Similarly, investors can consider this a valuable sign before making investment decisions.Design/methodology/approachThis study follows Custódio et al.'s (2013) approach to measuring the CFO general ability index (GAI) in five dimensions, while the D/E ratio is treated as the primary proxy of corporate debt financing. This study investigates the linear relationship between CFO general ability and corporate debt financing by using the ordinary least squares (OLS) regression with controlling year and industry fixed effect simultaneously.FindingsBased on a sample dataset of all listed firms in China from 2008 to 2023, this paper identifies a significant positive correlation between CFOs' general management skills and corporate debt financing. This finding underscores that generalist CFOs prefer debt financing over equity financing. The paper also suggests that corporate innovation could be a potential mechanism through which CFOs' comprehensive management skills influence debt financing.Originality/valueThis study expands upon prior research by establishing a positive correlation between generalist CFOs and debt financing. Previous studies investigating the influence of CFO demographic characteristics have predominantly concentrated on singular dimensions, such as educational background, varied professional experiences and career trajectories, often overlooking the significance of past work experience. Secondly, this paper enriches the financial literature by introducing a novel determinant that substantially impacts debt financing.

Research on the effect of multiple credit ratings from the perspective of financial regulatory systems in Chinese bond market.

This paper, starting from the effects of financial regulatory policies, considers the interaction between Chengxin_Moody and Lianhe_Fitch with the dual rating system and the multi-rating system, constructs a new ordered Logit model, and attempts to explore the impact of the Notice, the dual rating system and the multiple rating system on the probability of Chinese corporate bond defaults, rating upgrades, rating downgrades, and the magnitude of credit rating migrations. This study compares the effectiveness of different rating regulatory systems. Using nine thousand two hundred and sixty-two data of Chinese corporate bonds as the research samples. Empirical analysis and robustness test reveal the following findings: (1) The issuance of the Notice has a significant positive effect on the implementation of both the dual rating system and the multiple rating system, with a greater impact on the implementation of the multiple rating system; (2) The issuance of the Notice, along with the dual rating system and the multiple rating system, can all reduce the probability of corporate bond defaults, with the multiple rating system showing the best preventive effect against corporate bond defaults; (3) The dual rating system is more effective in promoting rating agencies to adjust rating behaviors, accurately correcting corporate bond ratings and effectively alleviating the issue of rating inflation. Competition among rating agencies intensifies rating shopping; (4) Under the dual rating system, rating agencies are more likely to expand the magnitude of credit rating upgrades and downgrades, enhancing the differentiation between high-quality corporate bonds and junk corporate bonds; (5) The selection of rating information from Chengxin_Moody and Lianhe_Fitch can appropriately adjust the degree of flexibility or tightening in response to rating regulatory systems. Chengxin_Moody demonstrates a more sensitive reaction compared to Lianhe_Fitch regarding the rating regulatory systems. This study provides valuable references for the formulation and evaluation of the effectiveness of Chinese corporate bond rating regulatory policies.

Imbalanced Value Perception Enhances Secondhand Luxury Purchase: Evidence From Chinese Consumers

ABSTRACTThe secondhand luxury market has experienced significant growth in the past few years. Unlike the well‐known knowledge on consumers' luxury consumption, the motivations for purchasing secondhand luxury items remain underexplored. To address this gap, the present study examines how and when Chinese consumers' perceived values affect their purchase intention of secondhand luxury products. We propose that the imbalanced luxury value perception is superior to the balanced one in boosting customer purchase. This hypothesis received convergent support from two studies adopting different methodologies. Specifically, Study 1 was a lab experiment that verified that the imbalance value perception, that is, either a salient financial or symbolic value of a secondhand luxury product, can increase consumers' purchase intention. However, when the two values are highlighted, purchase intention decreases instead. Furthermore, Study 2 adopted a questionnaire survey to test the moderating effects of product risks. Specifically, when the level of product quality (fit) risk is high, a financial‐focused (symbolic‐focused) imbalanced value perception is most effective in improving consumers' purchase intention. This study contributes to the literature on luxury value and risk perception and benefits the marketing practice of secondhand luxury.

Forecasting Chinese Stock Market Volatility With Volatilities in Bond Markets

ABSTRACTIn this paper, we investigate whether the bond markets contain important information that can improve the accuracy of stock market volatility forecasts in China. We use realized volatility (RV) implemented by different maturity treasury bond futures contracts to predict the Chinese stock market volatility. Our work is based on the heterogeneous autoregressive (HAR) framework. Empirical results show that the volatility of treasury bond contracts with longer maturities (especially 10 years) has the best effect on predicting the Chinese stock market volatility, both in sample and out of sample. Two machine learning methods, the scaled principal component analysis (SPCA) and the least absolute shrinkage and selection operator (lasso), are also more effective than the HAR benchmark model's prediction. Finally, mean–variance investors can achieve substantial economic gains by allocating their investment portfolios based on volatility forecasts after introducing treasury bond futures volatility.

The Impact of Heterogeneous Market Sentiments on Corporate Risk-Taking and Governance

This research focuses on how market sentiment affects corporate governance in the Chinese market. The sample covers the years from 2014 to 2023. Market sentiment is estimated using a cross-sectional absolute deviation (CSAD) model, and earnings quality is used as an indicator of the consequences of corporate governance. Both mutual fund shareholding and the number of firm visits by mutual fund analysts are verified as effective corporate governance instruments that work well in a regular market but become ineffective when the market sentiment is high. The reason for this is that managers’ expectations change, and they may believe that disclosing good news during high-sentiment market periods significantly increases the share prices and helps them meet their performance requirements. In a high-sentiment market, an incentive contract encourages managers to take on projects with inappropriate risk or even manipulate earnings. One potential solution is to adopt venture capital firms’ high-water mark and clawback clauses to prevent managers from focusing on short-term goals rather than seeking long-term business sustainability.