Topic: Job Matching with Subsidy and Taxation   Time&Date:   3:15-4:00 pm, 2019/5/17 (Friday) Venue: Room 619, Teaching A Speaker:  Prof. Ning Yu (Nanjing Audit University) Abstract: In a Kelso-Crawford job matching framework, we consider arbitrary transfers (subsidy and/or taxation) that depend on the sets of doctors that hospitals hire and corresponding salaries. A transfer function preserves the substitutes condition if and only if it is a sum of an additively separable function and a cardinally concave one. This paper explores the consequences of applying these transfer functions.

Dear colleagues and SME and SFI students,   The “SME and SFI Newsletter” May 2019 issue is published today. The newsletter provides an overview of development and changes at SME and SFI in the past two months—major events, key activities, research results, news reports, enrolment and career, new members and student activities. You will also get notices for upcoming events. We welcome you to share the news with your family and friends, and let more people know about us.   Regards, Howard Lam, Director (Marketing and Communications) of School of Management and Economics / Flora Wang, Director of Branding Office, Shenzhen Finance Institute.     Researches and Honors Analysis and Policy Outlook on U.S. Economy in April 2019 Read More Good News | Student of Master of Economics Programme Received Ph.D. Offers from Overseas Universities Read More Good News | Students of Master of Science in Data Science of Class of…

Topic: Multiproduct Firms and the Business Cycle   Time&Date:  10:30-11:45 pm, 2019/5/10 (Friday) Venue: Room 619, Teaching A Speaker:  Dr. Diyue Guo (Xiamen University) Abstract: Multiproduct firms account for a large fraction of economic activity and are actively engaged in changing their product mix. In this paper, I investigate changes in product scope, the number of products that a firm offers, over the business cycle and decompose the impact of such changes on aggregate output. I use the Nielsen Retail Scanner data of U.S. consumer goods purchases for 2007-2014. I find that firm product scope is an important margin of adjustment. The changes at the new margin are procyclical on average and heterogeneous across firms. Such product scope changes affect aggregate consumption and output by changing…

Topic: Transparency of Behavior-Based Pricing   Time&Date:  14:00-15:15 pm, 2019/5/7 (Tuesday) Venue: Room 619, Teaching A Speaker: Dr. Xi Li (City University of Hong Kong) Abstract: Collection and usage of consumers’ purchase history data for behavior-based pricing (BBP) is a prevalent practice for firms and a worldwide concern for consumers. Extant research has examined BBP under the assumption that consumers observe whether firms practice BBP. However, consumers are often unaware of how firms collect and use their data. In addition, advances in information technology have reduced firms’ cost of implementing BBP, which would seem to benefit them. We find that when consumers do not observe whether a firm practices BBP, the cost of implementing BBP has a non-monotone impact on firm profit, consumer…

Topic: Ecosystems of Entrepreneurship: Configurations and Critical Dimensions   Time&Date:  12:00-13:15 pm, 2019/5/6 (Monday) Venue: Room 619, Teaching A Speaker: Prof. Nicholas S. Vonortas (The George Washington University) Abstract: The dominant discourse on Entrepreneurial Ecosystems remains focused on the profile of a handful of successful locations. This has hindered a deeper understanding of the socio-economic mechanisms that shape entrepreneurial activity across different locations and how ecosystems operate in distinct places. Our dual goal in this research is to identify latent hierarchies in the critical dimensions of entrepreneurial ecosystems and to assess whether the configurations of successful ecosystems present dissimilarities. Through fuzzy-set Qualitative Comparative Analysis (fsQCA) we…

Topic: Signaling by Bayesian Persuasion and Price Strategy   Time&Date:  15:00-16:15 pm, 2019/4/26 (Friday) Venue: Room 619, Teaching A Speaker: Prof. Jun Zhang (University of Technology Sydney) Abstract: This paper investigates how a privately informed seller could signal her type through Bayesian persuasion and pricing strategy. We find that it is generally impossible to signal the seller’s type through one channel alone. Furthermore, the outcome that survives the intuitive criterion always exists and is unique. This equilibrium outcome is separating, for which a closed-form solution is provided. The signaling concern forces the high-type seller to disclose inefficiently more information and charge a higher price, resulting in fewer sales and lower profit. Finally, we show that a regulation on minimal quality…

