The global talent race is getting increasingly fierce with the development of disruptive technologies such as AI and big data. To remain relevant in the international landscape, we must plug our brain drain and boost our talent supply.

Themed “The Global race for talent where does Hong Kong stand?”, the fourth HKU Business School x HKGCC webinar was successfully held on October 20, 2021 to gauge views from business experts and scholars to fathom new talent strategies amidst an ageing population.

The thought-provoking session was led by Dr. Stephen Ching, Associate Professor in Economics at HKU Business School and Mr. KC Kwok, CEO of the Hong Kong Academy of Finance (AoF), and moderated by Mr. Tony Miller, Chairman of the HKGCC Economic Policy Committee.

The webinar started off with the presentation of Mr. KC Kwok on the current position of Hong Kong in the global talent race. Mr. Kwok posited that Hong Kong is only attractive to corporations and senior managers overseas with its low tax rates and lucrative remuneration packages, but high living costs are deterring mid-level talent from putting down their roots here. He also criticised that there is a mismatch between our talent pool and the market’s demand. While Hong Kong has a huge demand on fintech and green finance, our city is not only unable to supply these talent, but also has way less aggressive talent attraction policies than our neighbours. Therefore, more investments on education and a reform on our talent policy are necessary. At the end of the day, Mr. Kwok believed that the economic clout of a city is limited, and to integrate into a bigger regional block is the key to our future success. He looked forward to seeing more integration between Hong Kong and other GBA cities.

In contrast to Mr. Kwok’s comprehensive review, Dr. Stephen Ching explored the topic of nourishing and retaining talent from another perspective by focusing on the post-secondary education system of Hong Kong. He firstly gave a detailed overview of the structure of the system by highlighting the number of enrolments in different UGC-funded and self-funded programmes. In face of claims that our tertiary education has failed to be responsive to market demand, Dr. Ching maintained that our undergraduate education aims to provide a whole-person training to equip the next generation to be visionary and be adaptive to ever-changing needs, whereas the taught postgraduate education serves the purpose of equipping them with advanced and practical skills to fill the demanding job vacancies. Therefore, he remained optimistic that Hong Kong is not going to lag behind in nourishing talent and embracing economic transformation. However, he recognised the need for the government to double down funding in research and academic programmes as global talent competition intensifies.

The seminar came to an end with a stimulating Q&A session. Using the story of Google’s online auction system, Dr. Ching further elaborated that the value of academic research is pivotal to achieve sustainable economic development. He posited that receiving education is not entirely for job hunting, but also to imagine the future. Mr. Kwok added that more communications with our mainland partners are needed to better synergise and co-cultivate a GBA talent pool. On our side, we must think deeply on how to close the gap between sub-degree programmes and the practical needs of the job market. Mr. Tony Miller concluded that the webinar today had covered a lot of the talent issues in the high-end sectors. He urged us to think more about the shortage of blue-collar workers in Hong Kong and what we can do about it. All speakers agreed and they look forward to engaging in more in-depth discussions and debates among experts and business leaders in the society.

The delight of making new discoveries has kept economics Professor Wing Suen committed to research for decades.

The Henry G. Leong Professor in Economics at the University of Hong Kong’s School of Economics and Finance counts doing research and ‘learning something new every day’ as among the privileges of his job. “It is not just about letting students learn something new; I am also learning new things constantly from reading articles, going to seminars, talking to colleagues, who always have new things to teach me. That made my day.”

Professor Suen is filled with even more gratitude after being elected as one of the 51 fellows of the Econometric Society, an international society for the advancement of economic theory in its relation to statistics and mathematics. He said: “It is great to be in the company of scholars whom you admire. There are a lot of great economists in the Society. I am thankful to all my co-authors who had collaborated with me in my work, without whom it would be impossible for me to gain the honour.”

An expert in microeconomics – a core field of economics that studies human behaviors – he had served as a member of the Minimum Wage Commission and the Competition Commission. But rather than social advocacy, he is more committed to theoretical work, intent on advancing knowledge about diverse human behaviors and their implications for society.

