Tse-Chun Lin
Prof. Tse-Chun LIN
Area Head of Finance

3910 2157

KK 1003

Academic & Professional Qualification
  • Ph.D., University of Amsterdam
  • M.Phil., Tinbergen Institute
  • M.B.A., National Chengchi University
  • B.A., National Taiwan University

Professor Tse-Chun LIN received his Bachelor degree in Economics from National Taiwan University and MBA degree from National Chengchi University. He graduated with an M.Phil. in Economics from Tinbergen Institute in 2006. In 2009, he graduated from the Ph.D. program at the University of Amsterdam and joined The University of Hong Kong as Assistant Professor at HKU Business School. He was promoted to Associate Professor with tenure in 2015 and Professor in 2018.

Professor Tse-Chun LIN has been publishing his research in leading academic journals such as American Economic Review, Journal of Financial Economics, Review of Financial Studies, Journal of Accounting and Economics, Management Science, Journal of Financial and Quantitative Analysis, Review of Finance, etc. His research has also been featured in The EconomistWSJBloomberg, and Investopedia, etc.

Research Interest
  • Behavioral Finance
  • Empirical Asset Pricing
  • Financial Market
Selected Publications
Recent Publications
Local information advantage and stock returns: Evidence from social media

We examine the information asymmetry between local and nonlocal investors with a large dataset of stock message board postings. We document that abnormal relative postings of a firm, that is, unusual changes in the volume of postings from local versus nonlocal investors, capture locals' information advantage. This measure positively predicts firms' short-term stock returns as well as those of peer firms in the same city. Sentiment analysis shows that posting activities primarily reflect good news, potentially due to social transmission bias and short-sales constraints. We identify the information driving return predictability through content-based analysis. Abnormal relative postings also lead analysts' forecast revisions. Overall, investors' interactions on social media contain valuable geography-based private information. Supporting Information

The Violent Ripple Effects of Stock Market Losses

[This article discusses domestic violence. If you or someone you know is experiencing domestic violence, you are not to blame, what is happening is not your fault. There are numerous resources and refuges available to you. They are listed at the end of this article.]

The Disutility of Stock Market Losses: Evidence From Domestic Violence

Stock returns during the week are negatively associated with the reported incidence of domestic violence during the weekend. This relationship is primarily driven by negative returns. The incidence of domestic violence increases with the magnitude of losses, and the effect increases with local stock market participation. Our findings suggest that negative wealth shocks caused by stock market crashes can affect stress levels within intimate relationships, escalate arguments, and trigger domestic violence. Stock market losses may reduce household utility beyond the shock to financial wealth, supporting gain-loss models where disutility from losses outweighs the utility from gains of a similar magnitude.

Psychological barrier and cross-firm return predictability

We provide a psychological explanation for the delayed price response to news about economically linked firms. We show that the return predictability of economically linked firms depends on the nearness to the 52-week high stock price. The interaction between news about economically linked firms and the nearness to the 52-week high can partially explain the underreaction to news about customers, geographic neighbors, industry peers, or foreign industries. We also find that analysts react to news about economically linked firms but the 52-week high effect reduces such reactions, providing direct evidence that the 52-week high affects the belief-updating process.

The Cost of Distraction

What could be the result if some compelling opportunities, like lottery jackpots, were potentially lucrative enough to distract the investors' attention from monitoring the stock market?

Governance through Trading on Acquisitions of Public Firms

We identify an important channel, acquisitions of public targets, via which the governance through trading (GTT) improves firm values. The disciplinary effect of GTT is more pronounced for firms with higher managerial wealth-performance sensitivity and moderate institutional ownership concentration. Firms with higher GTT also have higher subsequent ROA, ROE, Tobin's Q, analysts forecasted EPS growth rate, and lower expected default risk. The effect is stronger after Decimalization and robust to using two instrumental variables. We conduct several exercises to rule out alternative explanations, such as institutional superior information, investor activism, and momentum. Additional tests show that the disciplinary effect of GTT only exists for less financially-constrained firms and non-all-cash M&As where the agency problem is more likely to be prevalent.

Does short-selling threat discipline managers in mergers and acquisitions decisions?

We explore the governance effect of short-selling threat on mergers and acquisitions (M&A). We use equity lending supply (LS) to proxy for the threat, as short sellers incentives to scrutinize a firm depend on the availability of borrowing shares. Our results show that acquirers with higher LS have higher announcement returns. The effect is stronger when acquirers are more likely to be targets of subsequent hostile takeovers and when their managers wealth is more linked to stock prices. We conduct four sets of tests to mitigate endogeneity concerns. Finally, the governance effect exists only for deals prone to agency problems.

Contractual Managerial Incentives with Stock Price Feedback

We study the effect of financial market frictions on managerial compensation. We embed a market microstructure model into an otherwise standard contracting framework, and analyze optimal pay-for-performance when managers use information they learn from the market in their investment decisions. In a less frictional market, the improved information content of stock prices helps guide managerial decisions and thereby necessitates lower-powered compensation. Exploiting a randomized experiment, we document evidence that pay-for-performance is lowered in response to reduced market frictions. Firm investment also becomes more sensitive to stock prices during the experiment, consistent with increased managerial learning from the market.

Attention allocation and return co-movement: Evidence from repeated natural experiments

We hypothesize that when investors pay less attention to financial markets, they rationally allocate relatively more attention to market-level information than to firm-specific information, leading to increases in stock return co-movements. Using large jackpot lotteries as exogenous shocks that attract investors’ attention away from the stock market, we find supportive evidence that stock returns co-move more with the market on large jackpot days. This effect is stronger for stocks preferred by retail investors and is not driven by gambling sentiment. We also find that stock returns are less sensitive to earnings surprises and co-move more with industries on large jackpot days.

Round Numbers Can Hurt Crowdfunding Campaigns

The research study by Professor Tse-Chun Lin, Professor of Finance and his Ph.D. student Vesa Pursiainen is covered by a number of regional and international media.