Fuji Bank and Heller Professor of Finance

Latest Research Highlights

Agency MBS as Safe Assets, 05/2022, with Zhaogang Song.
The convenience premium of agency MBS averages 47 bps, about half of Treasury’s. Via prepayment-driven demand channel, MBS convenience premium depends on mortgage rate negatively, which contrasts with the positive dependence of MBS-repo convenience premium on interest rates implied by the “opportunity cost of money” hypothesis.

What Gets Measured Gets Managed: Investment and the Cost of Capital, 01/2022, with Guanmin Liao and Baolian Wang.
Study the impact of government-led incentive systems by examining a staggered EVA reform in the performance evaluation policy for Chinese SOEs. This EVA policy adopts a one-size-fits-all approach by stipulating a fixed cost of capital, to which SOEs did respond. Provide causal evidence that incentive schemes affect real investment and sheds new light on challenges faced by economic reforms in China.

Share Pledging in China: Funding Listed Firms or Funding Entrepreneurship?, 01/2022, with Bibo Liu and Feifei Zhu.
Challenge the common wisdom that share pledging funds in China circle back to the listed firms: a majority of the largest shareholders (67.3%) use pledging funds outside the listed firms. Connect share pledging and entrepreneurial activities, with an identification strategy based on the launch of the exchange market in 2013 that favors natural person shareholders against that by legal entity shareholders.

An Economic Model of Consensus on Distributed Ledgers, 11/2021, with Hanna Halaburda and Jiasun Li.
Develop economic framework to analyze Byzantine fault tolerance (BFT) problem by assuming that rational non-Byzantine nodes are ambiguity averse (Knightian uncertain) about Byzantine actions, with decisions/inferences are all based on local information.

Intermediation via Credit Chains, 12/2021, with Jian Li.
Build a dynamic model of credit chains where one institution’s asset is another institution’s liability, delivering a new insight on the benefit of intermediation via layers: Credit chains insulate interim negative fundamental shocks and protect the underlying real project from being liquidated in bad times, resulting in a greater borrowing capacity.

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