Topic: Dynamic Bank Capital Regulation in Equilibrium   Time&Date:  13:00-14:15 pm, 2019/4/26 (Friday) Venue: Room 619, Teaching A Speaker: Prof. Andrea Gamba (The University of Warwick) Abstract: We study optimal bank regulation in an economy with aggregate uncertainty. Bank liabilities are used as “money” and hence earn lower returns than equity. In laissez faire equilibrium, banks maximize market value, trading off the funding advantage of debt against the risk of costly default. The capital structure is not socially optimal because external costs of distress are not internalized by the banks. The constrained efficient allocation is characterized as the solution to a planner’s problem. Efficient regulation is procyclical, but countercyclical relative to laissez faire. We show that simple leverage constraints can…

Topic: Exit Friction, Firm Selection and Trade Reform   Time&Date:  15:00-16:15 pm, 2019/4/19 (Friday) Venue: Room 619, Teaching A Speaker:  Prof. Jiandong Ju (Tsinghua University) Abstract: This paper highlights the importance of incorporating exit friction, i.e. cost upon firm closure, into the analysis of firm dynamics and trade reform. Selection of firms through entry and exit is crucial for aggregate efficiency and benefits from trade. The exit friction, however, hampers firm selection by preventing unproductive yet large firms from exiting, meanwhile, discouraging small and productive firms out from increasing size. In this paper, we build a dynamic model with heterogeneous firms and exit cost related with firm size in an open economy. Exit cost reduces firm turn rate and weakens the…

Topic: Diversification and Systemic Bank Runs   Time&Date:  13:00-14:15 pm, 2019/4/19 (Friday) Venue: Room 619, Teaching A Speaker:  Prof. Xuewen Liu (Hong Kong University of Science and Technology) Abstract: Diversification through pooling and tranching securities was supposed to mitigate creditor runs in financial institutions by reducing their credit risk, yet many financial institutions holding diversified portfolios experienced creditor runs in the recent financial crisis of 2007-2009. We present a theoretical model to explain this puzzle. In our model, because financial institutions all hold similar (diversified) portfolios, their behavior in the asset market is clustered: they either sell their assets at the same time or collectively do not sell. Such clustering behavior reduces market…

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Topic: Effects of Dominance Transitions on Advice Adherence in Professional Service Conversations   Time&Date:  13:00-14:15 pm, 2019/4/17 (Wednesday) Venue: Room 619, Teaching A Speaker: Prof. Chi Kin (Bennett) Yim (The University of Hong Kong) Abstract: For many professional services, advice adherence is a necessary condition for achieving service success for both customers and service providers. Despite their pivotal roles in value cocreation, typical conversational interactions often lead to low adherence. We propose that enabling a “dominance transition,” from provider dominance in the pre-advice stage to customer dominance in the post-advice stage, enhances advice adherence because it increases customers’ perceived common ground. Furthermore, providers’ consultation focus, customers’ prior knowledge…

Topic: Sourcing Competition under Cost Uncertainty and Information Asymmetry   Time&Date:  15:00-16:15 pm, 2019/4/15 (Monday) Venue: Room 619, Teaching A Speaker: Prof. Xiaole Wu (Fudan University) Abstract: Driven by increasing costs in the traditionally-regarded low-cost manufacturing bases (e.g., China), many firms have started to outsource their production to the regions of even lower costs (e.g., Southeast Asia). However, a new environment may involve higher cost uncertainty and severer information asymmetry. Motivated by these observations, we consider a sourcing game where competing firms choose between a supplier with transparent certain cost (type-C supplier) and a supplier with potentially lower but less transparent, uncertain cost (type-U supplier). We characterize the equilibrium of the…

Topic: Competitive Nonlinear Pricing for Signals   Time&Date:  15:00-16:15 pm, 2019/4/12 (Friday) Venue: Room 619, Teaching A Speaker: Dr. Zhuoran Lu (Fudan University) Abstract: This paper studies nonlinear pricing for horizontally differentiated products that provide signaling value to consumers, who choose how much to purchase as a signal to the receivers. We characterize the optimal symmetric price schedules under different market structures. Under monopoly, when the receivers observe the price schedule, the market is partially covered, and quantity is downward distorted if there is slight horizontal differentiation. As the degree of horizontal differentiation rises, the market coverage rises, and the downward distortion decreases. When the degree is sufficiently high, for a certain level of signaling…