His time is often taken up by poring over literature from his field, thinking through research topics, building mathematical models and writing mathematical equations in order to deduce implications for a topic. “I am more interested in understanding than in changing things,” said Professor Suen.

Most of his research is related to information, an area in which economists have done more pioneering work than other social sciences, according to Professor Suen. The projects he worked on also involve issues affecting the society. One currently underway focuses on the much-reported phenomenon of tutoring, a prominent trend in Asia that has spread to parts of the West. In his view, higher grades received with the help from tutoring does not necessarily reflect students’ true capabilities or capacity to learn.

Putting incentives at the centre of the study, he has explored information related to students’ academic performance, and looked at how the information is used, distorted or manipulated. He calls it ‘signal jamming’ – the fact that many students are receiving tutoring support makes the information about students’ abilities less informative. “Once we understand the incentives, the problems facing the universities and students, we may be able to design better admissions schemes, select better student and save resources,” said Professor Suen.

A preliminary finding of the research shows that despite an increased supply of degree places, the tutoring trend has far from declined. A possible factor could be the brand name effect of universities, Professor Suen said. “That is another subject for research. Nonetheless, you cannot arrive at some conclusive ideas without sitting down to write models and think through all the implications of the problems.”

On minimum wage, he is pleased to see that none of the negative effects raised by opponents to the minimum wage law introduced a decade ago have materialised.  “The positive effects are visible. It has improved the livelihood of the grassroots population.”

He also witnessed the remarkable growth of HKU, his alma mater, alongside the growing influence of its Business School, which he joined as teaching staff in 1989 upon finishing his doctoral studies at the University of Chicago. “When I first joined, there wasn’t much of a research environment,” he recalled. “For the School, it has also grown in size and in the research culture; I can talk a lot about other fields such as strategy, finance, marketing, with other colleagues in the Business School. It is a very fertile and productive environment.”

The School is well-positioned to further expand its influence in Asia and beyond. “We are in a leading position in economics in Asia. That is partly because Hong Kong, as an international city, attracts talent and has a culture of openness and international outlook. HKU is among the most successful universities in Asia with a culture that focuses on international publications, peer review, and communication with the international community of scholars.”

To sustain the success, he notes the importance for Hong Kong to remain an open society with a free flow of information. “It is vital to maintain freedom of expression, freedom of the press and academic freedom.”

He supports a free approach as well with regards to university education, encouraging students to follow their passion in choosing courses. “You have to have some core skills that can guide your thinking but when it comes to electives, it can be a course on Mozart if that is what you like.”

The Zhongguancun (ZGC) Forum was successfully held from September 24 to 28 in Beijing, China. The ZGC Forum is a national platform that facilitates global exchanges and cooperation on high-tech innovation. This glorious mission is bestowed upon by the CPC Central Committee, and the Forum itself is considered to be the embodiment of China’s innovation-driven growth. The 2021 session was co-hosted by the Ministry of Science and Technology of the People’s Republic of China, Chinese Academy of Science, China Association for Science and Technology, and The People’s Government of Beijing Municipality.

Professor Chen Lin, Associate Dean in Research and Knowledge Exchange and Chair of Finance, was invited as a keynote speaker for the parallel forum – Financial Technology Forum, on September 25. Themed “FinTech Governance under the Digital Economy,” renowned scholars, skilled industry experts, and corporate leaders around the globe were invited to share their knowledge and inject new impetus in the development of FinTech. A wide range of topics related to the digitalisation of the financial industry, the challenges and opportunities brought by the development and reform of FinTech, and effective governance over FinTech were discussed.

Other than Professor Chen Lin, distinguished guests such as Professor Michael Spence, Nobel Memorial Prize laureate in Economics, Professor Yang Li, Chairman of the National Institution for Finance & Development, Professor Lei Lu, Deputy Administrator of the State Administration of Foreign Exchange, Professor Wenzhong Fan, Board Director and Secretary of Party Committee of Beijing Financial Holdings Group, and other global business leaders and top scholars were also invited. Attending the forum online, Professor Lin had delivered a keynote speech titled “Food for Thought on the Development of the Technology Credit Market” to share his views on the opportunities and challenges faced by the growing FinTech credit market.

