Variable Impact of Renminbi Appreciation on Chinese Industries＇ Profitability

This paper uses the input-output tables from 2007 to estimate the exchangerate risk exposure of all 42 sectors of the Chinese economy. It then demonstrates a new quantitative approach for examining the differential impacts of Renminbi appreciation on the export of finished goods and the import of intermediate inputs in each sector, and estimates the changes in profitability of each sector under different degrees of Renminbi appreciation. The results indicate that appreciation of the Renminbi will increase the profitability of 22 sectors, which are generally monopolistic, capital-intensive, and reliant on R＆D, and reduce the profitability of 20 sectors, which are generally competitive, labor-intensive, and less reliant on R＆D. This suggests that the degree and pace of Renminbi appreciation must be coordinated with industrial and employment policies in order to reduce exchange-rate risk exposure through trade restructuring, to improve economic structure, to promote competition and employment, and to maintain steady and sustainable economic growth.

Profits and losses from changes in fair value,executive cash compensation and managerial power:Evidence from A-share listed companies in China

According to optimal contracting theory, compensation contracts are effective in solving the agency problem between stockholders and managers. Executive compensation is naturally related to firm performance. However, contracts are not always perfect. Managers may exert influence on the formulation and implementation of compensation contracts by means of their managerial power. As fair value has been introduced into the new accounting standards in China, new concerns have arisen over the relationship between profits and losses from changes in fair value(CFV) and levels of executive compensation.In this study, we find that executive compensation is significantly related to CFV. However, this sensitivity is asymmetric in that increases to compensation due to profits from changes in fair value(PCFV) are higher than reductions to compensation due to losses from changes in fair value(LCFV). Furthermore,we find that managerial power determines the strength of this asymmetry.

Changes in firm profitability, heterogeneous investor beliefs, and stock returns

In this study,we show that changes in profitability predict a firm's stock returns and future profitability.We construct three horizon-based profitability changes,including short-,medium-,and long-term changes.We find that the predictive information for short-term changes in profitability is not subsumed by the profitability level in the Chinese stock market.We also find that short-term profitability changes generate an asymmetrical premium across different market states.Furthermore,we find that the beta anomaly is embedded in the premium generated by a short-term change in profitability.In addition,we explore the underlying mechanisms of the profitability premium and propose a heterogeneous investor belief channel to explain the profitability premium.We find that riskbased q-theory also helps explain the profitability premium.Therefore,the profitability premium comes from a mixed source and cannot be entirely explained by a single theory.

The evolution and determinants of Chinese property insurance companies’profitability:A DEA-based perspective

The property insurance industry grows fast in China and it is necessary to further investigate the profitability of the Chinese property insurance industry.This study investigates the evolution and determinants of the profitability of 53 Chinese property insurers during the year 2013-2017.Profitability is measured by profit ratio efficiency by data envelopment analysis(DEA)methodology and a profit ratio change index is applied to compare the performance of these insurers over different periods.Tobit regression models are used to investigate several influencing factors of profitability.The empirical results show the importance of proper arrangement of costs and revenues for an insurer and help to better understand the effect of firm size,age,and product specification on profitability.Some policy implications and suggestions are also proposed.