Associate Professor Yong Huang, a researcher of the Base, has published a collaborative paper titled "Does the truth rest with the minority? Divergent views on nonfinancial firms' financial investments from the private equity market" in  International Review of Financial Analysis

Abstract:

We investigate how the seasoned equity market evaluates nonfinancial firms that recently bought wealth management products (WMPs). Using a sample of Chinese firms, we find that the stock market reacts less positively to private equity placements (PEPs) by firms that recently purchased WMPs (i.e., quasi-deposits) than to those that did not. Further analysis suggests that compared with retail investors, sophisticated (i.e., institutional and high-net-worth) investors pay a higher price for the shares of these WMP-buying firms. After PEPs, we find that the long-term operating performance and firm value of WMP-buying firms are higher than those of non-buying firms. Overall, the findings suggest that: (i) engaging in shadow banking activities (buying WMPs) does not mean a firm is distracted, and (ii) sophisticated investors are less concerned than retail investors about a firm's shadow banking activities.

Key Words: Financialization,Shadow banking,Wealth management products,Private equity placements

Link: https://doi.org/10.1016/j.irfa.2022.102264

Teacher Profile

Yong Huang, Associate Professor of Financial Management, School of Accounting, Zhongnan University of Economics and Law, PhD in Economics, Kyushu University, Japan. His research interest covers empirical corporate finance and behavioral corporate finance. Papers have been published in the Journal of Corporate Finance, International Review of Economics and Finance, International Review of Financial Analysis and Pacific-Basin Finance Journal.  He is an anonymous reviewer of journals such as Journal and Finance Research Letters, International Review of Economics and Finance, International Review of Financial Analysis, and Pacific-Basin Finance