Professor Lin posited that Small and Medium Enterprises (SMEs) are the pivot of every economy, and domestic consumption is therefore the major economic propelling force. However, he observed that traditional financial institutions are unable to fully address the credit needs of SMEs and domestic consumers, and this problem is further exacerbated by the Coronavirus pandemic. FinTech lenders have now become one the major liquidity sources for SMEs and domestic consumers worldwide.

The reason why traditional financial institutions are unable to cover this niche, is because they are hindered by their IT infrastructures. Comparing with other developed countries, Professor Lin observed that the credit coverage rate in China is lagging behind. Traditional financial institutions, such as banks, rely on credit scores and algorithms to conduct credit checking and credit pricing. However, because of low credit coverage rate, Chinese SMEs and domestic consumers in general are having difficulties in submitting “hard information”, such as those quantitative and verifiable information contained in balance sheet data and produced with credit scoring, when applying for loans. That said, to collect and effectively utilise those qualitative and non-verifiable “soft information” is the key to promote financial inclusion. Professor Lin pointed out that there are already academic research proving “soft information” could play a critical role in credit pricing. Therefore, to open up the sharing of credit information can massively benefit both traditional financial institutions and FinTech lenders.

But Professor Lin warned that this could be a double-edged sword. As the abuse of consumer privacy can inflict serious damage to the market, it is important to strike a balance between data sharing and consumer privacy. One of the possible solutions, is to utilise the latest Federal Learning AI technology, which is believed to be capable of mitigating the risks in data management and effectively protecting consumer privacy. In addition, there are also concerns that a new monopoly is on the rise as some observed that FinTech lenders are starting to collaborate with small-scale credit to increase their market share. Some are also worried that tech firms’ monopoly over big data technology and algorithm coding will lead to problems such as high agency costs, system-wide risks, and the deterioration of innovation within the FinTech industry, etc.

While the society has doubts over the FinTech industry, Professor Lin would like to point out that the FinTech sector may contribute a lot in counter cycle measures. For example, as FinTech lenders are believed to have a thorough understanding over the needs of their SMEs clients, if they can keep providing precisive financial services to SMEs during recessions, the FinTech sector could potentially help stabilising national output and unemployment rate. Their potential contribution in Corporate Social Responsibilities could be significant.

Financial inclusion is defined as the availability and equality of opportunities to access financial services, and this concept can only become a reality with the development of FinTech. Could FinTech impact social welfare? Will it reform domestic finance and transform the physical economy? All of these questions are closely related to our nations’ grand strategy of achieving common prosperity. Until this very moment, FinTech is still a nascent concept relying on nutrients from the academia and the private sector to sprout, and the international community can unit and brought forth a new age for mankind.

To seek truth from facts is the nature of Professor Fabrice Lumineau, and to create knowledge for the betterment and progression of the business world is his aspiration as a scholar. In order to pursue new heights in his career, our French savant has officially joined us at May 2021 as a Professor in Management and Strategy.

A serendipity in life: Being a scholar

“Throughout my academic journey, I have been blessed with the opportunity to be inspired by astute scholars and mentors. Under their influence, my passion for research started during my Master years in 2003. I then decided to pursue a PhD to become a scholar,” said Professor Lumineau. He believes that developing an expertise in a specific field and use it to explore new issues for managers and organisation is a very meaningful career. He said, “The idea of passing down new knowledge to the young generation is also very noble.”

Professor Lumineau is a strategic management scholar. He investigates how firms develop a sustainable comparative advantage over their competitors, mitigate risk, and make strategic decisions. Scholars will also co-develop scientific models with practitioners to provide the market with theoretical guidance. Out of the many topics this discipline encompasses, Professor Lumineau is particularly interested in issues of governance. He seeks to understand how organisations develop and adjust their collaboration mechanisms. Equipped with sharp business instincts, Professor Lumineau has contributed a myriad of high quality papers for the academia and has become no stranger to rewards and honours since 2003. He was offered the Conflict Management Division’s Most Influential Article Award by the Academy of Management in 2019; selected as one of the 40 Under 40 Most Outstanding Business School Professors by Poets & Quants in 2017; and won the Best Paper Award in the Journal of Strategic Contracting and Negotiation in 2016.

