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Papers by yanhui zhu

SSRN Electronic Journal, 2007

We extend the Barro (2006) closed-economy model of the equity risk premium in the presence of ext... more We extend the Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events ("disasters") to a two-country world. In this more general setting, both the output risk of rare disasters and the associated risk of a default on Government debt, can be diversi…ed. The extent to which agents in one country can diversify away the risk of extreme events depends on the relative size of the two countries, and critically on the probability of a disaster in one country conditional on a disaster in the other. We show that, using Barro's own calibration in combination with a broad range of plausible values for the additional parameters, the model implies levels of the equity risk premium far lower than those typically observed in the data. We conclude that the model is unlikely to explain the equity risk premium.

SSRN Electronic Journal, 2008

The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extre... more The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events ("disasters") allowed for leverage in the form of risky corporate debt which defaulted only in states when the Government defaulted on its debt. The probability of default was therefore exogenous and independent of the degree of leverage. In this paper, we take the model a step closer reality by assuming that, on the one hand, the Government never defaults, and on the the other hand, that the "corporate sector" in the form of the Lucas tree owner pays its debts in full if and only if its asset value is su¢ cient, which is always the case in non-crisis states. Otherwise, in exceptionally severe crises, it defaults and hands over the whole "…rm"to its creditors. The probability of default by the tree owner is thus endogenous, dependent both on the volume of debt issued (taken as exogenous) and on the uncertain value of output. We show, using data from both Barro (2006) and Barro and Ursua (2008), that the model can generate values of the riskless rate, equity risk premium and credit risk spread broadly consistent with those typically observed in the data.

Research in International Business and Finance, 2017

Ever since the collapse of the Bretton-Woods system, gold has retained its function as an importa... more Ever since the collapse of the Bretton-Woods system, gold has retained its function as an important monetary commodity (Baur and Lucey, 2010), and continues to provide important inflation forecasting information to monetary policy setters (Tkacz, 2007). However, Capie et al. (2005) highlight the instability of gold price dynamics through time, attributing it to unpredictable political attitudes and events. In this paper, we investigate gold price dynamics under different inflation regimes and stock market conditions using UK and US index-linked Treasury bond data. We show that gold lost its role as an inflation hedge after May 1997 in the UK, and after 2003 did not act as an inflation hedge in the US, supporting the argument that gold is an inflation hedge only in periods of high inflation and inflation expectations. Further, we show that gold retained its safe haven status throughout the sample period in both countries, but it did not act as a stock market hedge in the UK except during the 2008-9 global financial crisis. Finally, we conduct an event-study analysis of the impact of QE announcements from four leading central banks on the gold price in US dollars. While the QE announcements of the US Federal Reserve and the European Central Bank exerted a strong and weak influence on gold, respectively, the Bank of England and the Bank of Japan's QE announcements had no discernible impact on the gold price.

Nonlinear Financial Econometrics: Forecasting Models, Computational and Bayesian Models, 2011

Journal of Contemporary Accounting & Economics, 2021

Abstract Against the backdrop of a series of regulations issued by the Chinese Government in an e... more Abstract Against the backdrop of a series of regulations issued by the Chinese Government in an effort to rein in top executives’ compensation in state-owned enterprises, this study investigates whether the exogenous shock resulting from restricting top executives’ pay levels modifies their incentives to conduct socially responsible activities. Our analyses, using a baseline regression and a difference-in-differences (DiD) approach, both reveal that the pay restriction on top executives imposed by the government adversely affects firms’ CSR performance. The results hold after conducting tests to alleviate the concerns about possible self-selection bias and reverse causality between the pay restriction and CSR. In addition, we reveal that the negative effect of the pay restriction on CSR is alleviated in regions with a high level of social capital, suggesting that the social expectation of firms serves as an influential factor in managers’ CSR decisions. Meanwhile, managerial shareholding mitigates the negative effect of the pay restriction on CSR performance because of an alignment of interests between managers and other stakeholders.

Accounting Research Journal, 2018

Purpose This paper aims to examine the relationship between ownership type and the likelihood of ... more Purpose This paper aims to examine the relationship between ownership type and the likelihood of publication of a corporate social responsibility (CSR) report. Design/methodology/approach Drawing on stakeholder salience theory, the probit model is used for a sample of 1,839 Chinese listed firms to study how different types of owners influence firm CSR engagement. Findings The analysis reveals that the Chinese stock exchanges exert a positive influence on the likelihood of a firm producing a CSR report, an effect which is more significant in state-owned enterprises (SOEs). Foreign investors lead to a greater likelihood of publication of a CSR report, though this effect is weaker in SOEs. In contrast, the holdings of state and domestic institutional investors are broadly neutral. Practical implications The study helps corporate managers to recognise how particular types of shareholders will value their efforts regarding CSR activities and disclosure and also assists policymakers in im...

The evidence of the effect of ownership structure on corporate social responsibility (CSR) is rel... more The evidence of the effect of ownership structure on corporate social responsibility (CSR) is relatively sparse especially in the emerging economies. This paper seeks to address this situation to comprehensively examine the link between different types of shareholders and CSR disclosure in the context of China. Our findings reveal that different owners have differential impact on the CSR. The firms controlled by the state are more likely to disclose CSR information and their CSR reports’ quality is better compared with non-SOEs. Interestingly, firms with more shares held by mutual funds, foreign investors or other corporations are significantly better at CSR disclosure. The study also discloses that firm size, profitability, and leverage affect CSR in China. Overall the study contributes to the literature on CSR practices in emerging countries and point to some policy suggestions.

