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Department of Financial and Management Studies (DeFiMS)

Finance in China

Course Code:
151030013
Unit value:
0.5
Year of study:
Year 3 of 3 or Year 4 of 4
Taught in:
Term 2
The objective of this course is to provide necessary knowledge to help students understand fundamental theories of corporate finance; the differences between the Chinese financial system and financial systems in mature market economies; and how these differences explain the observed discrepancies in corporate financing behavior between Chinese firms and firms in mature market economies. The course focuses on features of the Chinese banking sector and Chinese capital markets, including the stock market, the bond market and other informal financing channels. These features are explained in relation to China’s institutional arrangements.

Prerequisites

A prerequisite for this course is Financial Strategy 151030012 in Term 1

Objectives and learning outcomes of the course

At the end of this course students should be able to:

  • Understand why the Chinese finance system is different from other financial systems elsewhere
  • Apply standard corporate finance theories to Chinese firms and explain why Chinese firms may behave differently from firms in mature market economies
  • Obtain updates about the most recent development in Chinese capital markets such as the corporate bond market, private equity, and the shadow banking system in China.

Method of assessment

This course is assessed by 30% written coursework and 70% by one two hour examination

Suggested reading

  • Allen, Franklin & Douglas Gale (2001) Comparing Financial Systems, the MIT press, Chapters1,2, 3.
  • Allen, Franklin, Jun Qian and Meijun Qian (2005) Law, Finance, and Economic Growth in China, Journal of Financial Economics, 7 (1), 57-116.
  • Allen, Franklin, Jun Qian, Chenying Zhang, Mengxin Zhao (2012) China’s Financial System: Opportunities and Challenges, in NBER book “Capitalizing China”, edited by Joseph Fan and Randall Morck, University of Chicago Press.
  • Bo, Hong, Zhongnan Huang, and Changyun Wang (2011) Understanding Seasoned Equity Offerings of Chinese Firms, Journal of Banking and Finance,35(5), 1143-1157.
  • Franklin Allen, Ana Babus, Elena Carletti (2009), Financial Crises: Theory and Evidence, Annual Review of Financial Economics, December 2009.
  • Joseph P. H. Fan, Sheridan Titman, and Garry Twite (2012) An International Comparison of Capital Structure and Debt Maturity Choices. Journal of Financial and Quantitative Analysis 47(1), 23-56.
  • Kim, W., M.S.Weisbach, (2008) Motivations for Public Equity Offers: An International Perspective. Journal of Financial Economics 87, 281-307.
  • Meghana Ayyagari, Asli demirgiic-Kunt, Vojislav Maksimovic (2010) Formal versus Informal Finance: Evidence from China, Review of Financial Studies, 23(8), 3048-3097.
  • Myers, S. and Majluf, N. (1984) Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13 (2), 187-221.
  • Opler, T., Pinkowitz, L., Stultz, R., Williamson, R. (1999) The Determinants and Implications of Corporate Cash Holdings, Journal of Financial Economics, 52, 3-46.
  • Shleifer, A. and R. Vishny (1997) A survey of Corporate Governance, Journal of Finance 52, 737-783.
  • Stiglitz, J.E. and A. Weiss, (1981) Credit rationing in markets with imperfect information. The American Economic Review, 71 (3), 393-410.