Delegation contracts with conventional linear benchmarking cannot motivate institutions to acquire information, which deteriorates price informativeness and increases return volatility. This study investigates performance-based contracts in which the benchmark is a nonlinear (quadratic) function of the benchmark portfolio return. In a unified model incorporating both information acquisition and investment decisions, we show that delegation contracts with the nonlinear benchmark can overcome the weakness of conventional benchmarked contracts. Specifically, they can incentivize information acquisition, enhance price informativeness, lower return volatility, and, when penalty intensity is relatively low, increase institutions' expected utility and reduce fixed delegation costs. The impact of the contract's incentive component on the equilibrium price and price informativeness depends on the average incentive slope. Further analysis finds that delegated investment by informed institutional investors can improve price informativeness. This effect is more pronounced under nonlinear benchmarked contracts than under non-benchmarked or linear benchmarked contracts.

Green technology innovations propel both economic development and environmental sustainability. Exploring the contributing factors to green technology innovations carries important policy implications, but research from the perspective of supply chain relationships has been rare. This paper examines the impact of corporate customer concentration on green technology innovations and explores its influencing mechanisms using the data of Chinese A-share listed companies. The results show that a high customer concentration inhibits the quantity and quality of green technology innovations, a finding that is robust when endogeneity is addressed and when alternative measures and an alternative estimation model are employed. Financing constraints and social responsibility play intermediary roles in the impact of customer concentration on green technology innovations. A high customer concentration tends to increase corporate financing constraints and reduce corporate social responsibility performance, which hinder green technology innovations. The heterogeneity analysis reveals that the inhibitory effect of customer concentration on green technology innovations is less severe in digitally transformed enterprises, mature enterprises, or enterprises with a high level of market power. As this study provides a novel perspective on the contributing factors to corporate green innovations, it offers important policy recommendations.

Stock returns demonstrate different levels of sensitivity to marketwide sentiment fluctuations. Previous studies argue that stock sentiment risk is caused by information opacity and that companies lacking information transparency tend to be young, small, paying no dividend, volatile, and fast growing. However, little direct evidence exists regarding the impact of information transparency on stock sentiment sensitivity/beta. This paper contributes to fill this gap by employing proximate measures of information transparency: quality of accruals and earnings, and accuracy of analyst forecast. Empirical results validate that information transparency indeed helps curb stock sentiment beta. Such an impact is more pronounced during periods of low market sentiment when irrational investors are mostly sidelined. Two mediating factors are identified: noise trading and stable institutional shareholding. Additionally, improving information transparency on corporate governance also constrains stock sentiment sensitivity. Our results are robust to alternative measures and the endogeneity concern.

This study examines the impact of CEO political connection on stock sentiment beta. We theorize that CEO political connection contributes to elevated stock sentiment sensitivity because investors overvalue executives' political connection in a transitioning economy. Panel regression results with data of Chinese listed companies from 2009 to 2019 support our hypotheses. The impact of CEO political connection on stock sentiment risk is more pronounced during high sentiment periods and among non-state-owned enterprises. Investors often ignore politically connected CEOs' deficiency in internal management reflected by low quality internal information, ineffective supervision and control, and high management risk. These deficiencies contribute to higher stock sentiment beta. Noise trading uplifts stock sentiment beta, especially for companies with politically connected CEO. Encouragingly, the national anti-corruption campaign has curbed investors' adulation of political connections. This study warns investors and corporate boards against CEO political connection and calls for a more prudent treatment.

Mutual funds in China that invest heavily in stocks with high sentiment beta deliver poorer performance when standard risk factors and fund characteristics are controlled. However, these funds attract more new investment, which is somewhat puzzling. Funds adopting such a sentiment-catering strategy follow less idiosyncratic strategies and tend to increase risk taking. The impact of fund sentiment beta is more significant in bull markets than in bear markets, and more pronounced for growth and balanced funds than for value funds. Together, the findings suggest that Chinese mutual funds exploit investor sentiment for self-serving purposes.

This study examines the impact of investor attention, measured by internet search volumes, on mutual fund flow and performance. In a sample from China between 2011 and 2017, we find that investor attention, proxied by targeted search in Baidu, positively contributes to contemporaneous mutual fund flow and performance, but fund performance will reverse in the following 6-12 months. Moreover, investor attention bolsters the positive relationship between fund flow and performance. The findings support wider applications of attention data in decision making.