SSRN Electronic Journal, 2007

We extend the Barro (2006) closed-economy model of the equity risk premium in the presence of ext... more We extend the Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events ("disasters") to a two-country world. In this more general setting, both the output risk of rare disasters and the associated risk of a default on Government debt, can be diversi…ed. The extent to which agents in one country can diversify away the risk of extreme events depends on the relative size of the two countries, and critically on the probability of a disaster in one country conditional on a disaster in the other. We show that, using Barro's own calibration in combination with a broad range of plausible values for the additional parameters, the model implies levels of the equity risk premium far lower than those typically observed in the data. We conclude that the model is unlikely to explain the equity risk premium.

SSRN Electronic Journal, 2008

The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extre... more The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events ("disasters") allowed for leverage in the form of risky corporate debt which defaulted only in states when the Government defaulted on its debt. The probability of default was therefore exogenous and independent of the degree of leverage. In this paper, we take the model a step closer reality by assuming that, on the one hand, the Government never defaults, and on the the other hand, that the "corporate sector" in the form of the Lucas tree owner pays its debts in full if and only if its asset value is su¢ cient, which is always the case in non-crisis states. Otherwise, in exceptionally severe crises, it defaults and hands over the whole "…rm"to its creditors. The probability of default by the tree owner is thus endogenous, dependent both on the volume of debt issued (taken as exogenous) and on the uncertain value of output. We show, using data from both Barro (2006) and Barro and Ursua (2008), that the model can generate values of the riskless rate, equity risk premium and credit risk spread broadly consistent with those typically observed in the data.

Research in International Business and Finance, 2017

Ever since the collapse of the Bretton-Woods system, gold has retained its function as an importa... more Ever since the collapse of the Bretton-Woods system, gold has retained its function as an important monetary commodity (Baur and Lucey, 2010), and continues to provide important inflation forecasting information to monetary policy setters (Tkacz, 2007). However, Capie et al. (2005) highlight the instability of gold price dynamics through time, attributing it to unpredictable political attitudes and events. In this paper, we investigate gold price dynamics under different inflation regimes and stock market conditions using UK and US index-linked Treasury bond data. We show that gold lost its role as an inflation hedge after May 1997 in the UK, and after 2003 did not act as an inflation hedge in the US, supporting the argument that gold is an inflation hedge only in periods of high inflation and inflation expectations. Further, we show that gold retained its safe haven status throughout the sample period in both countries, but it did not act as a stock market hedge in the UK except during the 2008-9 global financial crisis. Finally, we conduct an event-study analysis of the impact of QE announcements from four leading central banks on the gold price in US dollars. While the QE announcements of the US Federal Reserve and the European Central Bank exerted a strong and weak influence on gold, respectively, the Bank of England and the Bank of Japan's QE announcements had no discernible impact on the gold price.

Nonlinear Financial Econometrics: Forecasting Models, Computational and Bayesian Models, 2011

Journal of Contemporary Accounting & Economics, 2021

Abstract Against the backdrop of a series of regulations issued by the Chinese Government in an e... more Abstract Against the backdrop of a series of regulations issued by the Chinese Government in an effort to rein in top executives’ compensation in state-owned enterprises, this study investigates whether the exogenous shock resulting from restricting top executives’ pay levels modifies their incentives to conduct socially responsible activities. Our analyses, using a baseline regression and a difference-in-differences (DiD) approach, both reveal that the pay restriction on top executives imposed by the government adversely affects firms’ CSR performance. The results hold after conducting tests to alleviate the concerns about possible self-selection bias and reverse causality between the pay restriction and CSR. In addition, we reveal that the negative effect of the pay restriction on CSR is alleviated in regions with a high level of social capital, suggesting that the social expectation of firms serves as an influential factor in managers’ CSR decisions. Meanwhile, managerial shareholding mitigates the negative effect of the pay restriction on CSR performance because of an alignment of interests between managers and other stakeholders.

Accounting Research Journal, 2018

Purpose This paper aims to examine the relationship between ownership type and the likelihood of ... more Purpose This paper aims to examine the relationship between ownership type and the likelihood of publication of a corporate social responsibility (CSR) report. Design/methodology/approach Drawing on stakeholder salience theory, the probit model is used for a sample of 1,839 Chinese listed firms to study how different types of owners influence firm CSR engagement. Findings The analysis reveals that the Chinese stock exchanges exert a positive influence on the likelihood of a firm producing a CSR report, an effect which is more significant in state-owned enterprises (SOEs). Foreign investors lead to a greater likelihood of publication of a CSR report, though this effect is weaker in SOEs. In contrast, the holdings of state and domestic institutional investors are broadly neutral. Practical implications The study helps corporate managers to recognise how particular types of shareholders will value their efforts regarding CSR activities and disclosure and also assists policymakers in im...

The evidence of the effect of ownership structure on corporate social responsibility (CSR) is rel... more The evidence of the effect of ownership structure on corporate social responsibility (CSR) is relatively sparse especially in the emerging economies. This paper seeks to address this situation to comprehensively examine the link between different types of shareholders and CSR disclosure in the context of China. Our findings reveal that different owners have differential impact on the CSR. The firms controlled by the state are more likely to disclose CSR information and their CSR reports’ quality is better compared with non-SOEs. Interestingly, firms with more shares held by mutual funds, foreign investors or other corporations are significantly better at CSR disclosure. The study also discloses that firm size, profitability, and leverage affect CSR in China. Overall the study contributes to the literature on CSR practices in emerging countries and point to some policy suggestions.