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HONG KONG, CHINA--(Marketwired - Nov 23, 2016) - The following article was first published in the China Business Knowledge (CBK) website by CUHK Business School -- A cutting-edge option pricing research at CUHK Business School reveals flaws in the derivatives markets. The study not only challenges our fundamental understanding of how these markets operate, but it also opens the door to sustainable and predicable profit-making opportunities. The results have turned heads on Wall Street and may rewrite the manual on trading strategies. It is said that there is no such thing as a free lunch, least of all on Wall Street. Conventional wisdom tells us that financial markets operate efficiently, and that securities -- whether it is stocks, bonds, or the derivative instruments they underlie -- are priced tightly to eliminate any arbitrage opportunity that may generate risk-free profits. But a recent finance research study by the Chinese University of Hong Kong (CUHK) Business School throws a spanner into those long-held views, specifically in the option markets. The results of the study entitled Option Return Predictability reveal that sustained returns from trading delta-hedged options are not only possible, but they are also predictable using basic stock fundamentals such as market capitalisation and return on equity. Leading the research was Associate Professor Jie Cao of the Department of Finance at CUHK Business School and his former Ph.D. student Xintong Zhan who joined Erasmus University Rotterdam as Assistant Professor in Finance this August, alongside Bing Han of the University of Toronto and Qing Tong of Singapore Management University. The team conducted extensive regression analyses using monthly option data of over 5,000 underlying stocks between 1996 and 2012, which amounts to nearly 160,000 data points. The model focused on actively traded stocks in the United States across a broad range of industry sectors, screening out small, highly illiquid ones that could potentially skew results. A delta-hedged or delta-neutral option position involves longing and shorting options and underlying stocks in such a way that the overall payout is the same regardless of stock volatility. The position has to be rebalanced on a regular basis to adjust for fluctuating stock prices. Delta-hedged options are priced using traditional models such as Black-Scholes and stochastic volatility to eliminate any arbitrage gains. The central question is whether a relationship exists between delta-hedged option gains and well-known stock characteristics used by financial analysts and investors. Of the 12 characteristics studied by the research team, eight of them, namely market capitalisation, cash-to-asset ratio, return on equity, new issuance, idiosyncratic volatility, monthly returns, annual returns and the dispersion of analyst forecast, show a strong correlation with delta-hedged option returns. That means long-short trading strategies involving delta-hedged options based on those eight stock characteristics can yield stable, predictable profits over time. Their Sharpe ratios -- a commonly used measure of risk-adjusted return -- ranged from 0.63 to 2.00 (for perspective, a portfolio of U.S. Treasury bills has a Sharpe ratio of exactly zero). The correlation remains robust regardless of seasonality and market conditions. For instance, the profitability of the option trading strategies did not diminish during the 2008-2009 subprime mortgage crisis. The predictive power of these stock fundamentals suggests one of two things: either conventional pricing models are flawed, or the option market -- with all its modern innovations and the rise of high-frequency algorithmic trading -- is not as efficient as previously thought. While further studies are necessary to understand the exact cause of the abnormal returns, Prof. Cao's research team believes that one possible source of market inefficiency is the insufficient cross-sectional arbitrage activities in the option market. More specifically, trading frictions created by regulatory limits to arbitrage may have played a key role in, ironically, spawning the delta-hedged arbitrage. Until this anomaly is corrected, arbitrage opportunities continue to exist and risk-free profits in the option market -- the proverbial free lunch -- are there for the taking. That's why Wall Street traders and fund managers have taken notice of the startling results. In October 2015, Prof. Cao presented his research findings to a captivated audience at the Third Deutsche Bank Annual Global Quantitative Strategy Conference in New York. He was subsequently invited to speak at a seminar at Morgan Stanley's head office, hosted by Dr. Peter Carr, the investment bank's Global Head of Market Modelling. Within the same month, his Ph.D. student Xintong Zhan gave similar presentations to a number of New York-based hedge funds and investment firms, including OptionMetrics, Cubist Systematic Strategies, and Two Sigma. What followed were other high profile speaking engagements, including the 10th Advances in the Analysis of Hedge Fund Strategies Conference in London; the Sixth Risk Management Conference in Mont-Tremblant, Canada; the Fourth Chicago Quantitative Alliance Asia Conference in Hong Kong; and a presentation at Menta Capital LLC in San Francisco. More recently, in May this year, Prof. Cao presented his research at the 4th annual Asia Bureau of Finance and Economic Research Conference in Singapore, one of the largest events of its kind in Asia Pacific. In June, he presented it at Macquarie Global Quantitative Research Conference, a leading conference for finance industry, and in August, at European Finance Association Annual Meeting in Oslo, Norway, a leading conference for finance academic researchers. Reactions from the financial community have ranged from excitement and intrigue to amazement and disbelief. To answer the sceptics, Prof. Cao and his team continue to test the robustness of their theory by controlling for "noise" such as stock volatility risk factors and adjusting for transaction costs resulting from the spread between bids and ask option prices. So far, the findings have held up and the research remains on firm ground. There have also been questions of a more pragmatic nature: how big the potential