Seminar (Dept. of Finance)

Title: Supply Chain Localization in China

Speaker: Xiaolei Liu, Boya Distinguished Professor, Guanghua School of Management, Peking University

Time: 10:00-11:30, May 31, 2024(Friday)

Venue: Room 1008, Mingde Business Building

Language: English/Chinese

ABSTRACT:

This paper provides firm-level evidence on the outcomes of agglomeration by investigating supply chain localization. Using China’s enterprise entry and exit data, we find that local supply chain growth positively predicts future stock returns. A value-weighted portfolio that longs stocks with the highest local supply chain growth and shorts stocks with the lowest growth earns a significant Fama-French five-factor alpha of 0.628% (t-statistic = 3.61) per month. Evidence on accounting performance and analyst forecasts further supports that local supply chain growth promotes firm development and that market underreaction leads to return predictability. This predictability is even more pronounced among firms in the secondary sector and those heavily reliant on their customers and suppliers. Furthermore, we delve into the concept of “local” by exploring the geographical scope of agglomeration and the role of local governments in shaping the impact of local supply chain growth. We find that the effects are much stronger across cities in the same provinces comparing to cities in different provinces with similar distances; and the effects are much stronger when the supply chain is supported by local industrial policies. This study enhances our understanding of how supply chain localization affects firm performance and the local governments’ role in supply chain construction.

SHORT BIOGRAPHY:

Laura Xiaolei Liu is Boya Distinguished Professor, Professor of Finance and Accounting, Chair of Finance Department, at Guanghua School of Management, Peking University. She is also the director of Fintech Lab. She graduated from University of Rochester. Her paper has won awards such as An Zijie International Trade Research Award, the Best Corporate Finance Paper at WFA, the Best Paper in Investment at AsianFA, the Best paper at CICF, the Best PhD Paper at SWFA and the Best Paper at Journal of Financial Research (in Chinese). She has won Zeng Xianzi Excellent Teaching Award. She served as an associate editor of Financial Management before. Currently, she is an associate editor of Journal of Empirical Finance、Pacific-Basin Finance Journal and Journal of International Trade (in Chinese). Her work has been published in leading academic journals including Journal of Political Economy、Journal of Finance、Journal of Financial Economics、Review of Financial Studies、Journal of Monetary Economics、Management Science、Journal of Management Science and Engineering (in Chinese)、Journal of Financial Research (in Chinese)、and Journal of International Finance (in Chinese). The case she wrote has won “YUE management” outstanding practice award granted by Harvard Business Review. Before joining Guanghua, she taught at Hong Kong University of Science and Technology and received tenure there. Her research interests include capital markets and corporate finance. Recently, she focuses her study on China related topics.