Topic: Matching and Pricing Coordination for Shared Transportation   Time&Date:  15:00-16:15 pm, 2019/4/4 (Thursday) Venue: Room 619, Teaching A Speaker: Dr. Hai Wang (Singapore Management University) Abstract: With the rapid development and popularization of mobile and communication technologies, dynamic ride-sharing platforms, as pioneers in a sharing economy context, provide on-demand shared transportation services and are disruptively changing the transportation industry. First, we study the matching problem for ride-sharing platforms, in which the platforms match passengers and drivers in real time considering multiple objectives such as platform revenue, pick-up distance, and service quality. We develop an efficient online matching policy, provide theoretical performance guarantee, and…

Topic:   Auditing the Auditors and Stock Crashes: International Evidence   Time&Date:    15:00-16:15 pm, 2019/3/29 (Friday) Venue: Room 625, Zhiren Building Speaker: Prof. Qingyuan Li (Wuhan University)   Abstract: We investigate the impact of the initiations of national audit inspection programs on firm-specific stock crash risk in 38 countries. The staggered commencement of the inspection regimes in different countries allows us to identify the effect of audit quality on crash risk. We document a significant decrease (32.39%) in a firm’s crash risk subsequent to the initiations of audit inspections. This effect is stronger for small auditors, and for auditors with limited industry expertise and long tenure. We explore the mechanisms through which audit inspections affect crash…

On Mar 17, 2019, IE Venture Day (Vday) was held at the research institute of The Chinese University of Hong Kong, Shenzhen. It was jointly organized by the School of Management and Economics (SME) of The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen), Center of Innovation, Design, and Entrepreneurship (CIDE) of CUHK-Shenzhen and IE University from Spain. In the Vday, IE University, SME, CIDE and other institutions brought the latest development strategy to the Greater Bay, and shared their insights on the real issues related to Artificial Intelligence (AI). All parties hope to make efforts to advance the AI technology that has a momentous influence on the economy and society. These activities include competition among entrepreneurs, summit forum, keynote speeches and alumnus presentation. In addition, there were also many experts from AI-related industries. There was a live broadcast with more than 500,000 people watching. Tencent media served as the media supporter.…

Topic:   Political Institutions, Leaders’ Career Concerns and FDI Inflows in China   Time&Date:    15:00-16:15 pm, 2019/3/29 (Friday) Venue:   Room 619, Teaching A Speaker: Dr. Danqing Wang (The University of Hong Kong)   Abstract: Political institutions characterized by high political risks deter foreign direct investment (FDI). We argue that career concerns of government leaders—i.e., how the government designs a career ladder to motivate appointed leaders—also creates constraints on their discretion. The career concerns institutionally link FDI attraction to career advancement, becoming a main driver attracting rather than deterring FDI. We test this by examining Chinese city leaders and FDI inflows from 2003 to 2010. Using a difference-in-difference approach, we…

Topic:   From Market Making to Matchmaking: Does Bank Regulation Harm Market Liquidity?   Time&Date:    12:00-13:15 pm, 2019/3/29 (Friday) Venue:   Room 619, Teaching A Speaker: Prof. Haoxiang Zhu (Massachusetts Institute of Technology) Abstract: Post-crisis bank regulations, such as Basel III and the Volcker Rule, raised the market making costs of bank-affiliated dealers. We show that the increase in banks dealers’ balance sheet costs can, somewhat surprisingly, reduce customers’ average transaction costs and increase their overall welfare. In the model, bank dealers both provide market making services to customers and invest in a search technology that matches buyers and sellers (matchmaking). If balance sheet costs are low, bank dealers underinvest in the matchmaking technology to preserve market making…

  Topic:   Premium for Heightened Uncertainty: Solving the FOMC Puzzle   Time&Date:    12:00-13:30 pm, 2019/3/28 (Thursday) Venue:   Room 619, Teaching A Speaker: Dr. Xing Hu (The University of Hong Kong) Abstract: Lucca and Moench (2015) document that prior to the announcement from FOMC meetings, the stock market yields substantial returns without major increase in conventional measures of risk. This presents a "puzzle" to the simple risk-return connection in most (static) asset pricing models. We hypothesis that the arrival of macroeconomic news, with FOMC announcements at the top of the list, brings heightened uncertainty to the market, as investors cautiously await and assess the outcome. While this heightened uncertainty may not be accurately captured by conventional risk…

