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Three essays in China's financial market
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Zhang, Chang (2021) Three essays in China's financial market. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b3717728
Abstract
This thesis studies several important issues of the fast-developing Chinese financial market. It is comprised of three chapters.
In Chapter 1, we find that China's stock market (the \A share market") has lower correlation with the global market and is less affected by international financial contagions than any other major economies. The inclusion of mainland China stocks into an international portfolio increases its Sharpe Ratio. However, we find that Chinese stocks providing the most diversi- fication benefits also carry the most policy risk for international investors. Holding Chinese stocks listed in Hong Kong does not reap the same diversification benefits. While global market integration and the increase in foreign ownership can diminish diversification benefits, mainland China stocks still provide valuable diversification opportunities for international investors up till most recent time in late 2010s.
Chapter 2 studies the industry contagion effect of financial distress in China. China witnessed a wave of bond defaults in recent years. By exploiting these defaults, I investigates how industry peers of the defaulted firms are affected through industry contagion. I find that while non-SOE peers suffer from decrease in firm value after the defaults, SOE peers' firm value does not change. Consistent with this, SOE peers' debt financing and investment are not affected by the defaults, while non-SOE peers decrease significantly in debt financing (especially bank loans) and investment. The contagion effect is stronger in high competition and high debt dependent industries. Therefore, I find novel evidence of industry contagion of financial distress and shows that state ownership is an important determinant of industry contagion in China.
A new regulation issued in the end of 2013 as part of the anti-corruption campaign in China leads to a wave of resignation of politically connected independent directors (PCID). In Chapter 3, I find that while firms with PCIDs have negative cumulative abnormal return (CAR) around release of the new regulation, they have even larger positive CAR around announcement of PCID resignations, especially for non-SOEs. This is because firms with PCIDs have higher political risk after release of the regulation, but their political risk decreases after PCIDs resign and they are complied with the regulation. I also show that operating performance does not change after PCID resignations, casting doubt on the \helping hand" theory of political connections.
Item Type: | Thesis (PhD) | ||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance J Political Science > JQ Political institutions (Asia, Africa, Australia, Pacific Area, etc.) |
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Library of Congress Subject Headings (LCSH): | Stock exchanges -- China, Default (Finance) -- China, Debt financing (Corporations) -- China, Banks and banking -- Government ownership -- China, Corruption -- China | ||||
Official Date: | April 2021 | ||||
Dates: |
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Institution: | University of Warwick | ||||
Theses Department: | Warwick Business School | ||||
Thesis Type: | PhD | ||||
Publication Status: | Unpublished | ||||
Supervisor(s)/Advisor: | Fidrmuc, Jana P. ; Wang, Sarah Qian | ||||
Format of File: | |||||
Extent: | vii, 139 leaves : illustrations | ||||
Language: | eng |
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