A bright overview of Blockchain in corporate governance

Over the years, Professor Lumineau has produced a lot of papers covering issues faced by different companies. A recent paper of him, studies how adjustments in formal and informal governance mechanism can save a business alliance against the backdrop of disruption brought by internal re-organisation within the larger, more established partner. However, in 2020 Professor Lumineau had decided to do something new, and look at how disruptive technologies impact governance.

“Blockchain is not just about Bitcoin. It enables business parties to share and keep an identical list of traceable and immutable transaction records. This technology has made market decentralisation possible, and I would like to study more on its impact on governance and management,” said Professor Lumineau.

Other than facilitating business cooperation by providing trading parties with a high degree of transparency, Professor Lumineau also posits that blockchain can facilitate collaboration in a multitude of ways, “For example, a food supply blockchain from Walmart can help identify misinformation in pricing quickly. The TradeLens blockchain led by Maersk and IBM enables nearly real-time data sharing and realises data reconciliation across the network in a decentralized way” said Professor Lumineau. He further adds on that the Blockchain technology has become so advanced, that it can execute organisational routines, “the distributed venture capital fund called The DAO was instantiated on a Blockchain and had neither people in a formal manager role nor a physical address. Investors voted on project proposals by using tokens, and eventually payout to investors were determined and executed based on their votes and the subsequent performance of the projects as measured by the prescribed smart contracts.”

Professor Lumineau suggests that blockchain governance may reduce searching, monitoring, and enforcement costs, but tends to imply relatively higher designing costs. He believes that there are 5Ws and 1H that future scholars could explore in the realm of Blockchain in management studies in the future:

What – To learn more about the nature of Blockchain

Who – To study which party is most benefited with the use of Blockchain

Why – To study the early adoption and diffusion patterns of Blockchain

When – To study the best timing to introduce this technology to a company

Where – To study what encourages some communities to favour or to oppose Blockchain

How – To study how the use of Blockchain influence the performance of collaborations

The dedicated educator

In addition to his research work, Professor Lumineau is also a dedicated teacher. He has received teaching awards almost 30 times throughout his career. He is going to teach in our EMBA-Global Asia programme and other PhD courses at fall; in 2022 spring, he will be teaching strategic management courses in both MBA and Undergraduate level.

Professor Lumineau had once came to HKU as a visiting scholar. He was impressed by the high level research our scholars have produced, and more so by the hardworking attitude of HKU students. He looks forward to teaching soon, and engage in exciting knowledge exchange with the young generation.

The low and simple tax system has been one of the key elements contributing to the success of Hong Kong’s economy as an international financial hub. However, in view of future economic uncertainties and global tax revamp, some have raised concerns over the fiscal outlook of the city.

Themed “The Future of Hong Kong’s Public Finances: Spend Now, Tax Later?”, the third HKU Business School x HKGCC webinar was successfully held on September 20, 2021 to gauge views from business experts and scholars and debate over whether an overhaul is needed in response to the external environment and underlying flaws of our current tax structure. The thought-provoking session was led by Dr. Stephen Chiu, Associate Professor in Economics at HKU Business School and Mr. Andrew Fennell, Lead Analyst for China and Hong Kong at Fitch Ratings, and moderated by Mr. Tong Miller, Chairman of the HKGCC Economic Policy Committee.

The webinar started off with Mr. Fennell’s in-depth analysis on the city’s economic performance and government finances. Despite Hong Kong’s economy was heavily struck by the pandemic, he evaluated that it will rebound this year because of global trade cycle and gradual economic recovery. Furthermore, he highlighted the important role that our fiscal reserves have played as a buffer in minimising the impacts on businesses and citizens. However, he suggested that the pandemic has revealed the fragility of the city’s finances as there was more severe fiscal deterioration when compared to other cities.

