Date of Award
Doctor of Philosophy (PhD)
My dissertations aim at understanding the different aspects of the Chinese financial markets. It includes three chapters.
The first chapter studies how firm level political connections affect a firm's decision of going to court and the trial outcomes, using hand-collected data on Chinese listed firms. We found that connected firms have a win rate that is 8.6% higher than unconnected firms have. The higher win rate is most significant in cases with straightforward facts, in provinces where the local legal institutions are weak, and in cases tried in politically-connected firms' home provinces. The empirical evidence is consistent with the hypothesis that the difference in the win rates is caused by judicial bias. We show that trial outcomes have real impacts on firms' stock prices.
In the second chapter, I examine the effectiveness and cost of monetary sterilization in China. The study adapts a 2SLS method to estimate the extent of China's sterilization. It also compares the sterilization cost with the central bank's income from investing foreign exchange reserves. I conclude that the sterilization has been highly effective to date. Moreover, so far the sterilization cost of the central bank can be fully covered by the income from foreign reserve investment.
The third chapter provides a comprehensive review of China's financial system, and explore directions of future development. First, the financial system has been dominated by a large banking sector. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. Third, the most successful part of the financial system is a non-standard sector that consists of alternative financing channels, governance mechanisms, and institutions. Finally, among the policies that will help to sustain stable economic growth in China are those that reduce the likelihood of damaging financial crises, including a banking sector crisis, a real estate or stock market crash, and a "twin crisis" in the currency market and banking sector.
Zhang, Chenying, "Essays on Chinese Financial Market" (2012). Publicly Accessible Penn Dissertations. 597.