market is and whether option traders can make fortunes by replicating the trading strategy on a large scale. "Our research is relatively new and Wall Street has yet to test it in the actual derivatives markets," says Prof. Cao. "But based on the presentations we have done to date, there is a lot of interest in our discoveries on the streets," he says. When it comes to risk-free gains, however, popularity can be a double-edged sword. "As more traders start to take advantage of our trading strategy," Prof. Cao offers a reality check, "we expect the arbitrage to narrow. It may eventually disappear." That sentiment may have answered, if only preliminarily, the question of what causes the abnormal returns in the first place. Prof. Cao's prediction of narrowing arbitrage suggests that the anomaly uncovered by the study may have far less to do with flaws in the conventional pricing models than market inefficiency and regulatory frictions. While the study is being discussed and debated in the real world, Prof. Cao has already moved on to analysing other derivative instruments. He is expanding his research from delta-hedged options to raw options and straddles -- longing a call and a put option with the same strike price and expiration date -- in hopes of discovering a similar pattern. "We've dug up something interesting and opened a door to a new area of research," says Prof. Cao. "More broadly speaking, our study forces us to examine how much we actually understand option valuation and trading. We hope our work will attract attention from both practitioners and researchers so that more people will focus on this area." It appears that the professor does not have to wait long for his hope to materialize. His research has already drawn praise from heavyweights in high finance. "I just wanted to say how impressed I was with your new papers," wrote Euan Sinclair, option trader and author of such definitive treatises as Volatility Trading and Option Trading: Pricing and Volatility Strategies and Techniques, in a congratulatory email to Prof. Cao. "For a few years I've been convinced that the next frontier in option trading is using factors like [the ones referenced in your research]." Reference Cao, Jie and Han, Bing and Tong, Qing and Zhan, Xintong, Option Return Predictability (April 8, 2016). Rotman School of Management Working Paper No. 2698267; 27th Annual Conference on Financial Economics and Accounting Paper. Available at SSRN: This article was first published in the China Business Knowledge (CBK) website by CUHK Business School: About CUHK Business School CUHK Business School comprises two schools -- Accountancy and Hotel and Tourism Management -- and four departments - Decision Sciences and Managerial Economics, Finance, Management and Marketing. Established in Hong Kong in 1963, it is the first business school to offer BBA, MBA and Executive MBA programs in the region. Today, the School offers 8 undergraduate programs and 13 graduate programs including MBA, EMBA, Master, MSc, MPhil and PhD. In the Financial Times Global MBA Ranking 2016, CUHK MBA is ranked 26th. In FT's 2016 EMBA ranking, CUHK EMBA is ranked 37th in the world. CUHK Business School has about 4,400 full-time and part-time students and has the largest business school alumni network in Hong Kong, with over 32,000 alumni worldwide. Professor Kalok Chan is the Dean of CUHK Business School. More information is available at: or by connecting with CUHK Business School on Facebook: and LinkedIn: About China Business Knowledge (CBK) CBK is a portal belonging to the Chinese University of Hong Kong (CUHK) Business School which provides easy access to the China-related research conducted at CUHK Business School. Through feature articles, mini case studies, discussions and a research paper database, CBK aim to narrow the knowledge gap between China and the rest of the world, providing in-depth knowledge and practical tips about doing business in China. Free content is available at or by connecting with CBK@CUHK on Facebook:, Twitter: and LinkedIn:

HONG KONG, CHINA--(Marketwired - Feb 28, 2017) - The following article was first published in the China Business Knowledge (CBK) website by CUHK Business School -- Research in sociology and psychology tells us that beauty can have a significant impact on people's earning, job opportunities and career success and that attractive individuals generally receive better treatments in the workplace and other social settings. In the working paper "More than Skin-deep? Analysts' Beauty and Their Performance", Prof. George Yang, Associate Professor at the School of Accountancy of The Chinese University of Hong Kong (CUHK) Business School, extends the study to information acquisition and forecast performance in China's capital market. It reveals that the attractiveness of financial analysts is positively associated with their earnings forecast accuracy and stock recommendation informativeness. "Our study aims to look at whether a predetermined attribute of a financial analyst, namely, their physical attractiveness, affects his or her success in information acquisition and job performance," says Prof. Yang who works on the study in collaboration with Prof. Ying Cao, Associate Professor of the School of Accountancy of CUHK Business School, Prof. Feng Guan of Shanghai Lixin University of Commerce, as well as Prof. Zengquan Li, Dean of the School of Accountancy at Shanghai University of Finance and Economics. In capital markets, sell-side financial analysts who are generally employed by broker-dealers and investment banks, play an important role in disseminating the information on particular securities or stocks, giving investors the necessary information they need to judge the attractiveness of certain investments. "In China, the influence of financial analysts on the stock market is even greater because the market is dominated by retail investors who are more likely to be influenced by the so-called expert opinions than institutional investors," says Prof. Yang. Therefore, the financial analysts would actively seek out information from various sources, and the private communication with firm management is one of the critical sources, being viewed as more useful to their earnings forecasts and stock recommendations than firms' public disclosure and even their own primary research. Prior