Such a view was also shared by Dr. Chiu as he doubts on the fiscal sustainability of the current model, especially with its narrow tax base. He contended that instead of striving to maintain a balanced budget, we should be more forward looking by considering the long-term sustainability, or else we will be facing a structural fiscal deficit in the coming years. Drawing from Singapore’s model in reserves management, he recommended adopting a bold “Borrow-to-Invest” strategy to build a more robust financial portfolio. New institutions and mechanisms could be established to drive a higher rate of return out of the reserves. He further explained that the current investment return of our exchange fund has been declining and is way lower than other sovereign funds. Therefore, his proposition could take advantage of the sizable reserves at hand and reinforce the fiscal strength of the city.

The seminar came to an end with a stimulating Q&A session. There were insightful exchanges on the feasibility of Dr. Chiu’s idea and alternatives in raising fiscal revenue. Both speakers stressed that there will be trade-offs if we are transforming our ways in managing our public finances. Therefore, we look forward to discussions and debates on related topics among experts and business leaders in the society.

Formerly a senior consultant at Oliver Wyman, Dr. Cho later realised that her true passion lies in knowledge creation. After finishing her PhD studies in Yale, our young Korean scholar officially joined us in June 2021 as an Assistant Professor in Management and Strategy.

The conclusion of an international working journey

Equipped with strong business acumen, Dr. Cho received a return offer from the globally renowned management consultancy firm Oliver Wyman after completing an internship there during her undergraduate years. “Our job as a consultant was not just about fathoming grand strategies and delivering well-versed speeches. The truth is, you have to connect with clients and win their hearts. The small human touches make all the differences,” Dr. Cho explained.

Solving managerial problems of numerous multinational corporations based in the Asia-Pacific Region had Dr. Cho realise that pecuniary rewards are not the only factor that motivates workers. The desire to seek truth had encouraged Dr. Cho to pursue an MBA at the Wharton School of the University of Pennsylvania, and subsequently, a PhD in Management in Yale. “During my MBA, I realised that management studies is the field where scholars use scientific methods to understand workplace behaviours. It is something that I didn’t know when majoring in economics, but I am glad that I have found my true interests in life,” Dr. Cho said.

Studying the halo effect on workers

Dr. Cho has conducted a number of studies on the relationship between workers and their careers. A paper that would soon be published in the Academy of Management Journal, studies the relationship between employees’ meaning of work and their career outcomes. Collecting data via a longitudinal study and an online survey on US employees, the research discovers that there are different implications for the three types of orientations held by workers: job orientation (seeing work as a means to a financial end); career orientation (seeing work as a means to attain success and prestige); and calling orientation (seeing work as personally fulfilling and contributing to a better world).

She observes that the workers with a calling orientation oftentimes exhibit positive vibes at work and are willing to go extra miles even on routine tasks. Research shows that these workers are effective in establishing a positive image in the eyes of their supervisors and are seen as being more committed to the organization. Subsequently, they tend to have a better career and receive greater monetary rewards. “But interestingly, even when their performances are not particularly impressive, managers still consider them to be a better employee. As a result, there is a halo effect to be seen more positively at work,” Dr. Cho commented.

However, Dr. Cho admitted that there are limitations on this paper. “Asian companies tend to take it for granted that workers should see work as a calling. Therefore, I am interested to study workplace relationships contextualised in the Asian market. That is one of the reasons I decided to join HKU Business School.”

Impressed by the prowess of HKU alumni

Over the course of her undergraduate years, her consultant career, and throughout her PhD studies, Dr. Cho is no stranger to HKU students and alumni. She commented that they are very intelligent and are equipped with a global mind-set. “In addition, I have always been admiring the high impact level of research conducted by HKU Business School. The colleagues here are also very friendly. Soon after I have come to Hong Kong, the MBA director Dr. Cheng had even helped me with apartment hunting,” she added.

The 14th National Games of China will start today! 5 elite athletes CHAN Ming Tai, YEUNG Man Wai, CHOI Chun Yin Ryan, FAN Linna and CHANG Long Yin from HKU Business School will represent Hong Kong China to compete with our nations’ finest.

May they compete with grace, and be adorned with prizes!

