A research by Professor Dragon Youngjun Tang, Professor in Finance at HKU Business School and other co-authors discovers that banks using CDS for capital relief have effectively freed up extra capital for businesses, but at the same time are more likely to extend loans and build up riskier loan portfolios.
Academic & Professional Qualification
- Ph.D., University of Texas at Austin
- M.S., Texas A&M University
- B.S., Jilin University
Prof. Dragon Yongjun TANG received his Ph.D. in finance from the University of Texas at Austin in 2005. He also holds a B.S. from Jilin University, and M.S. from Texas A&M University. Dragon joined The University of Hong Kong (HKU) in 2007, and became Associate Professor of Finance in 2013. Before joining HKU, Dragon also held teaching positions at the University of Texas at Austin and Kennesaw State University.
Dragon’s current research interests include credit risk, credit derivatives, and Chinese banking and credit markets. He has previously done research on mutual funds and Bayesian methods in finance. His research articles are published in top journals such as the Journal of Finance and Journal of Financial Economics. He has also received numerous research awards.
In HKU, Dragon was the Director of the Master of Finance Programme in 2012 – 2015, and has been the Associate Director of the Center for Financial Innovation and Development since 2013, and of the Center for China Financial Research since 2015.
More information can be found at http://www.fbe.hku.hk/~yjtang.
- Credit Risk
- Credit Derivatives
- China Credit Markets
- “Subnational Debt of China: The Politics-Finance Nexus”, with Haoyu Gao and Hong Ru, 2020, Journal of Financial Economics, forthcoming.
- “Credit Default Swaps and Bank Regulatory Capital”, with Chenyu Shan, Hong Yan, and Xing (Alex) Zhou, 2021, Review of Finance 25, 121-152.
- “Is “Greenness” Priced in the Market? Evidence from Green Bond Issuance in China” with Zhiyao Deng and Yupu Zhang, 2020, Journal of Alternative Investments 23, 57-70.
- “Do Shareholders Benefit from Green Bonds?” with Yupu Zhang, 2020, Journal of Corporate Finance, 61, 101427.
- “Do Banks Still Monitor When There is a Market for Credit Protection?”, with Chenyu Shan and Andrew Winton, 2019, Journal of Accounting and Economics 68, 101241.
- “Employees’ Risk Attitude and Corporate Risk Taking: Evidence from Pension Asset Allocations” with Yanling Guan, 2018, Journal of Corporate Finance 48, 261-274.
- “Model Specification and Collateralized Debt Obligation (Mis)Pricing” with Dan Luo and Sarah Qian Wang, 2018, Journal of Futures Markets 38, 1284-1312.
- “Credit Default Swaps, Exacting Creditors and Corporate Liquidity Management” with Marti Subrahmanyam and Sarah Qian Wang, 2017, Journal of Financial Economics 124, 395-414.
- “Understanding Transactions Prices in Credit Default Swaps Market” with Hong Yan, 2017, Journal of Financial Markets 32, 1-27. Lead Article
- “The Leverage Externalities of Credit Default Swaps” with Jay Li, 2016, Journal of Financial Economics 120, 491-513.
- “Credit Default Swaps: Past, Present, and Future” with Patrick Augustin, Marti Subrahmanyam, and Sarah Qian Wang, 2016, Volume 8 of Annual Review of Financial Economics.
- “Suitability Checks and Household Investments in Structured Financial Products” with Eric Chang and Miao Zhang, 2015, Journal of Financial and Quantitative Analysis 50, 597-622.
- “Internal Control Quality and Credit Default Swap Spreads” with Feng Tian and Hong Yan, 2015, Accounting Horizons 29, 603-629.
- “Does the Tail Wag the Dog? The Effects of Credit Default Swaps on Credit Risk” with Marti Subrahmanyam and Sarah Qian Wang, 2014, Review of Financial Studies 27, 2927-2960.
- “Credit Default Swaps (CDS): A Survey” with Patrick Augustin, Marti Subrahmanyam, and Sarah Qian Wang, 2014, Foundations and Trends in Finance 9(1-2), 1-196.
- “Potential Losses from Incorporating Return Predictability into Portfolio Allocation”, 2014, Australian Journal of Management 39, 35-45.
- “Rating Shopping or Catering: An Examination of Response to Competitive Pressure for CDO Credit Ratings” with John Griffin and Jordan Nickerson, 2013, Review of Financial Studies 26, 2270-2310.
- “Did Subjectivity Play a Role in CDO Credit Ratings?” with John Griffin, 2012, Journal of Finance 67, 1293-1328.
- “Did Credit Rating Agencies Make Unbiased Assumptions on CDOs?” with John Griffin, 2011, American Economic Review Papers and Proceedings 101:3, 125-130.