research already reveals that analysts who cater to the interests of managers enjoy an information advantage and exhibit superior forecast performance, according to researchers. The Study In the study, the researchers studied a sample of 89,056 earnings forecasts made by 2,328 analysts from 2005 to 2014. The analysts in their sample come from 102 unique brokerages, which cover all the largest brokerages in China. At the same time, they downloaded the head-to-shoulder ID photos of all sell-side financial analysts in the sample from the website of the Securities Association of China and asked 63 raters with different education background, occupation, income, and social experience to score them on a five-point scale: 1 for homely or not good looking; 2 for below average; 3 for average; 4 for above average and; 5 for strikingly beautiful or handsome. The 63 raters were from different settings including a Big Four accounting firm, a brokerage firm, a large private company, as well as university faculty members and students. Of the group, 27 of them are males while the rest are females. All the raters were reminded to use the common people in the Chinese population, not the sample analysts, as the benchmark for rating and that age should not be considered in rating. Hence, the rating score would be solely based on attractiveness, not depending on how young or old he or she looks. Lookism Matters As expected, the study reveals that the beauty ratings of financial analysts are significantly negatively associated with their forecast errors. That is to say, more attractive analysts make more accurate forecasts. The research team points out that their evidence suggests that more attractive financial analysts possess an advantage in acquiring information from firm management. "Compared with other analysts, attractive analysts are more likely to gain advance access to information about pending significant corporate events, and they are more likely to issue a stock recommendation in the quarter prior to the public announcement of three types of corporate news, including restructuring, signing of important business contracts and earning warning. Accordingly, they can produce more informative stock recommendations," says Prof. Yang. When it comes to information access, it is important to go to the right people. Again, attractive analysts have better access to them. "Attractive analysts are more likely to get more information from corporate site visits when they can directly interact with firm management. Our results show that firm managers are more likely to disclose information to those attractive analysts," he says. Taste-Driven Discrimination However, what's interesting is that the study also shows that the beauty effect disappears when managers are allowed to trade their shares in the open market or when their firm is under a share pledge agreement. To explore the reason behind, Prof. Yang went on to find out if the effect was attributed to managers' taste-based discrimination on the attractiveness of the analysts or on the notion that attractive people possess superior job-related skills and can better serve the interests of the firm. If managers believe that more attractive analysts are more capable and valuable to firms, the beauty effect would persist when there is a strong incentive for managers to boost the firm performance and increase the stock value. But, the researchers didn't find such evidence in the study. "In other words, it suggests that managers' discrimination among financial analysts is just taste-driven," Prof. Yang comments. "When managers need to rely more on analysts to inform and guide the market, they are less likely to allow their taste for beauty to sway the decision about which analysts to rely on for disseminating firm information," he explains. Apart from the relation between analysts' attractiveness level and their forecast performance, the study also demonstrates the impact of analysts' attractiveness on their career opportunities. Specifically, it finds that a more attractive analyst is more likely to be voted as a star analyst who is more likely to be hired by top-notch brokerage firms even if, for some reason, he or she could only get into a smaller firm initially. A New Challenge While social science has documented and extensively studied the beauty effect, this study provides a new perspective into the practice by financial analysts in capital markets. Unlike in previous research suggesting that analysts who issue favorable opinions would obtain more information from firm management, the current study documents a different incentive -- the indulgence of managers' taste for beauty, which affects the interaction between managers and financial analysts. "Since this form of discrimination originates from psychological and social bias and is difficult to regulate, it brings new challenges to regulators and practitioners in the industry," Prof. Yang says. Reference Ying Cao, Feng Guan, Zengquan Li and Yong George Yang, "More than Skin-deep? Analysts' Beauty and Their Performance", 2016. Working paper. This article was first published in the China Business Knowledge (CBK) website by CUHK Business School: About CUHK Business School CUHK Business School comprises two schools -- Accountancy and Hotel and Tourism Management -- and four departments -- Decision Sciences and Managerial Economics, Finance, Management and Marketing. Established in Hong Kong in 1963, it is the first business school to offer BBA, MBA and Executive MBA programs in the region. Today, the School offers 8 undergraduate programs and 13 graduate programs including MBA, EMBA, Master, MSc, MPhil and PhD. In the Financial Times Global MBA Ranking 2017, CUHK MBA is ranked 36th. In FT's 2016 EMBA ranking, CUHK EMBA is ranked 37th in the world. CUHK Business School has the largest number of business alumni (32,000+) in Hong Kong - many of whom are key business leaders. The School currently has about 4,400 undergraduate and postgraduate students and Professor Kalok Chan is the Dean of CUHK Business School. More information is available at: or by connecting with CUHK Business School on Facebook: and LinkedIn: About China Business Knowledge (CBK) CBK is a portal belonging to the Chinese University of Hong Kong (CUHK) Business School which provides easy access to the China-related research conducted at CUHK Business School. Through feature articles, mini case studies, discussions and a research paper database, CBK aim to narrow the knowledge gap between China and the rest of the world, providing in-depth knowledge and practical tips about doing business in China. Free content is available at or by connecting with CBK@CUHK on Facebook:, Twitter: and LinkedIn:

Experts advocate the two cities join force in formation of complementary advantages to foster international competitiveness HONG KONG, CHINA--(Marketwired - Feb 15, 2017) - New research released today by the professors of The Chinese University of Hong Kong (CUHK) Business School's Center for Entrepreneurship (CfE) and Hong Kong Baptist University (HKBU)'s School of Business shows that entrepreneurship in Hong Kong and Shenzhen is on the rise. A collaborative effort by CUHK CfE, HKBU School of Business, the University of Hong Kong's Faculty of Business and Economics, Shenzhen Academy of Social Science and Savantas Policy Research Institute, the research titled "Global Entrepreneurship Monitor (GEM) Hong Kong and Shenzhen Report 2016-17" provides a detailed analysis of the current status of entrepreneurship in Hong Kong and Shenzhen. The study compares the results with past indicators for both ecosystems and provides an international benchmark with 65 economies worldwide. It is part of the global initiative, Global Entrepreneurship Monitor (GEM), the world's foremost comparative entrepreneurship study and a trusted resource on entrepreneurship for key international organizations such as the United Nations, World Economic Forum, World Bank and more. In the recent few years, Hong Kong and Shenzhen have experienced an explosive growth in the start-up support ecosystem. The GEM Hong Kong and Shenzhen Report 2016-17 shows that the start-up rates recorded a staggering increase in Hong Kong and Shenzhen from 2009 to 2016. In mid-2016, the early-stage entrepreneurial activity among the adult population was estimated at 9.44 percent (3.64 percent in 2009) in Hong Kong and 16.04 percent (4.8 percent in 2009) in Shenzhen. The growth has been driven by a rapid increase in Shenzhen's new* (+284 percent) and Hong Kong's growth in nascent** businesses (+206 percent) in comparison with 2009 statistics. The prevalence rates of established businesses recorded an increase as well: +389 percent for Shenzhen and +109 percent for Hong Kong. It is worth noting that while entrepreneurship rates are on the rise in Hong Kong and Shenzhen, they are declining in other places in China. Both cities have developed a separate start-up culture and entrepreneurial ecosystem that operate independently from the rest of the Mainland. The positive changes were not limited to early entrepreneurship rates only. The research team also observed a major shift in attitudes and entrepreneurial intentions. In particular, 56.8 percent of the adult population perceives start-up opportunities in Hong Kong. In Shenzhen, the same proportion of individuals who declared they possessed necessary skills and knowledge to start a new business (35.8 percent), also reported their intention to start a business in the next two years (36 percent). Comparing to 2009, the population with entrepreneurial intentions in Hong Kong grew from 7.3 percent to 19.7 percent in 2016, representing an impressive increase of +170 percent. Similarly, in Shenzhen the intentions grew from 17.6 percent to 36 percent, an increase of +105 percent. According to the study, cultural conditioning and attitudes towards entrepreneurship, perception of own skills, and exposure to entrepreneurship practices all had a positive impact on intentions to start businesses. Successful entrepreneurs are also regaining their high status and are promoted by local media in Shenzhen and Hong Kong. In terms of financial support, Hong Kong early-stage firms have lower capital requirements than that of their Shenzhen counterparts, which may be related to the lower technological intensity of Hong Kong firms. 92 percent of nascent entrepreneurs in the two cities declared that their principal source of financial support was their own savings. The role of the family in financing new ventures is still significant in Shenzhen, but not so much in Hong Kong. Banks are also more supportive of startups in Shenzhen than in Hong Kong and so are venture capitalists, which could be explained by a higher prevalence of start-ups with profound market impact. In Hong Kong, on the other hand, crowdfunding is more prevalent as the source of capital for early-stage businesses, a sign of a more established product innovation. Aligned with higher entrepreneurship rates, the research team also found a growing culture of informal investors developing in both cities. Shenzhen observed a much higher informal investment prevalence rate (20.5 percent) than Hong Kong (6.5 percent) of the adult population. In fact, Hong Kong and Shenzhen informal investors were two of the most generous among all economies in the study with a contribution of US$70,565 and US$76,112 respectively. The study has also recorded a dramatic change in investment patterns for Shenzhen. While in 2009 individuals were rather investing in family members, in 2016, friends and neighbors had been the first choice which was aligned with that of Hong Kong. In addition, the research team interviewed 39 Hong Kong and 37 Shenzhen experts in the field of entrepreneurship about their opinions on how the cooperation between Hong Kong and Shenzhen that would increase the cities' international competitiveness. The most frequent recommendation was to leverage the natural industry compatibilities between Hong Kong and Shenzhen. Other recommendations include: Prof. Kevin Au, Associate Director of CUHK CfE and Associate Professor of the Department of Management at CUHK Business School, says: "If Hong Kong and Shenzhen join forces in the formation of complementary advantages on entrepreneurship, it would strengthen the international and Mainland competitiveness for both. This can be the first step towards the development of the Hong Kong-Shenzhen megalopolis." Dr. Marta K. Dowejko, Research Assistant Professor in Entrepreneurship of the Department of Management at HKBU School of Business, says: "Hong Kong and Shenzhen are facing a fantastic opportunity: that of being in