Topic:   Progressive Taxation, Nominal Wage Rigidity, and Business Cycle Destabilization   Time&Date:    15:00-16:15 pm, 2019/3/26 (Tuesday) Venue:   Room 619, Teaching A Speaker: Prof. Jang-Ting Guo (University of California, Riverside) Abstract: In the context of a prototypical New Keynesian model, this paper examines the theoretical interrelations between two tractable formulations of progressive taxation on labor income versus (i) the equilibrium degree of nominal wage rigidity as well as (ii) the resulting volatilities of hours worked and output in response to a monetary shock. In sharp contrast to the traditional stabilization view, we analytically show that linearly progressive taxation always operates like an automatic destabilizer which leads to higher cyclical fluctuations within the…

Topic:   Flow-induced trades and asset pricing factors   Time&Date:    13:00-14:15 pm, 2019/3/22 (Friday) Venue:   Room 619, Teaching A Speaker: Dr. Yang Song (University of Washington) Abstract: We show that mutual funds’ flow-induced trades significantly influence returns and co- movement among 50 well-known asset pricing “factors.” Mutual fund investors are ignorant about both systematic and idiosyncratic risks when allocating capital among funds. We measure the non-fundamental demand shocks to each factor by aggregating mutual funds’ flow-induced trading of individual stocks underlying the factor. We show that flow-induced demand shifts largely determine factor return dynamics and that the expected (co)variance of flow-induced trades of factors strongly forecasts factor return (co)variance. Our…

Topic: Treatment of Outliers: Firm Heterogeneity in Managerial Incentive and Corporate Innovation   Time&Date:    12:00-13:15 pm, 2019/3/21 (Thursday) Venue:   Room 619, Teaching A Speaker: Dr. Kam-Ming Wan (Hong Kong Polytechnic University) Abstract: Ordinary least squares (OLS) regressions are commonly used to estimate the effects of managerial incentives on corporate innovation.  However, OLS estimates are vulnerable to two data problems. First, managerial incentives data have univariate outliers because some CEOs have exceptionally large equity incentives. Second, corporate innovation data have a discrete spike at zero because many firms never engage in corporate innovation. To handle univariate outliers, extant studies routinely perform data treatments.  Nevertheless, these…

Topic: Mixed Dynamic Factor Models----With Application to Explosive House Prices   Time&Date:    15:00-16:15 pm, 2019/3/15 (Friday) Venue:   Room 619, Teaching A Speaker: Prof. Ye Chen (Capital University of Economics and Business) Abstract: The standard asymptotics for the dynamic factor models are built on the assumption of the common persistency among factors. However, the empirical study of the financial exuberance requires models with the distinct persistent factors. In particular, when observing the prevailed bubble behavior of the asset prices in different markets, such phenomenon may be driven by the explosive factors from the bubble component, by the I(1) factors from the fundamental value component, and by the stationary factors from the economic environment. In this paper, we consider the…

Dear colleagues and SME and SFI students, The “SME and SFI Newsletter” March 2019 issue is published today. The newsletter provides an overview of development and changes at SME and SFI in the past two months—major events, key activities, research results, news reports, enrolment and career, new members and student activities. You will also get notices for upcoming events. We welcome you to share the news with your family and friends, and let more people know about us. Regards, Howard Lam, Director (Marketing and Communications) of School of Management and Economics / Flora Wang, Director of Branding Office, Shenzhen Finance Institute. Researches and Honors Prof. Lawrence J. LIU’s New Book: The China-U.S. Trade War and Future Economic Relations Read More 24 Academic Publications in International Journals in 2018 from Professors of SME and SFI, CUHK-Shenzhen Read More Analysis and Policy Outlook on America’s Economy in January Read More…

Topic: Incentive Design on MOOC: A Field Experiment   Time&Date:    15:00-16:15 pm, 2019/3/8 (Friday) Venue:   Room 619, Teaching A Speaker: Dr. Jie Gong (National University of Singapore) Abstract: In this study, we examine the impact of monetary incentives on learner engagement and learning outcomes in massive open online courses (MOOCs). While MOOCs have innovated education by offering high-quality interactive educational resources to users worldwide, maintaining student learning enthusiasm in these courses is a challenge. To address this issue, we conduct a field experiment in which users are given monetary incentives to engage in online learning. Our results show that those given a monetary incentive are more likely to submit homework and to gain higher grades. The effect largely reflects the…