The 2024 China Financial Research Conference (CFRC 2024) was recently held in Beijing, which was jointly organized by Tsinghua University PBC School of Finance (Tsinghua PBCSF) and Tsinghua University National Institute of Financial Research. Participants shared their latest academic research on China’s financial and economic issues. This annual conference was attended by 453 participants in person and nearly 200,000 viewers online.
The CFRC 2024 scene
The CFRC 2024 received 894 paper submissions from around the world. These papers cover China-related topics across a range of key academic and policy areas, including asset pricing, corporate finance, behavioral finance, macro finance, money and monetary policy, venture capital financing, analysts’ forecasts, real estate markets, ESG, household finance, labor finance, fintech, information and financial theory, digital economy, banking and financial vulnerability, investor behavior, financial markets, and fixed income and money markets. After deliberation by the program committee, 72 papers were accepted, representing about 8% of the total. Those accepted were then presented and discussed in 24 sessions during the conference. The committee, comprising 79 renowned domestic and foreign scholars, was chaired by Xuan Tian, Associate Dean and Chair Professor of Finance at Tsinghua PBCSF and Chair of Tsinghua University National Institute of Financial Research, along with Xiaoyan Zhang, Associate Dean and Chair Professor of Finance at Tsinghua PBCSF.
Jie Jiao delivered a speech for the CFRC 2024
Jie Jiao, CFO at Tsinghua University and Dean and Chair Professor of Management at Tsinghua PBCSF, gave a speech. He noted that China’s economy is poised for a new start against the backdrop of rising economic uncertainty and declining economic growth across the world, showing greater potential and stronger resilience while continuing to empower the global economy. Jiao underlined that advancing academic research on China’s financial issues is not only conducive to promoting the finance sector’s high-quality development, but also meaningful for building China into a strong modern country and stabilizing global economy and finance. He emphasized that this conference offered a major opportunity to propel China’s financial reform and development as well as an academic exchange platform. Through intensive discussion, participants at the conference contributed their insights to support China’s building of a modern financial system and push the boundaries of financial innovation.
Shang-Jin Wei delivered a keynote speech
Subsequently, Shang-Jin Wei, N.T. Wang Professor of Chinese Business and Economy and Professor of Finance and Economics at Columbia University’s Graduate School of Business and School of International and Public Affairs, and a former Chief Economist at Asian Development Bank, delivered a keynote speech titled The Cost of Capital Market Distortions to Entrepreneurs: Evidence from IPO Locational Choices, stating capital market distortions could be costly to entrepreneurs who are drivers for job creation and economic growth. This paper finds entrepreneurs face an array of challenges when intending for IPOs, including expropriation risk, capital control, and other market distortions, which significantly affect their investment decisions. From an analysis of IPO locational choices, the research estimates the entrepreneurs of overseas listed Chinese firms are willing to pay a 50-60% haircut in firm value in order to bypass these distortions. The findings show entrepreneurs are willing to bear considerable costs to avoid these distortions in China. Additional independent data confirm the plausibility of this estimate, indicating that in responding to these distortions, entrepreneurs indeed often opt for overseas listings. With a structurally estimated model, the paper infers that the welfare gains for the entrepreneurs from the relevant capital market reforms to be 18%. This means entrepreneurs will be greatly motivated to invest heavily if the capital market conditions are improved, regulations in IPO system are relaxed, and the IPO waiting period is reduced, thus boosting job creation and economic growth. Useful in informing policymakers in their decision-making process, these findings highlight the necessity for capital market reforms and call for governmental measures to reduce barriers and costs facing entrepreneurs in the capital markets, in a bid to promote economic growth and social welfare.
The CFRC 2024 presented four awards—Asset Pricing Best Paper Award, Corporate Finance Best Paper Award, Behavioral Finance Best Paper Award, and China Financial Research Network (CFRN) Young Scholar Best Paper Award. The awards are designed to recognize the academic contributions of outstanding scholars and encourage economic and financial scholars worldwide to delve into topical financial issues in China. Xuan Tian presided over the award ceremony for best papers, extending gratitude to all committee members. In addition, he noted that the CFRC has always been committed to a strict paper review process, making it a top academic event on China-related financial issues.
