HKUST Annual Report 2018-19

27 HKUST FINTECH HUB ROADMAP A multidisciplinary fintech research project is seeking to deliver policy recommendations, scholarly contributions, and industrial impact through the creation of a roadmap to transform Hong Kong into a global fintech hub. The study, the first of its kind in Hong Kong, is led by Prof. TAM Kar-Yan. It involves a team of researchers from HKUST and other local universities. The eight major research tasks cover blockchain, cybersecurity, risk preference, robo-advising, artificial intelligence/machine learning, systemic risk, financial innovation policy, and manpower development.Theresearchteam’sexpertiseencompasses finance, information systems, computer science, accounting, and economics. SOCIAL RELATIONSHIPS IN VC FUNDRAISING Prof. Pavel ZHELYAZKOV (Management) studied the role of social connections in the decision-making of institutional investors who invest in venture capital firms. In an article published in Administrative Science Quarterly , he explored competitive concerns and relationship quality in shaping whether venture capital firms connect their syndication partners with institutional investors (also known as limited partners, or LPs). He is now extending his research to service providers, such as lawyers, auditors, and placement agents, and their matching of LPs and venture capital firms. MANDATORY CSR AND FIRM PROFITABLITY Corporate social responsibility (CSR) is now a key business practice, with a growing number of countries mandating sustainability disclosure in recent years. Leveraging China’s 2008 mandate, Prof. HUNG Mingyi (Accounting) and her co-authors were among the first to document the impact of mandatory CSR reporting on firms, finding that companies experienced a decrease in profitability after the mandate. However, cities most impacted by the disclosure mandate also saw a decrease in industrial wastewater and SO2 emission levels. The findings suggested that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders. The study was published in the Journal of Accounting and Economics . NEWS SHOCKS AND EQUITY RETURNS Researchers have studied the connection between the timing of equity cash flows and expected stock returns in recent years, finding a downward slope in the term structure of equity returns. More importantly, the slope varied substantially over time and was significantly negative in the Great Recession of 2007-2009. Prof. LI Kai (Finance) and his co-authors have now proposed a novel production-based asset pricing model that offers a unified explanation of the slope’s features, based on the interplay of learning about exposure to aggregate shocks and the time-varying volatility of news regarding future productivity shocks. The paper appeared in The Review of Financial Studies .