Chao Ma and Shuoxun Zhang*
Journal of Development Economics, 2024 March
AMES 2021, AREUEA International 2021, FMA 2021, CFRC 2022, CICF 2022
We show that house price appreciation elevates financial institutions’ financing costs because it can make households invest more in houses and invest less in or require higher returns on other assets. For identification, we employ the unique feature of wealth management products (WMPs, the largest component of China’s shadow-banking sector) that the issuing markets are local whereas the markets of some products’ underlying assets are national. Stocks, bonds, and deposits do not possess this feature. We find that house price growth raises WMPs’ expected returns offered by banks. Household-level analyses further confirm that house price growth reduces households’ WMP-investment demands.
Shao-Chieh Hsueh, Paresh Narayan, Shuoxun Zhang*
Journal of Financial Research, forthcoming
We evaluate how purchases of wealth management products (WMPs) influence the performance of Chinese
nonfinancial listed companies. Our main finding is that purchasing WMPs enhances firm performance, but the
relation shows an inverted U‐shape: When WMP investment exceeds 62.57% of total assets, its positive effects
diminish and ultimately harm performance. Heterogeneity analysis reveals that the performance gains are concentrated among non‐state‐owned enterprises (non‐SOEs), whereas state‐owned enterprises (SOEs) experience no significant benefits or even negative effects. Furthermore, the positive impact of WMPs is more pronounced in
firms with higher leverage, abundant cash holdings, or lower top‐shareholder concentration.
BANK COMPETITION UNDER DEREGULATION:
EVIDENCE FROM WEALTH MANAGEMENT PRODUCT MARKET
Liming Hou, Shao-Chieh Hsueh, Shuoxun Zhang
IIOC, 2021; CICF, 2021
We investigate banks’ issuance decisions of wealth management products (WMPs), which are both interest-rate deregulation vehicles and shadow deposits without explicit government insurance. Support for an inverted-U shape between market share and WMP issuance is found. In the national market, big banks are reluctant to issue WMPs due to their monopoly power, while very small banks do not have the capacity to issue. Banks that are regulatory constrained or less geographically diversified have higher incentive to issue WMPs. Taking advantage of the differentiated market structures of issuing regions, we can identify banks’ heterogeneous WMP issuance decisions in local markets. Incumbent banks use WMPs to fight off new entering competitors, but their marginal incentive is weaker.
