Revise & Resubmit at Journal of Corporate Finance

FMA 2023, SWFA 2024, AFA (Poster) 2025, AEA (Poster) 2025

We document that culture and cultural perception both influence financial decisions. We examine the impact of clan culture, an important dimension of Chinese culture, on individual lending behavior. Using data from RenRenDai, a leading peer-to-peer lending platform in China, we find that borrowers from regions with higher clan culture are more likely to get loans funded, attract larger bids from lenders, get loans funded faster, are less likely to default, and repay a larger fraction of their loans. These effects are more pronounced when borrowers are riskier, there is greater information asymmetry, and the legal environment is weaker. These results are robust to potential endogeneity concerns and to alternative measures of clan culture. We show that clan culture acts as a substitute for formal institutional mechanisms and participants in the peer-to-peer market use information about clan culture as a proxy for economic factors. Our results suggest that cultural considerations improve the efficiency of financial decisions.

FMA 2024 (semifinalist for the best paper award), SWFA 2025

We show how Chinese mutual fund managers react to superstitious beliefs. There is a widely held belief in China about bad luck during one's "zodiac year," which occurs on a 12-year cycle around a person's birth year. We utilize data from CSMAR database from 2008 to 2019 to study funds' behavior related to superstition. We find that fund managers are more likely to decrease their holdings of "zodiac stocks," non-state-owned enterprises in the zodiac years of their chairperson. Fund managers make greater profits from trading zodiac stocks than from trading other stocks. The impact is more pronounced in firms with less retail investor awareness indicating that fund managers possess an information edge. They foresee markets' negative attitudes towards zodiac stocks and trade before investors react to superstitious beliefs. Fund managers with higher past ability are more likely to sell zodiac stocks.

I show that social connections transmit shocks that influence mutual fund managers' ES voting behavior. I find that fund managers are more likely to vote in favor of ES shareholder proposals when they are more socially connected to counties affected by natural disasters. This effect is not driven by physical proximity, large disasters that attract significant media coverage, or other cross-county channels such as common ownership. Among E proposals, these effects are stronger for the more polluting firms, more highly contested environmental proposals, and funds led by women. Moreover, this influence is also reflected in fund managers' portfolio strategies. Fund managers who are more affected by social ties in one quarter tend to have portfolios with higher ESG scores in the following quarter. Additionally, when ES proposals fail, fund managers who voted in favor and have stronger connections to the affected areas are more likely to reduce their holdings in the company.

We use a large microloan dataset from a leading Peer-to-Peer (P2P) lending platform in China to study the behavior of P2P investors. We find that investors who actively choose loans face a higher probability of loan default and earn a lower return than investors who delegate investment decisions to the platform. We show that overconfidence is a plausible explanation for the behavior of these investors. We provide evidence of investors' learning behavior: investors who experience a loan default are likely to select less risky loans and earn a higher return in the future.

We document that fund managers are more likely to allocate assets to firms managed by executives with whom they share a similar cultural background. We find that this bias is not associated with improved fund performance. We also find that cultural distance is dynamic. As the tenure of the fund manager increases, the cultural distance between them and the companies they hold gradually decreases. Cultural bias is more evident in more informationally opaque firms, and when the fund is led by female fund managers. These findings suggest that cultural bias among fund managers may be due to in-group favoritism.