The Institute is pleased to announce the funding results of IEMS Research Grants 2019. Out of a total of 18 applications, 10 grants valued at more than HKD1.2M altogether were awarded for unique research conducted on a broad range of emerging market related issues.  

IEMS Research Grants 2019

HKUST IEMS Research Grants support high-quality research that provides valuable insights into the challenges facing businesses and governments in emerging markets. The Institute encouraged collaborative proposals among HKUST faculty and with researchers outside HKUST.  Priority is given to collaborative research projects that are oriented around the Institute's focus research themes, as well as proposals that contribute to ongoing Institute’s research initiatives on the topics of Belt and Road and Digital Economy.

Impact of U.S. Unconventional Monetary Policy on Debt Issuances by Emerging Market Firm

Vidhan Goyal, Chair Professor, Department of Finance

The objective is to examine the impact of U.S. unconventional monetary policy on debt issuances by firms in emerging market economies. The idea is to examine the Federal Reserve’s maturity extension program and the incentives that created for U.S. investors to search for high-yielding long-dated bonds issued by emerging market firms. Do firms that depend more on long-term debt issue more US dollar corporate bonds during the MEP implementation period relative to other firms that do not depend on long-term debt? In addition, the project tests if firms rated A- issued relatively more debt compared to firms at other rating categories. Finally, the project will examine real outcomes and will test if U.S. monetary policy alleviated financing constraints for some emerging market firms enabling them to increase investments. [More]

How do firms adjust when trade stops? Labor markets, industrial linkages, and macroeconomic effects

Alminas Zaldokas, Assistant Professor, Department of Finance

In this project, we investigate how firms adjust to sudden and unanticipated negative trade shocks. We explore a unique event when due to political reasons, unrelated to trade, the exporters of an emerging country have lost a major export market. Our rich firm-level data allows us to quantify the adjustment margins. In particular, we investigate how a significant loss in profits has led firms to adjust their employment structure and wages; capital investment; as well as product mark-ups; and the composition of export destination countries. Our project is likely to have major policy implications, suggesting that trade policies have an immediate effect on emerging country’s economy and labor market, and that recent global trends reversing trade integration might have adverse consequences in the export-dependent industries. [More]

Public Support for Climate Policy in China and India

Kim-Pong Tam, Associate Professor, Division of Social Science

We propose to examine public support for climate policies in China and India. Given their population sizes and emission levels, these two countries have important roles to play in the mitigation of climate change. However, we currently know little about how the public in these two countries view climate policies, as the literature on this issue is currently dominated by research in high-income democracies. We will therefore test whether some known individual difference determinants of climate policy support operate similarly among Chinese and Indian citizens. We will also explore to what extent limiting population growth is accepted as a climate policy option, and whether support for climate policies is contingent on reciprocation by other countries. For the governments of China and India to increase their commitment to emission reductions, public support will be desirable, if not indispensable. The proposed investigation will provide useful data in this respect. [More]

The Effect of State-building on the Salience of Ethnicity: Experimental Evidence from Southwest China

Ji Yeon Jean Hong, Assistant Professor, Division of Social Science

A common political economic problem in emerging markets is ethnic cleavages and tensions. Unlike most studies assuming ethnic identities are given, this paper explores how the historical process of nation-building redefines the ethnic boundaries and reweighs ethnic identities. We claim that the nation-building process affects an individual’s ingroup and outgroup trust, cooperative behaviors, and thus economic outcomes by affecting the salience of ethnic identity, as opposed to national identity. Using historical events around natural boundaries of four districts in Lijiang Prefecture in Yunnan, China, we plan to conduct behavioral experiments examining how the nation-building attempts by the Qing Dynasty and by the CCP, along with the ethnic minority autonomy policy, have shaped the salience of indigenous Naxi ethnicity across counties in this region. Our study will provide insights not only for the developmental struggles of ethnic minority areas in China but also to ethnically diverse countries in emerging markets. [More]

Green and Smart or Black and Clumsy ? Examining the role of Chinese investors in ASEAN's sustainable development

Angela Tritto, Dini Sejko and Yujia He, Post-doctoral Fellows of IEMS

Studies on the Belt and Road Initiative and its impact on the sustainable development of host countries lack empirical foundations. This research aims to contribute to the gap in the literature by focusing on Chinese outward investments in energy and smart city solutions development. Our research project is divided in three connected studies that seek to (1) Provide a novel and more balanced examination of the impact of Chinese companies and institutions in the financing and construction of energy-related projects; (2) Analyze the regulatory and legal framework for energy cooperation and the protection of energy investors between China and ASEAN; (3) Examine the way companies negotiate access for developing smart city solutions through a qualitative and policy analysis. The projects will employ a mix of qualitative and quantitative methods, including interviews and proprietary databases. Most of the data has already been collected/assembled, but the researchers plan to conduct follow up interviews, site visits, and enrich current data through triangulation to strengthen the empirical parts of the studies. [More]

Property rights, investments, and financial reporting quality: Evidence from a natural experiment