This study provides empirical rationale and guidance for incorporating investor sentiment into mutual fund enterprise information systems. It investigates the effect of fund-specific investor sentiment on fund risk taking and performance. Working on a sample of equity funds in China, our panel regressions reveal that fund risk-taking is negatively related to lagged fund-specific investor sentiment. Investor sentiment is negatively linked to subsequent fund performance, which conforms with the dumb money effect. Encouragingly, there is evidence that mutual fund managers in China possess investing expertise. Fund-specific investor sentiment shows asymmetric impacts. The dumb money effect is primarily driven by positive sentiment.

This study investigates the impact of fund sentiment beta (FSB) in delegated investment, which provides managed funds a novel grasp for formulating investment strategies. In a unified framework, it is shown that fund managers can exploit investors' sentiment with strategic choice of FSB: when investors are optimistic (pessimistic), the catering (contrarian) strategy delights investors, who are thus willing to invest more and pay more to fund managers. Funds with high sentiment sensitivity tend to have elevated volatility, which warns against its excessive usage. These results provide theoretical support to many empirical findings in literature.

This paper investigates how performance-based fee (PBF) contracts affect strategic risk-taking behaviours of fund managers in an asset management tournament. In the perfect equilibrium, managers with better mid-year performance will hold the risky asset with a higher probability in the remaining of the year, compared to managers with poorer mid-year performance. If the volume of the cash flow into the winner fund is contingent on its level of success, the winning fund will take a more aggressive approach. When the PBF contract pays more heed to relative performance against the benchmark, managers are more likely to adopt aggressive strategies.

This study explores the effects of investor optimism bias in a portfolio delegation framework. We show that the optimistic investor increases his portfolio delegation, while the risk-averse manager reduces investment in the risky asset. The investor suffers welfare loss due to lower expected return, but the manager enjoys increased compensation. The investor’s optimism bias aggravates the moral hazard problem.

This paper studies the impact of external monitoring on the behavior in mutual funds. Specifically, we investigate how and why external monitoring can alleviate contracting inefficiency caused by information asymmetry between investors and the manager. It is shown that efficiency loss emerges when investors contract with the manager just relying on her investment return history. The establishment of external monitoring that provides investors more information about the manager's ability can improve contracting efficiency, which converges to first-best as external monitoring strengthens. These results provide strong support for tightening supervision in mutual fund industry.

Fund managers in delegated portfolio management face asymmetries in their compensation contracts and in the fund flows contingent on their funds' performance relative to a benchmark. In this study we investigate the impacts of contract asymmetry and fund flow asymmetry on the risk-taking behavior of open-end funds whose delegation contracts are performance based, and show that their impacts are opposite. When the two asymmetries apply simultaneously, the impact of one on the fund's risk-taking alleviates the impact of the other. Raising the return-sharing ratio cannot make the manager take more risk, but increasing the cash flow volume can. We also show that the tracking-error variance can measure the degree of risk that the fund takes.

In this paper we investigate the issues involved in the deregulation of an electricity market. The paper focuses on efficiency considerations, comparing the gap between the socially efficient outcome and that achievable by a market. We model this problem with two-sided uncertainty: the uncertain market demand and the uncertain cost of production. In each case, we find the social optimum and the equilibrium outcome of the deregulated market. Conditions when deregulated industry cannot generate the socially optimal number of firms are identified. The relationship between market demand, the degree of risk-aversion of private firms, and the equilibrium number of firms is investigated.

This paper studies the incentive effect of linear performance-adjusted contracts in delegated portfolio management under a value-at-risk (VaR) constraint. It is shown that a linear performance-based contract can provide incentives for the portfolio manager to work at acquiring private information under a VaR risk constraint. The expected utility and optimal effort of a risk-averse manager are increasing functions of the return sharing ratio in the contract. However, a risk constraint causes the portfolio manager to reduce effort in gathering private information, suggesting that the VaR constraint increases the moral hazard between the investor and the manager.

In this paper, we consider the issue of entry in telecommunication market. When there exists consumer switching cost, a potential en- trant could offer a new product bundled with an existing product and successfully penetrate the incumbent's market. Unlike previous liter- ature on bundling, this paper focuses on the entrant's tying behavior instead of the incumbent's. We find out that tying is pro-competitive and improves social welfare. In the second part of this paper, the potential entrant could rent the incumbent's facilities and offer a product of lower quality. Through bundling, the entrant compensates consumers of their switching cost. Successful entry results in vertical differentiation of products. The effect on social welfare is ambiguous. Comparison of the two models gives an economic motivation for the regulatory authorities to prefer facility-based entry.