This paper first investigates the impact of social temporal and spatial changes on capital allocation efficiency. Applying the PSM-DID quasi experimental method, this paper finds that the development of modern transportation and information technology can greatly promote the information efficiency of capital market. After constructing a composite home bias index that integrates investors (distinguishing retail investors and institutional investors) and third-party audit and regulatory institutions (including audit institutions, law firms and asset evaluation), we show that home bias plays a significant mediating role in this impact. We further find that this effect varies systematically with firms' disclosure proactiveness, industry-level information barriers, and the level of regional economic development. Our findings remain robust after conducting placebo test and adopting alternative definitions of social temporal and spatial changes.
This study examines the causal effect of air pollution on mutual fund managers' portfolio pumping using a large sample of Chinese mutual funds. We find that higher air pollution significantly increases portfolio pumping. Mechanism test shows that pollution induces short-term opportunistic behavior through elevated portfolio turnover, which facilitates return manipulation. This effect is stronger when peer monitoring is weaker, managerial workload is higher, reputational pressure is lower, and stakeholder attention is limited. Causal identification relies on thermal inversions, the Beijing Olympic Games, and the Qinling-Huai River heating policy. Our findings highlight how environmental conditions shape managerial behavior and financial market outcomes.
Under the right conditions, foreign exchange intervention (FXI) plays an important role in stabilising currencies in emerging markets. Using a panel smooth transition regression model for 20 emerging economies and an instrumented FXI measure to address endogeneity, the paper finds that central banks lean against the wind of currency depreciation and appreciation and respond to deviations from long-run exchange rate targets. The effectiveness of FXI is state-dependent and varies with prevailing macroeconomic conditions, particularly exchange rate volatility and inflation differentials. FXI is not statistically significant in low-volatility regimes but becomes effective in high-volatility regimes, suggesting that intervention has a stronger influence on exchange rates when market pressures are elevated. Similarly, FXI is effective in high-inflation regimes, where it helps counteract inflation-induced depreciation pressures. These findings highlight the need for central banks to tailor the size and timing of FXI to prevailing economic conditions. In high-volatility environments, intervention can play an important stabilising role, while in high-inflation regimes its signalling channel can communicate a credible commitment to currency stability and help anchor market expectations. Central banks should also balance the frequency of interventions, using clustered actions where appropriate to reduce operational costs.
Using data from the China Household Finance Survey (CHFS), we employ a staggered difference-in-differences design to examine the effect of the establishment of inland pilot Free Trade Zones (FTZs) on household income. We find that inland FTZs significantly increase household income through increases in wage income, business income, and property income. The income gains are larger for households engaged in leading industries and their supporting sectors, as well as for those with higher human capital and stronger risk tolerance. In addition, inland FTZs reduce both within-city income inequality and the development gap between inland regions and the economic frontier. These findings provide micro-level evidence on the household welfare effects of institutional opening and offer policy implications for promoting high-standard institutional opening-up and more balanced regional development.
This study investigates the real effects of public information supply on corporate investment by examining whether greater government data openness mitigates the adverse impact of policy uncertainty. Exploiting a quasi-natural experiment based on the staggered adoption of regional data openness policies in China, we document that the public supply of administrative data substantially reduces the sensitivity of corporate investment to policy uncertainty. Anchored in the real options framework, we show that this buffering effect reduces the “option value of waiting”: public release of granular administrative data enables firms to convert vague national uncertainty into more calculable local risk, thereby encouraging earlier investment, particularly for firms with high investment irreversibility. This effect is concentrated among firms with sufficient digital capabilities to process raw data and among non-politically connected firms that previously lacked access to policy-relevant information. Direct evidence from reduced managerial uncertainty and improved market pricing efficiency confirms that government data openness operates through an information provision channel.
