1. The Allocation of Talent and Financial Development, 1897–1936. With Chen Lin, Chicheng Ma, and Yuchen Sun. Management Science，2025
We examine how the supply of talent affected financial development based on an experiment that abruptly changed the allocation of talent in historical China. Under the meritocratic civil examination system, government service was the main employment for the Chinese intellectuals. The abolition of this system in 1905 reduced the status and wealth attached to government service, which led the intellectuals to turn to modern banking as a high-status sector of employment. We find that regions where there were more candidates for the civil examination produced more financial professionals after 1905, which translated to a greater development of modern banking.
2. The Legal Origins of Financial Development: Evidence from the Shanghai Concessions. With Ross Levine, Chen Lin, and Chicheng Ma. The Journal of Finance，2023
The primary challenge to assessing the legal origins view of comparative financial development is identifying exogenous changes in legal systems. We assemble new data on Shanghai's British and French concessions between 1845 and 1936. Two regime changes altered British and French legal jurisdiction over their respective concessions. By examining the changing application of different legal traditions to adjacent neighborhoods within the same city and controlling for military, economic, and political characteristics, we offer new evidence consistent with the legal origins view: the financial development advantage in the British concession widened after Western legal jurisdiction intensified and narrowed after it abated.
3. The Telegraph and Modern Banking Development, 1881–1936. With Chen Lin, Chicheng Ma, and Yuchen Sun. Journal of Financial Economics ，2021
The telegraph was introduced to China in the late 19th century, a time when China also saw the rise of modern banks. Based on this historical context, this paper documents the importance of information technology in banking development. We construct a data set on the distributions of telegraph stations and banks across 287 prefectures between 1881 and 1936. The results show that the telegraph significantly expanded banks’ branch networks in terms of both number and geographic scope. The effect of the telegraph remains robust when we instrument it using proximity to the early military telegraph trunk.
Bonds of Love: Patriotism and the Rise of Modern Banks. With Yuchen Sun and Wanda Wang.
This study examines the role of patriotism in fostering public trust in modern banks when they emerged as a new form of financial institution. In China, the loss of Western financial support during WWI (1914) prompted the Republican government to issue patriotic domestic bonds to address fiscal shortfalls. Modern banks underwrote these bonds and expanded into regions with stronger patriotic sentiment to attract subscriptions. Public trust in these banks was formed as an extension of patriots’ state-building efforts within the framework of social contracts. Historical evidence suggests that patriotism similarly fueled early banking development in other countries.
Misselling in Financial Advice. With Chenhao Wang and Ting Zhang.
Financial advisors often steer clients toward high-commission products, leading to poor advice quality. Yet, uncertain investment returns make it challenging to detect deliberate misselling. Our study leverages Chinese Wealth Management Products (WMPs) with implicit guarantees, enabling clear identification of misselling as recommending objectively suboptimal low-return products. Using transaction data from a large Chinese retail bank, we document pervasive misselling (74%). To capture the role of advisors, we find that performance pressure, peer effects, and promotion prospects drive misselling, while client complaints deter it. Stressed advisors particularly target inexperienced clients and private banking clients, and female advisor-male client dyads.
From Fines to Feathers: Enforcement Stringency, Protectionism, and Biodiversity. With Panyu Li and Luping Yu.
This study underscores the critical role of policy enforcement stringency in biodiversity conservation. Leveraging birdwatching records and the staggered institutional reforms that enhanced the independence of China’s Environmental Protection Bureaus (EPBs) between 2003 and 2019, we find that greater EPB autonomy increased bird species richness by 25–36% and bird abundance by 24–35%. The reforms substantially increased the frequency of environmental penalties, which imposed both direct fines and indirect reputational and financial costs on firms. In response, firms reduced emissions and increased green innovation. Strengthened enforcement had disproportionately large effects on privately owned enterprises (POEs), while state-owned enterprises (SOEs) continued to avoid regulatory scrutiny due to persistent central protectionism. Overall, our findings highlight the substantial ecological costs of weak enforcement arising from incomplete administrative independence.
Fight or Flee? The Role of Firms’ Connected Social Media Outlets. With Zhiqian Jiang, Baixiao Liu and Bohui Zhang.
We examine whether and how firms leverage social media outlets to counteract the impact of negative news coverage in traditional media. Using a sample of Chinese public firms with established connections to social media outlets, we find that the connected outlets actively promote favorable narratives about the firms immediately following unfavorable coverage in traditional media. This effect is more pronounced for firms with stronger incentives to stabilize stock prices or when managers face greater career concerns. Moreover, while traditional media coverage tends to highlight firms’ short-term underperformance, connected social media outlets shift the focus toward their long-term development prospects. Our findings highlight the role of social media in the proactive corporate management of media narratives.
Dissecting Momentum in China. With Xin Liu, Songtao Tan, Peixuan Yuan, and Yun Zhu .
Why is classic momentum absent in China? We document a tug-of-war where stocks that outperform on news days underperform on subsequent non-news days. The back-and-forth in news returns and non-news returns, when aggregated, makes momentum disappear. Our results suggest that news returns are contaminated by excessive price pressures from the temporary attention-driven buying demand of retail investors, while non-news-day-reversals represent mispricing corrections from institutional investors. Such a pattern is not observed in the U.S. stock markets, which are highly institutionalized. Using a textual-based proxy that is insulated from the attention-driven excessive buying demand, we find a strong underreaction to news in China.
Partisan Depositor Responses to a Currency Shock. With Xiangyang Gao, Chen Lin and Vesa Pursiainen.
Depositor responses to a large currency shock vary depending on political views. Triggered by a combination of economic policies and a geopolitical conflict with the U.S., the Turkish lira depreciated 14% against the U.S. dollar on August 10, 2018. Using unique depositor-level micro data from a Turkish bank, we find that households significantly increase their share of deposits held in foreign currency after the currency shock, and the shift to FX is most pronounced in areas with low support for president Erdogan, while people in areas with high support are significantly less likely to move from lira to FX. These shifts to FX persist long after the shock, despite the lira regaining much of its lost value. The change in depositor currency preferences is associated with an increase in foreign-currency lending and increasing currency mismatches on Turkish banks' balance sheets, which translate into differences in bank profitability.
Selected working in progress...
Revolution fund raising.
Ethnic Conflict and the Transformation of Gender Norms.
Jewish diaspora and Shanghai's financial markets, 1930s.
Vietnam War and the Trade War.
Foreign Investment and Cross-country Input-Output Linkages.
Silver flow and trade shock, 1860-1910.
Information asymmetry and Fintech adoption.
Public gallery and Liquidity, 1970s HKSE.