Granting the Asset Pricing Best Paper Award
The paper Earnings Management and Price Informativeness, co-authored by Zhiguo He, Wenxi Jiang, and Wei Xiong, received the Asset Pricing Best Paper Award. This paper examines how earnings management affects the price informativeness measure in Carpenter, Lu, and Whitelaw (2021), which builds on the cross-sectional correlation between stock valuation and future earnings. It provides an alternative (non-exclusive) interpretation of their finding: in the presence of prevalent earnings management and less sophisticated investors, high-valuation firms could intentionally inflate reported earnings to cater to investors’ expectation. Chinese stocks with high prices tend to have better subsequent earnings but not more payouts to investors. It shows further supportive evidence by measuring earnings management with non-recurring gain and loss (NRGL) and using the 2019-2020 reform on delisting rules as a shock to earnings management.
Granting the Corporate Finance Best Paper Award
The paper Learning by Investing: Entrepreneurial Spillovers from Venture Capital by Josh Lerner, Jinlin Li, and Tong Liu garnered the Corporate Finance Best Paper Award. This paper studies how investing in venture capital (VC) affects the entrepreneurial outcomes of individual limited partners (LPs). Using comprehensive administrative data on entrepreneurial activities and VC fundraising and investments in China, the paper first documents that individual LPs, on average, contribute about 50% of the capital of each fund in which they participate, and over 50% of them are entrepreneurs. It then exploits an identification strategy by comparing the entrepreneurial outcomes of individual LPs in funds that eventually launched with those in funds that failed to launch. The fraction of committed capital from corporate LPs in industries that subsequently encounter poor returns is used as an instrument for funds’ launch failures. The findings show that after investing in a successfully launched VC fund, individual LPs create significantly more ventures than do LPs in funds which failed to launch. These new ventures tend to be high-tech firms and file more patents than do the LPs’ prior ventures. The paper presents evidence consistent with venture investments being a channel through which individual LPs learn.
Granting the Behavioral Finance Best Paper Award
The Behavioral Finance Best Paper Award went to Pengfei Sui and Baolian Wang for their work Social Transmission Bias: Evidence from an Online Investor Platform. Using data from a Twitter-like investor social platform, this paper documents evidence consistent with self-enhancing transmission bias. The findings illustrate that investors are more likely to post about their better-performing stocks. Their followers are more likely to buy the posted stocks than others, and postings’ effect on follow-up purchases is related to postings’ perceived credibility. The performance-postings relationship is stronger among more volatile stocks and the relationship between postings and follow-up purchases is stronger among stocks with higher recent returns, shedding light on the spread of high-variance and extrapolative strategies.
Granting the CFRN Young Scholar Best Paper Award
The paper In Victory or Defeat: Consumption Responses to Wealth Shocks, co-written by Alex Imas, Tse-Chun Lin, Yan Luo, and Xiaohuan Wang, was granted the CFRN Young Scholar Best Paper Award. Using four sets of personal digital payment and mutual fund investment data from a leading fintech platform, this paper observes a robust U-shaped relation between individual investors’ consumption and their financial wealth shocks. Contrary to the prediction of the wealth effect, individuals increase their consumption shortly after experiencing large positive or negative wealth shocks. The unexpected increase in consumption following negative wealth shocks is particularly pronounced when consumption with “hedonic” nature, such as entertainment-related purchases, is examined. The paper shows that this effect, termed “financial retail therapy,” is consistent with a dynamic model of Prospect Theory, and provides further evidence for it in a controlled laboratory experiment.
Xuan Tian, Program Chair, presided over the award ceremony
Xiaoyan Zhang, Program Chair, addressed a speech at reception
China Financial Research Conference (CFRC) was created in 2016 by Tsinghua PBCSF and Tsinghua University National Institute of Financial Research. It is designed to encourage the research and discussion of China-related financial topics by offering a premier, open forum for academics and industry insiders from all over the world. Since its inception eight years ago, this annual conference has raised the global research interest in China’s financial reform and development, presented many seminal papers on China-related financial topics, and accelerated the real-world application of the latest research findings, making it a major international forum on China’s financial issues.