- “Market Conditions, Default Risk, and Credit Spreads” with Hong Yan, 2010, Journal of Banking and Finance 34, 724-734.
- “Unitary Boards and Mutual Fund Governance” with Sophie Xiaofei Kong, 2008, Journal of Financial Research 31, 193-224.
- “Macroeconomic Conditions, Firm Characteristics, and Credit Spreads” with Hong Yan, 2006, Journal of Financial Services Research 29, 177-210.
Awards and Honours
- Research Grant from International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE), June 2019
- Outstanding Paper Award, 13th International Conference on Asia-Pacific Financial Markets, Seoul, 2018
- Best Paper Award (sponsored by Elsevier and Pacific-Basin Finance Journal), Asian Finance Association Annual Meeting, Tokyo, Japan, 2018
- Outstanding Paper Award, 15th Financial System Engineering and Risk Management Conference, 2017
- FGV/HSG Best Paper Award in Finance, 2016
- Best Doctoral Dissertation Supervision Award, National Economics Foundation of China, 2016
- General Research Fund, Research Grant Council, Hong Kong, PI, 2016
- General Research Fund, Research Grant Council, Hong Kong, Co-I, 2016
- Outstanding Researcher Award, the Faculty of Business and Economics (HKU Business School), 2015
- Best Paper Award (Derivatives), Northern Finance Association Annual Meetings, 2014
- Best Paper Prize, the 5th Annual Financial Markets and Corporate Governance Conference, 2014
- Research Output Prize, The University of Hong Kong (香港大学研究成果獎), 2013
- Best Paper Award, 20th Annual Conference on the Theories and Practices of Securities and Financial Markets at National Sun Yat-Sen University, 2012
- Research Project Award, Paul Woolly Centre for Study on Market Dysfunctionality, 2012
- The Chinese Finance Association Award for the Best Paper on Chinese Financial Markets, 2011
- Semifinalist for Best Paper Award, Financial Management Association, 2010
- Best Paper Award, 17th Annual Conference on the Theories and Practices of Securities and Financial Markets at National Sun Yat-Sen University, 2009
- Best Paper Award (Risk Management), Financial Management Association, 2009
- Journal of Financial Research Outstanding Article Award, 2009
- Best Paper Award, International Economics, Finance, and Accounting Conference at National Taiwan University, 2008
- Best Paper Award (Financial Institutions), Eastern Finance Association, 2006
對全球及未來一代而言，氣候變化是最嚴重的威脅之一，全球日益關注當中涉及的風險，「綠色金融」（Green Finance）亦開始走入公眾視線，其中綠色債券（Green Bond）便是常見的金融工具。中國自2016年起連續四年成為綠色債券發行量最大的國家，而現時全球的金融中心在推動綠色債券上亦不遺餘力，站在發展前沿的香港亦不例外，特區政府除了積極發行綠色債券外，還致力推出不同的便利措施，吸引企業來港籌集資金，包括參與可持續發展並具有環境效益的投資。然而，綠色金融到底是解決全球暖化的關鍵，還是只是隨波逐流、迎合金融業趨勢的工具？兩者之間又該怎樣取得平衡？
Prof. Dragon Tang, Area Head of Finance, shares his views on the relationship between HSBC & China.
Findings from University of Hong Kong Update Knowledge of Corporate Finance (Do shareholders benefit from green bonds?)
The research study co-authored by Prof. Dragon Tang, Area Head of Finance and Yupu Zhang, research postgraduate student, is covered by Advisor News.
The green bond market has been growing rapidly worldwide since its debut in 2007. We present the first empirical study on the announcement returns and real effects of green bond issuance by firms in 28 countries during 2007–2017. After compiling a comprehensive international green bond dataset, we document that stock prices positively respond to green bond issuance. However, we do not find a consistently significant premium for green bonds, suggesting that the positive stock returns around green bond announcements are not fully driven by the lower cost of debt. Nevertheless, we show that institutional ownership, especially from domestic institutions, increases after the firm issues green bonds. Moreover, stock liquidity significantly improves upon the issuance of green bonds. Overall, our findings suggest that the firm's issuance of green bonds is beneficial to its existing shareholders.
The rise of credit default swaps (CDS) provides creditors with a market-based approach to obtaining protection, but it can also affect lenders' monitoring of the borrowers. We find that after CDS begin trading on a given firm, new loans to that firm are less likely to require collateral and have less strict financial covenants, even controlling for endogeneity. The effects are stronger when lenders have easier access to CDS, for safer firms, credit lines, and performance-based covenants. Our evidence is consistent with the theory that the introduction of CDS trading makes loan contracting more effective for better quality borrowers.
Demand for green bonds has grown in leaps and bounds since the market was launched in 2007. Beyond the important environmental projects they fund, they also bring benefits to shareholders.