the perfect position to build a highly unique and internationally competitive start-up hub with an unparalleled ecosystem compatibility between the two cities and a supportive informal investment culture. While Shenzhen's start-ups are well geared to deliver innovative ideas with high growth potential, Hong Kong's entrepreneurs possess the know-how in taking ideas to the next level and ensuring their long-term sustainability. The results from this year's GEM report give testament to this unique setup that no other place in the world has." * 3 to 42 months old businesses ** in the process of starting up, less than three months old About CUHK Business School CUHK Business School comprises two schools -- Accountancy and Hotel and Tourism Management -- and four departments -- Decision Sciences & Managerial Economics, Finance, Management and Marketing. Established in Hong Kong in 1963, it is the first business school to offer BBA, MBA and Executive MBA programs in the region. Today, the School offers 8 undergraduate programs and 13 graduate programs including MBA, EMBA, Master, MSc, MPhil and PhD. In the Financial Times Global MBA Ranking 2017, CUHK MBA is ranked 36th. In FT's 2016 EMBA ranking, CUHK EMBA is ranked 37th in the world. CUHK Business School has the largest number of business alumni (32,000+) in Hong Kong -- many of whom are key business leaders. The School currently has about 4,400 undergraduate and postgraduate students and Professor Kalok Chan is the Dean of CUHK Business School. More information is available at: or by connecting with CUHK Business School on Facebook: and LinkedIn: About HKBU School of Business Since 1956, HKBU School of Business has provided innovative business education to students from across the globe. We seek to inspire good business practice, create value for stakeholders, and enhance social and economic growth and development through our research on corporate sustainability issues, encompassing the areas of business ethics, corporate social responsibility and corporate governance. About Faculty of Business and Economics, The University of Hong Kong The Faculty of Business and Economics at The University of Hong Kong strives to nurture first-class business leaders and foster academic and relevant research to serve the needs of Hong Kong, China and the rest of the world in the new Asia-led economy. As Asia's premier international business school, FBE engages leading scholars from all corners of the globe and they instil in the students global knowledge with an Asian perspective. The Faculty attracts top students from Hong Kong and beyond. It admits the highest proportion of non-local undergraduate students amongst all Faculties at HKU. Three of its undergraduate programmes are ranked among the University's top 10 programmes. The Faculty's full-time MBA programme has a strong Asia and China focus, and the programme has been ranked Asia's no. 1 in the World MBA Rankings released by the Economist Intelligence Unit (EIU) for seven consecutive years from 2010 to 2016. Students can opt for an overseas exchange opportunity to supplement their campus learning in Hong Kong: a London track at London Business School, a New York track at Columbia Business School or a Hong Kong/China track at Fudan University. The Faculty also offers an elite EMBA Global Asia programme, jointly with CBS and LBS, for globally-focused senior executives and professionals. Its International MBA Programme, delivered in Shanghai in collaboration with Fudan University, was the first of its kind when it was launched in 1998. FBE is fully accredited by the European Quality Improvement Systems (EQUIS). Its accounting and business programmes are also accredited by the Association to Advance Collegiate Schools of Business (AACSB). About the Shenzhen Academy of Social Science Established in July 1992, the Shenzhen Academy of Social Science (SZASS) is a subordinate unit of the Shenzhen Municipal People's Government. SZASS is a research institute of philosophy and social science, consisting of five research units: economy, social development, culture, political science and law, and international urban studies. More information is available at:

HONG KONG, CHINA--(Marketwired - May 29, 2017) - The following article was first published in the China Business Knowledge (CBK) website by The Chinese University of Hong Kong (CUHK) Business School - Since the economic reform in 1978, China has created an economic legend. In 2014, it surpassed the United States in terms of economy output on the basis of purchasing power and became the world's largest economy. The past decade has seen the government's effort in establishing a market economy through privatization of state-owned enterprises (SOEs). However, after the top-down reform, the Chinese government still holds much power in the economy; in particular, self-interested politicians still impose substantial influences on SOEs' financing, investing, operating, and disclosure decisions. As such, the Chinese market is a transitional economy operating between political power (the 'visible hand') and market force (the 'invisible hand'). Yet, it is not clear how the 'visible hand' affects firms' operating behaviors. A recent study by Prof. Zhaoyang Gu, Director of the School of Accountancy and Prof. Donghui Wu, Associate Professor of the School of Accountancy and Associate Director of the Center for Institutions and Governance at the Chinese University Hong Kong (CUHK) Business School, as well as their collaborator Prof. Song Tang, Associate Professor of the School of Accountancy at Shanghai University of Finance and Economics, has revealed for the first time how political power intervenes in SOE's operating activities through studying a particular cost behavior known as 'cost stickiness'. Cost Stickiness As two important pillars of profit-driven corporations, sale revenues and operating costs should be parallel under normal operation, that is, operating costs should change proportionally along with sales change. This is the most basic rule found in any textbook of managerial accounting. However, a number of studies have found that a downward change of operating costs when sales decrease is much smaller than an upward change when sales increase by the same amount. It seems that firms' operating costs are more difficult to decrease than