Athletic

• CHAN Ming Tai (BBA (Acc&Fin) 2019)
• YEUNG Man Waic (BBA 2020)

Fencing

• CHOI Chun Yin Ryan (BBA (Acc&Fin) student)
• FAN Linna (BEcon&Fin student)

Canoe

• CHANG Long Yin, Canoe (BEcon&Fin 2019, PGDE student)

Professor Roni Michaely is a well-known academic in the world of finance. Being the former director of the Israel Securities Authority, and the broad member and one of the first investors of Tipranks, a successful Israeli startup, his remarkable achievements have won the respect from our Dean and Faculty management. Professor Micahely leads the creation of the HKU Entrepreneurial and Innovation Hub in Israel which will foster the school’ expansion into the Middle East and Europe.

Driven by sheer curiosity

Although working in academia has a staid public image, for Professor Michaely it is as exciting as working in a start-up because academic research is about breaking new ground – in this case at the frontier of knowledge – and envisioning new ideas for the future. His “frontier” is in the study of how conflicts of interest affect financial decisions. Using diverse methodologies and subjects, he has earned a strong reputation globally and has been receiving academic awards for his output since 1996, including 2020 Review of Finance best paper award, the 2017 Distinguish research award of the Eastern Finance Association, the 2005 Journal of Financial Economics Fama Prize for best paper, The Review of Financial Studies 1999 Barclays Global Investors/Michael Brennan Runner-up Award, and the 1996 Western Finance Association Award for best paper on investments, just to name a few.

A critique on SRI funds

Some of Professor Michaely’s recent research focuses on the role of firms and investment managers in combating climate changes. As problems such as climate change and social inequality are deteriorating in a global scale, some urges companies and investment management firms to take up more social responsibilities such as environmental protection and stakeholder welfare, instead of solely focusing on profit. Against this backdrop, a myriad of socially responsible investment (SRI) funds have emerged in the market. One can think of three strategies taken by these funds. First, they may simply invest in companies with good ESG scores. This is a relatively simple strategy which does not require too much on-going efforts from the funds. Second, in line with their fiduciary responsibilities, the funds may get actively involved in the firms they invest in, and actively change their environmental policies. Third, they may “Greenwash”—that is, they advertise themselves as having ESG as one of their objectives but in fact they do nothing. They do not materially tilt their portfolios towards ESG stocks, nor do they affect firms’ policies towards these goals. A paper by Professor Michaely and three other scholars titled “Does Socially Responsible Investing Change Firm Behavior?” contributes to this debate by examining these three possibilities. That is, it examines whether SRI funds choose firms with good environmental and social conduct or whether they cause their portfolio firms to improve environmental and social conduct. He discovers that these funds choose to invest in firms that already have (relatively) good records.

Across a variety of tests, it finds consistent evidence that SRI funds do select companies with better environmental and social conduct. On average, SRI funds hold firms that pollute significantly less and that invest more in pollution abatements. Furthermore, SRI funds hold firms that have higher employee satisfaction (e.g., better corporate culture, better career opportunities and compensation benefits), and fewer workplace accidents. Finally, firms in SRI funds’ portfolios have greater gender and ethnic diversity on the board of directors. In sum, SRI funds offer their investors a portfolio of firms with higher environmental and social standards.

However, the paper also finds that SRI funds do not improve the environmental or social conduct of their portfolio firms. The researchers find that changes in SRI fund ownership are followed by zero improvements in their portfolio firms’ environmental or social conduct. In additional tests, they further verify that these zero findings are not due to statistical issues, insufficiently long horizon, or fund ownership stake. SRI fund investment reliably has no effect on the conduct of their portfolio firms.

Professor Michaely believes fund managers can do so much more, such as balloting proposals at company annual meetings and lobbying top managers. A few SRIs have been showing how this can be done, such as Engine #1, whose actions encouraged Exxon to change its environmental policies.

SRI funds could also threaten to exit to coerce companies into improving their behaviour. “There are many ways, direct and indirect that fund managers show firms they are serious about changing their environmental and social policies. They can talk about it directly with managers, they can talk about it to the press, they can say they are planning to sell the stocks of a certain company in their portfolio for not acting socially responsible enough.” said Professor Michaely. As many investors care about corporate social responsibility, Professor Michaely hopes that his article can pressure SRI funds to be more active in improving firms’ environmental and social policies.

