Jian ZHANG

Jian ZHANG

The University of Hong Kong

Research

Selected Publications:

  1. Liberalizing Home-Based Business (with S. Agarwal, T. Sing and C. Song) Management Science, forthcoming.

    • Abstract Working at home benefits entrepreneurs by lowering fixed costs and allowing them to engage in joint market and household production. We evaluate a large-scale reform in Singapore, the Home Office Scheme, that allowed business creation at one's residential property and study whether home-based entrepreneurship spurs entrepreneurial activities. The difference-in-differences estimate shows that the reform led to a significantly higher level of business creation and that the firms newly created in response to the reform had a higher survival rate. The effect is more pronounced for low-income female individuals and industries with high startup capital, implying that financial constraints and nonpecuniary benefits likely drive the effect. The reform also encourages entrepreneurs to become serial entrepreneurs, and they open a larger business with a similar survival rate for their second firm. Overall, our findings suggest that the program effectively attracted more entry into self-employment without significantly lowering the average quality of the pool.

  2. Investing in Low-Trust Countries: on the Role of Social Trust in the Global Mutual Fund Industry (with Massa, M., C. Wang, and H. Zhang) Journal of Financial and Quantitative Analysis, 57(1), 2022, 240-290.

    • Abstract We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, “trust in the market” and “trust in managers” play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.

  3. Air Pollution, Behavioral Bias, and the Disposition Effect in China (with Li, J., M. Massa,and H. Zhang) Journal of Financial Economics, 142(2), 2021, 641-673.

    • Abstract Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 accounts in 247 cities, we find that air pollution significantly increases investors’ disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissipation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a potential mechanism.

  4. Interest Rate Pass-Through and Consumption Response: The Deposit Channel (with Agarwal, S., S. Chomsisengphet,and Y. Yildirim) Review of Economics and Statistics, 103(5), 2021, 922-938.

    • Abstract This study assesses a new mechanism, the deposit channel, in the transmission of interest rate shock to household consumption using an administrative panel data set of financial transactions for Turkey. Our empirical strategy exploits variation in consumers' adherence to the Islamic laws that forbid earning interest and employs a standard difference-in-difference design. Following an unanticipated announcement of interest rate hike, rate-sensitive consumers significantly reduce their overall spending, and the response persists throughout the post-announcement period. The response of debt payment, disparate exposure to inflation, exchange rate, and the demographic difference can hardly fully account for the documented consumption response heterogeneity.

  5. Good Days, Bad Days: Stock Market Fluctuation and Taxi Tipping Decisions (with Tan W.) Management Science, 67(6), 2021, 3965-3984.

    • Abstract Using taxicab tipping records in New York City (NYC), we develop a novel measure of real-time utility and quantitatively assess the impact of wealth change on the well-being of individuals based on the core tenet of prospect theory. The baseline estimate suggests that a one-standard-deviation increase in the stock market index is associated with a 0.3% increase in the daily average tipping ratio, which translates to an elasticity estimate of 0.3. The impact is short-lived and in line with the wealth effect interpretation. Consistent with loss aversion, we find that the impact is primarily driven by wealth loss rather than gain. We exploit Global Positioning System and timestamp information and design two difference-in-differences tests to establish causal inference. Exploitation of the characteristics of individual stocks suggests that the effect of wealth change on real-time utility is more pronounced in the stocks of firms with large market capitalization. Finally, our aggregate estimate suggests that annual tip revenue in the NYC taxi industry is associated with stock market fluctuations, ranging from −$17.5 million to $12.9 million.

  6. Disguised Corruption: Evidence from Consumer Credit in China (with Agarwal, S., W. Qian, and A. Seru) Journal of Financial Economics, 137(2), 2020, 430-450.

    • Abstract Using a comprehensive sample of credit card data from a leading Chinese bank, we show that government bureaucrats receive 16% higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher likelihood of delinquency and debt forgiveness. Regions associated with greater credit provision to bureaucrats open more branches and receive more deposits from the local government. After staggered corruption crackdowns of provincial-level political officials, the new credit cards originated to bureaucrats in exposed regions do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are similar to those of non-bureaucrats.

  7. Gender Gap in Personal Bankruptcy Risks: Empirical Evidence from Singapore (with Agarwal, S., J. He, and T. Sing) Review of Finance, 22(2), 2018, 813-847.

    • Abstract Gender gap can arise due to various factors—socio-economic, culture, risk attitudes, and macro-economic circumstances. Using a unique dataset that merges motor vehicle events with bankruptcy outcomes and personal data from Singapore, this study finds significant evidence of a gender gap in personal bankruptcy risk. We show that women’s odds of being involved in bankruptcy events are 28% of those of men after controlling for demographic variables, housing type, cultural and spatial fixed effects. Using motor vehicle accidents as an instrument, we confirm that the gender gap in bankruptcy risk is mainly driven by risk-taking behavior. The heterogeneity analyses show that culture also explains part of the difference. Chinese, Indian, and Malay women have differential bankruptcy rates in Singapore.

Book Reviews, Literature Reviews, and Other Publications (selected):

  1. Household Finance (with S. Agarwal and X. Zou) Oxford Research Encyclopedia of Economics and Finance, Oxford University Press, 2022.

  2. “FinTech, Lending and Payment Innovation: A Review (with S. Agarwal) Asia-Pacific Journal of Financial Studies, 49(3), 2020, 347-509.

Selected Working Papers(SSRN):

  1. Tax Policy Transmission and Household Expenditure (with S. Agarwal and P. Ghosh), Rev. & Resub.

  2. Dirty Air and Clean Investments: The impact of pollution information on ESG investment (with R. Fisman, P. Ghosh and A. Sarkar)

  3. When Human Met Algorithm: Evidence from Retail Investor Trading (with P. Ghosh and Y. Li), Rej. & Resub.

  4. Co-Collateral and the Shadow Cost of Margin Constraints (with M. Massa, C. Wang and H. Zhang)

  5. A Tale of Two Zoos: Machine Learning Insights on Retail Investors (with P. Ghosh, H. Lu and H. Zhang)

  6. Does Geopolitical Risk Exposure Lead to Higher Cost of Debt? Evidence from Multinational Companies (with F. Hu, T. Lin and W. Tan)

  7. Financing the Government: Procurement Rules and Bank Lending in an Emerging Market (with S. Agarwal, B. Morais and C. Ruiz)

  8. Does Death Teach Us Wisdom? Evidence from Trading during the COVID-19 Pandemic in India (with P. Ghosh and H. Zhang)