to increase. Such asymmetric phenomenon is given an intuitive label by researchers - 'cost stickiness'. There are different reasons to explain the 'stickiness' in firms' operating cost. In the working paper entitled "How Does the Visible Hand Shape Cost Behavior? Evidence from China", the researchers use this asymmetric cost behavior to illustrate how political incentives affect SOEs' employment decisions in China. The Importance of Political Incentives in China The issues on how political incentives affect the economic sector have been studied by many researchers in developed as well as developing countries. It is widely accepted that even in well-developed market economies, the influence of politicians cannot be ignored. This conclusive influence should get even more attention in China's transitional economy as the government still holds much power. The story dates back to China's market-oriented reform. As one consequence of the reform, the Chinese government plays a dual role as the owner of SOEs and the administrator of social affairs. The dual role offers a shortcut for the government to accomplish its political and social goals by interrupting firms' operating decisions. So what kind of incentives motivates Chinese officials to intervene in the operation of SOEs? The Cadre Evaluation System In the study, the authors look into details of the cadre evaluation system within the Chinese Communist Party (CCP). To motivate cadres and local leaders with the incentive to comply with the central government, the CCP has implemented a meritocratic political selections system which includes evaluating politicians based on the following three tiers of performance targets: Researchers find that local leaders who meet the 'hard' targets such as GDP growth are more likely to be promoted while meeting 'soft' targets have little influence in the assessment of overall performance. 'Veto' targets will also determine officials' political careers -- shortfalls to these targets will jeopardize the chances of promotion and may lead to demotions, administrative punishments, or even dismissal. Social stability, one of the 'veto' targets, is therefore of great concern to local leaders. "One can imagine the implication of unemployment rates to the government, especially for local politicians," says Prof. Wu. "As a determinant of social stability, layoffs and the resulting social unrest are significantly costly for political leaders' promotion prospects especially when the Beijing government has put a high priority on maintaining a harmonious and stable society in recent years," he says. As a result, politicians have strong incentives to distort firms' employment policy to stabilize their careers; in other words, they will require SOEs to keep more jobs and employees using their close ties and influence. Political Incentives Affect Firms' Cost Behaviors The study results reveal that SOEs exhibit higher stickiness in operating costs, particularly labor costs, than non-SOEs. On average, SOEs are more willing to increase employment than non-SOEs when sales are increasing; more importantly, SOEs are much less willing to cut down employment than non-SOEs when sales are decreasing. "When sales go up, firms naturally expand their employment base to satisfy production demands, resulting in an increase in labor cost; however, when sales go down, politically sensitive firms are more reluctant to dismiss workers than firms in a purely economic environment, resulting in a disproportionally lower decline in labor costs. The difference in the degree of asymmetric labor cost behaviors between SOEs and non-SOEs can reflect distortion of labor decisions imposed by government," Prof. Wu explains. As estimated by the researchers, labor expenditures of SOEs are about 29.3 percent more asymmetric than those of non-SOEs. Thus, with the objective to maintain social stability and avoid unemployment, state ownership changes firms' employment decisions and magnifies the cost stickiness in SOEs. However, "the will of government is ultimately carried out by individuals," says Prof. Wu. "We also find that among SOEs, labor costs are much stickier if a firm is run by a manager who is appointed by the government." This finding is another unique background in China's market as the government often appoints the board chair/CEO of listed SOEs. Unlike political connections built by personal donations or general social ties, the direct appointment relationship between the government and firms' top managers facilitates the implementation of government objectives. The Role of Institutions in China With a wide range of diverse institutions across regions, the effect of political incentives on the degree of labor cost stickiness is not uniform in China. The study finds that the positive relation between SOEs and labor cost stickiness is stronger in areas where institutions are less well developed. In other words, in institutionally weak regions, government intervention in business is more pervasive, and government shareholders have a greater influence on firms' operations. "The cross-sectional variation adds confidence to our reference on the causal link between political incentives and cost stickiness," says Prof. Wu. "It helps rule out some alternative conjectures. For example, top managers with a governmental background might be inferior to others in terms of business knowledge or administrative skills; alternatively, managers with and without political connections may differ in their political or ideological attitudes toward labor. All of these possibilities can also explain the differences in labor cost stickiness between SOEs and non-SOEs. However, with cross-variation analysis, we can at least be partially sheltered from contamination of competing explanations," he adds. Implications The study is the first to look at how political forces shape the cost behavior of Chinese firms, and therefore contributes to the understanding of privatization issues in China. "Our work lends support to the theory that partial privatization in China cannot completely remedy the government pathologies. The employment decision is one channel that leaves room to intervention by the 'visible hand' of government," says Prof. Gu. After the dramatic economic growth orchestrated by the Chinese government in the last three decades, the downside