From Israel with innovation and entrepreneurship

So, with his strong academic and business experience, what attracted Professor Michaely to Hong Kong? The lure of the East, the strategic position of Hong Kong as a bridge between the east and the west, and the rising importance of China as one of the world economic powers, and the proven and impressive academic status of Hong Kong University all played an important role in the decision. HKU was also a natural choice given its academic reputation and longstanding position as an academic gateway to China and the East.

Having Professor Michaely at the HKU Business School is a great benefit to the School, for his academic record, his passion for teaching and for the ability to leverage his expertise and  expand the school presence and reputation internationally. In Asia, we have a centre in Beijing and our centres in Shenzhen and Vietnam in the pipeline. The addition of Professor Michaely, with his private sector experiences in the Israel, with his keen interest in high tech start-ups and firms, and strong network with scholars from Asia, the US, and Europe, opens up possibilities for the School to tap into the Israel, the Middle East, and other parts of the world.

The establishment of The HKU Innovation Hub in Israel to promote innovation and entrepreneurship is an exciting and challenging task that Professor Michaely is totally up for. The main goals of this endeavour are to foster collaboration between entrepreneurs from HK and China and those from Israel (and later on, also Europe), help to further foster the innovation and entrepreneurial spirit in the region, and establish collaborations between HKU scholars those in other parts of the world,

Professor Michaely envisions that the centre will foster intellectual exchanges between Israel and Hong Kong, benefiting students, scholars, entrepreneurs, and business leaders from the two regions. Israel is a start-up nation and the spirit of entrepreneurship is strong among its young people. As professor Michaely summarizes: “This is a truly exciting journey for me. I am looking forward to work with my excellent colleagues at HKU, to meet the students and interact with the business community in Hong Kong and China. I believe the innovation center HKU is establishing in Israel will bring significant benefits to all communities involved and I am very happy to be a part of this.”

Since the collapse of the Bretton Woods System in the 1970s, the international foreign exchange rate (FX) system has entered an era of floating rates, making FX volatility one of the major international trading risks. With the acceleration of globalisation and expansion of the global supply chains since the 1990s, FX risk has also become increasingly significant to the investment, trading, and financing activities of multinational firms (MNCs).

Realising that there is a lack of empirical research studying the real effects of FX risks on corporate investments, Dr. Zigan Wang, Assistant Professor in Finance from HKU Business School had partnered with Professor Mark P. Tylor from the Olin School of Business, Washington University in St. Louis and Dr. Qi Xu from the School of Economics and Academy of Financial Research, Zhejiang University, to research on the capital expenditure data of 4082 MNCs from 44 countries between 1987-2017.

Contextualising their research on FX risks events including the shift from fixed to floating FX of a particular economy, and the downgrades of sovereign debts, the team discovers that FX risk does negatively and significantly affect the capital expenditure of MNCs. As one standard deviation increase in FX risk is followed by a 2.9% decline in the ratio of capital expenditure to the beginning-of-year total assets. The negative relationship is also stronger for MNCs that are operating in countries with a higher level of economic openness (economies that are more engaged in international trades), but the risk they face can be hedged with the actively use of currency derivatives.

Dr. Wang explains that there are two non-mutually exclusive rationales behind the negative relationship between FX risks and corporate investments. As MNCs are rational actors, when there is evidence that FX volatility is increasing, they will realise that the real option value of deferring or partially deferring their investments is higher than the opportunity cost of continuing their investments.

Against this backdrop, MNCs will also increase their precautionary savings to sustain their day-to-day business operations. one standard deviation increase of FX risk is associated with a 1.6% increase in their cash holdings ratio. This behaviour is more significant among MNCs that are more financial constrained. Another interesting finding is that over long-term horizons, FX risk on investments only appears in the single next year, followed by a partial reversal in the second year, and the effect disappears after the third year.