Allen Huang, Associate Professor, Department of Accounting

In this project, we aim to investigate whether and how an increase in property rights in China affects two constructs of key importance to emerging markets, i.e., investment efficiency and financial reporting quality, through a relaxation of credit constraints. Superior property rights generally lead to an improvement in access to financing. We focus on investment efficiency and financial reporting quality as outcome variables because of their importance for emerging markets. For example, Jun [2003] finds that the high growth in China between 1978 and 2000 could largely be attributed to the increase in investment efficiency of small firms in rural areas. Moreover, Bhattacharya, Daouk, and Welker [2003] show that lower earnings opacity (i.e., higher financial reporting quality) is regarded with a lower cost of equity. Similarly, Bharath, Sunder, and Sunder [2008] provide evidence that firms with higher financial reporting quality are able to access financing from a broader set of lenders and also face less stringent loan contract terms. We position our study at an appropriate intersection of the law, finance, and accounting literatures with a specific emphasis on emerging-market-type firms. Our study identifies property rights as a specific mechanism that drives our results. In summary, we aim to examine the effect of property rights on firms’ investment efficiency and financial reporting quality via the access to financing. In the next section, we outline our main hypotheses. [More]

Voluntary Information Disclosure under Competition: Evidence from Chinese P2P Financial Platforms

Sunny Huang, Assistant Professor, Department of Economics

Voluntary information disclosure by firms can improve market efficiency and welfare. In Chinese P2P lending market, many platforms publish almost all items requested by information agencies, while others disclose much less. We consider a novel setting that firms choose both pricing and the degree of information disclosure under competition. High-type firms have a natural incentive to let investors (consumers) learn their true types. However, doing so may drive away overconfident and naive investors with misperception on other firms' products. Intense competition reduces firms' incentive to disclose information because it becomes easier to lose naive investors. Mandatory disclosure policy is welfare-improving only when regulators can ensure all firms comply. Otherwise, naive investors will be attracted by firms who slip away and shroud their information. [More]

Evaluating the evaluators of political risks in emerging markets: A social network analysis of experts on Chinese politics

Franziska Keller, Assistant Professor, Division of Social Science

In emerging markets, assessing political risks often requires a country expert’s deep knowledge of the country’s elite politics. This project collects opinions of 20 China experts on a monthly basis to produce systematic data and analysis of Chinese political elites, their power and their informal connections, as well as the strength of formal institutions over a period of 12 months. We thus develop a unique, fine-grained dataset of Chinese elites to explore how conflict, instability, or sudden policy changes come about. More importantly, the project surveys the country experts on their sources and interactions with each other. This is thus the first analysis of the experts providing much of our knowledge about elite politics and the associated political risks. Furthermore, by analyzing the possible biases introduced by experts’ interactions, it also develops a general method to aggregate expert assessments in a manner that takes into account their interdependence. [More]

Risk Perception of AI in Indian Construction Industry

Kira Matus, Associate Professor, Division of Social Science, Public Policy and Environment

In emerging economies like India, there is a need for an increase in residential, energy and infrastructure capabilities to support the increase in urbanization, as well as to provide employment for workers across a range of skill levels. In response to growing demands, the construction sector is exploring new possibilities for improving the efficiency of their activities, including adopting cutting edge technologies to ensure faster delivery and a safe working environment. While the development of AI-based technologies for the construction industry is not as advanced as in some areas, it is progressing. However, the impacts of these technologies, positive and negative, remains unknown and their (un)successful deployment will rest on their acceptance by key stakeholders. With the use of AI in the construction industry, there will be a shift of activities from the known space to the unknown space, which may result in the fear of “something bigger yet unknown”, affecting how these technologies are adopted. This research tries to capture risk perception among the construction personnel and the public regarding AI inclusion in the construction sector through a multi-stage process of qualitative and quantitative methods, with the goal of using this data to better understand the potential barriers to the deployment of AI technologies in this key industry. [More]

Material Possessions As Coping Resources Under Income Inequality

Amy Dalton, Associate Professor, Department of Marketing / Anirban Mukhopadhyay, Professor, Department of Marketing

Rising income inequality is taking its toll on the subjective wellbeing (SWB) of consumers across the globe. We propose that income inequality’s damaging effect on SWB can be offset if consumers redirect attention from their accumulated material wealth to their most cherished and favored possessions. We have collected preliminary data in 10 countries that show that favorite possessions function as buffers against income inequality whether income inequality is operationalized as subjective, individual-level perceptions or as objective, country-level differences. To follow-up, we are designing a series of laboratory studies to test competing hypotheses, possible boundary conditions, and the underlying psychological mechanism for this effect. We hypothesize that the reason focusing on favorite possessions protects SWB is because the value of favorite possessions is idiosyncratically-derived and thus incommensurable with the value of other people’s possessions. Thus, the feelings of relative deprivation that arise under high income inequality should subside among consumers who focus on their favorite possessions. This should in turn mitigate the negative effect of income inequality on SWB. We further propose to design a longitudinal intervention that trains consumers to attend to their favorite things, and we will test its benefits after a delay. [More]