of government-oriented growth begins to draw attention. In recent years, the Chinese government has recognized the problem of economic-growth-based performance evaluation system and is changing to a more balance-scorecard-type performance evaluation of local government officials. While this change plays down the over emphasis on GDP in the performance evaluation, social stability, such as employment rate, is becoming a more important factor in the evaluation of bureaucrats. "It seems that the effects of political forces on state firms' labor employment decision are likely to persist in the future," says Prof. Gu. References: Zhaoyang Gu, Song Tang and Donghui Wu, "How Does the Visible Hand Shape Cost Behavior? Evidence from China". Working paper. This article was first published in the China Business Knowledge (CBK) website by CUHK Business School: About CUHK Business School CUHK Business School comprises two schools - Accountancy and Hotel and Tourism Management - and four departments - Decision Sciences and Managerial Economics, Finance, Management and Marketing. Established in Hong Kong in 1963, it is the first business school to offer BBA, MBA and Executive MBA programs in the region. Today, the School offers 8 undergraduate programs and 13 graduate programs including MBA, EMBA, Master, MSc, MPhil and PhD. In the Financial Times Global MBA Ranking 2017, CUHK MBA is ranked 36th. In FT's 2016 EMBA ranking, CUHK EMBA is ranked 37th in the world. CUHK Business School has the largest number of business alumni (32,000+) in Hong Kong -- many of whom are key business leaders. The School currently has about 4,400 undergraduate and postgraduate students and Professor Kalok Chan is the Dean of CUHK Business School. More information is available at: or by connecting with CUHK Business School on Facebook: and LinkedIn: About China Business Knowledge (CBK) CBK is a portal belonging to the Chinese University of Hong Kong (CUHK) Business School which provides easy access to the China-related research conducted at CUHK Business School. Through feature articles, mini case studies, discussions and a research paper database, CBK aim to narrow the knowledge gap between China and the rest of the world, providing in-depth knowledge and practical tips about doing business in China. Free content is available at or by connecting with CBK@CUHK on Facebook:, Twitter: and LinkedIn:

HONG KONG, May 15, 2017 /PRNewswire/ -- DYXnet Group Founder & CEO Lap Man appeared as a guest speaker at the Chinese University of Hong Kong Entrepreneur Day (CUHK E-day) over the weekend. The annual event serves as an information exchange for CUHK students, graduates and entrepreneurs, and comprises an exhibition, seminars and a consultancy service. Well known as a role model to budding entrepreneurs, Lap Man also served as one of four judges presiding over the CUHK Entrepreneurship Competition finals, which reviewed business plans submitted by up-and-coming talents. The outcome was a Memorandum of Understanding (MoU) signed between Lap Man, his fellow judges and the five winning teams. They were DurianBB Limited, Health View Bioanalytic Limited, Racefit International Company Limited, Shenzhen Jfun Technology Co Ltd and Smart Turn International (Asia) Logistics Co Limited. He took part in the "Investment, New Opportunity" seminar during the two-day CUHK E-day event and offered his perspective on what investors look for when considering start-ups to support. Lap Man became an "angel investor" after selling off several of his interests in DYXnet Group in 2014. This enabled him to get a number of start-ups off the ground, such as the Anlai contact center service provider, the Can Dao O2O platform for restaurant chains and the Delivery Republic food-delivery enterprise. Others included the Haoju property service platform, as well as HKTaxi, Hong Kong's most popular taxi-calling app, and iRent, a leading foreign-student hostel-renting platform, plus the Yiwole home design platform. More recently, Lap Man co-founded Beyond Ventures, a fund established to revitalise Hong Kong's ecosystem of entrepreneurs and venture capitalists eager to invest in new ideas and local start-ups. He said: "Business models submitted by the CUHK Entrepreneurship Competition winners were so sound and appealing that myself and the other judges were keen to sign the MoU immediately after the event. I was thrilled to be part of CUHK E-day because it showcased our next generation of entrepreneurs at a time when Hong Kong really needs to encourage innovation at every level to become more competitive." Lap Man added: "I believe passion, focus and perseverance are three key words to keep uppermost in mind when running a business – and I now hope the Beyond Ventures Fund I formed with like-minded partners will add impetus to Hong Kong's production cycle of start-ups." CUHK E-day was organized by the CUHK Alumni Torch Fund, which was established in 2014 following the "One-Day-One-Dollar" fundraising campaign initiated by CUHK alumni members and supported by the Alumni Affairs Office. Established in 1999, DYXnet Group is the leading carrier-neutral network service provider in Greater China offering Multiprotocol Label Switching Virtual Private Network (MPLS VPN), Internet access, data centre, unified communications and network security solutions to enterprise clients with provisioning capability in many cities in Greater China and the wider Asia Pacific region. In August 2014, our Virtual Private Network (VPN) business unit was acquired by 21Vianet Group, Inc. (NASDAQ: VNET) ("21Vianet"), China's largest carrier-neutral internet data center services provider. DYXnet Group serves 700 cities in mainland China, Hong Kong, Taiwan, Singapore and Vietnam, including more than 18,000 MPLS VPN clients' sites, and hosts more than 11,000 clients' servers. It was the first batch ICT service providers in Greater China to obtain ISO 9001:2008; ISO/IEC 20000:2011; ISO/IEC 27001:2013 international certifications for information security, international IT service management as well as quality control respectively. These qualifications demonstrate DYXnet's commitment to offering premium information and communication technology with outstanding customer service. For more information about DYXnet Group, please visit the official website at or call +852 2187 7688.