This research is one of the first papers that explore the potential impacts of FX risks on the investment behaviours of MNCs. Moreover, the increasing likelihood of RMB internationalisation, and the development and implementation of central bank digital currencies around the world, are unneglectable factors that could potentially cause huge FX volatility issues in the future. That said, the findings of this paper will remain relevant for years to come.

Dr. Dunhong Jin is a theoretical financial economist, specializing in security design and asset management fields. After graduating from Oxford University, Dr. Jin decided to come to Hong Kong in August 2020 and become an Assistant Professor in Finance.

To become the better version of oneself – Dr. Dunhong Jin

Dr. Dunhong Jin is a theoretical financial economist, specializing in security design and asset management fields. After graduating from Oxford University, Dr. Jin decided to come to Hong Kong in August 2020 and become an Assistant Professor in Finance.

On the grand path to achieve self-actualisation

In retrospect, Dr. Jin believes that her doctoral studies in Oxford was a life-changing experience. The serendipity to share experience and camaraderie with insightful mentors and comrades has rendered Dr. Jin to become a humble yet erudite scholar, guiding young people through education.

Dr. Jin comments that humans spend a lifetime in search of meaning and only a few have ever succeeded. “But referring from what the late novelist W. Somerset Maugham said in The Razor’s Edge: ‘When a man becomes pure and perfect the influence of his character spreads so that they who seek truth are naturally drawn to him. It may be that if I lead the life I’ve planned for myself it may affect others; the effect may be no greater than the ripple caused by a stone thrown in a pond, but one ripple causes another, and that one a third; it’s just possible that a few people will see that my way of life offers happiness and peace, and that they in their turn will teach what they have learnt to others’,” she said. She believes that this subtle influence on the youth would be meaningful, and she enjoys the tranquillity and freedom offered by an academic life.

Dr. Jin told us that teaching postgraduate and undergraduate level students are intrinsically different. As she will be teaching postgraduate students after joining us, Dr. Jin aims to broaden their horizons and help them to establish higher goals, so as to hone their business acumen in making better judgment. With regards to this, Dr. Jin has two recommendations to give. First, try to sponge up as much knowledge as possible in your undergraduate years and explore all feasible directions. You will find how romantic and serendipitous it is. Second, as finance is an applied discipline, you will inevitably feel impetuous in job hunting. She reminds students to balance their expectations in monetary rewards and aspirations, instead of recklessly venturing into a traditional career track with mundane repetitive work. As only when you have a thorough understanding over the market, you can make informed decisions while pursuing your goals.

Financial studies: a subject with endless possibilities

As a scholar specialised in theoretical models, Dr. Jin sees the beauty of theories in its power to map out a coherent and consistent framework for multiple empirical relationships, and how these individual effects relate to each other. Although she started off as a mathematician, she is deeply attracted by the rich potential and abundant agenda that the area of finance can offer.

Besides theoretical attempt, Dr. Jin also looks into the liquidity management of open-end funds and how that averts financial fragility during stress periods, utilizing unique and confidential data from Financial Conduct Authority in the UK. The paper is published in the renowned Review of Financial Studies.

Corporate bond mutual funds are associated with significant liquidity mismatch problem, and thus suffer high run risks amidst macroeconomic shocks. Against this backdrop, the swing pricing mechanism, which adjusts fund price so as to pass on the liquidation cost to the redeeming investors, is introduced by regulators to attempt to alleviate this phenomenon. Counting on end-investor level data, the paper shows that the new pricing mechanism eliminates the first-mover advantage and helps funds retain their investor capital during stress periods.

Enticed by the culture of Hong Kong

Dr. Jin loves art, literature, classical music, and history. Hence to her, Hong Kong is not only the jackpot for financial research, the city’s unique historical background and diverse culture have strongly resonated to her soul. “As my hobbies are deeply rooted in both traditional Chinese culture and Western art, Hong Kong as the bridge between the East and the West is really fascinating,” she said.

The collision between the charisma of HKU and the young vibrant nature of its Business School has radiated an irresistible aura. “I am impressed by the innovative and integrated research conducted by the group, and more so by the noble character of its scholars,” she added.