News Article | March 15, 2016

A shoddy building collapses in an earthquake, people are injured, then hospitals and health professionals respond. So Ardalan has worked to strengthen Iran's healthcare system - from hospitals to the country's 150,000 female community health volunteers - by training them in what to do when disasters strike. "Disasters have an impact on public health, and health systems have to take a proactive approach, preventive measures to reduce the risk of disasters," said Ardalan, chair of the Disaster and Emergency Health Academy at Tehran University of Medical Sciences. Ardalan was one of several speakers at a conference held last week in Bangkok to discuss implementation of health aspects of the Sendai Framework for Disaster Risk Reduction adopted by U.N. member states a year ago. Health is a relatively new aspect of disaster risk reduction. The Sendai accord was the first to give health a higher profile, with measures to protect health by reducing damage to hospitals and ensuring medical care continues in disasters. It also tackles the risks of epidemics and pandemics. In the decade ending in 2014, disasters caused $1.4 trillion in damage, killed about 700,000 people and affected 1.7 billion others, according to the U.N. Office for Disaster Risk Reduction. Key infrastructure and healthcare facilities are often wiped out. The 2008 Sichuan earthquake in China damaged or destroyed 11,000 hospitals, while the 2004 Indian Ocean tsunami damaged 61 percent of health facilities in Aceh, Indonesia, killed 7 percent of the area's health workers and 30 percent of its midwives, according to the Overseas Development Institute. Disaster health experts like Ardalan have focused on building resilience and preparing for such catastrophes. Iran has worked to ensure its hospitals have disaster contingency plans, including evacuation plans in the event of an earthquake or flood, said Ardalan, who is also a visiting scientist at the Harvard School of Public Health and an adviser to the World Health Organization. Iran has also trained its community health volunteers - all women - to conduct household training, which includes drawing a household earthquake risk map to show danger spots near big windows or under large ceiling lights, as well as safe spots under tables or near pillars. Last year, the volunteers trained 500,000 households across Iran, he said. "We believe it's better to be proactive, work with them, so they are sensitive to their safety and know how to react if something happens," he said on the sidelines of the conference. "It's a very-cost effective intervention for the entire society." Similar efforts are under way to provide health and disaster preparedness for ethnic minority communities in rural China. Emily Ying Yang Chan, who worked for Médecins Sans Frontières for 17 years and now heads the disaster and medical humanitarian response center at Chinese University in Hong Kong (CUHK), began the ethnic minority health program about six months after the Sichuan quake. The typical community her team works with is two flights and a seven-hour bumpy car ride away, though one village, 5,000 meters above sea level on the Tibetan Plateau, took 17 hours to get to in a four-wheel-drive car. Chan's approach has been to provide the knowledge or help that villagers request, on condition that her team gets to conduct disaster risk training. Most communities want to learn more about economic development, though women also ask them to teach their husbands not to smoke or how to read food labels. In return, Chan and her students from the Collaborating Centre for Oxford University and CUHK for Disaster and Medical Humanitarian Response (CCOUC) give health advice such as not burning waste indoors and reducing salt intake. Then the team helps the community to prepare disaster kits, handing out red cloth bags, with large Chinese characters that read "rescue bag". They put in soap, a towel, a bottle of water and non-perishable food, as well as a manual battery-less torch and a multipurpose knife with a can opener - which Chan said has often been missing from aid packages. "A lot of agencies sent food supplies, but forgot to send a can opener, and many people come to the clinic with cuts because they use whatever they can to cut (open the can)," she said. The ethnic minority health program team has worked in 11 villages, visiting each one four times over a two-year period. The biggest challenge now, Chan says, is digesting the data they have gathered, to improve and scale up assistance for the villagers.

HONG KONG, Nov. 15, 2016 /PRNewswire/ -- Six outstanding women, a business leader and an exceptional company were honored "Women of Influence" (WOI) Awards in recognition of their career accomplishments and their support for the empowerment of women at the 13th Women of Influence Conference & Awards held at the Four Seasons Hotel Hong Kong on November 11. Organized by the American Chamber of Commerce in Hong Kong (AmCham), the WOI conference is one of the most established women's symposiums in the Asia Pacific region. The awards confer accolades to individuals and organizations who have achieved exceptional achievements and dedicated steadfast commitment to supporting female leadership in business. Corresponding with this year's theme "Leading Change: Transforming ourselves, our organizations, our society", AmCham was delighted to have Dr. Rosanna Wong, Executive Director of the Hong Kong Federation of Youth Groups, as the event's opening keynote speaker, and Ms. Teresa Ko, Partner of the Hong Kong Office and China Chairman of Freshfields Bruckhaus Deringer as the luncheon keynote speaker. Dr. Wong remarked that inspiring leadership comprises elements of humbleness, trust and passion, and emphasized the importance of the expatriate community's commitment in making Hong Kong a truly metropolitan city with diversity and generosity. She added that building trust among people is essential for youth to nurture leadership in themselves. Ms. Ko noted that women should venture into their own areas of excellence despite multi-responsibilities between work and family for their contribution and influence to the community can be equally significant. Concurrent breakout sessions were led by 14 business and thought influencers who shared their challenges and success stories on three themes: (1) Ourselves -- Increasing our self-awareness and leadership effectiveness (workshop) (2) Our Organizations -- Leading through complexity, and (3) Our Society -- Influencing wider societal change to enable opportunities for women and others. The following outstanding awardees in eight categories were announced at the awards ceremony: Professional of the Year Stephanie Hui Head of Merchant Banking (APAC Ex-Japan), Goldman Sachs Stephanie plays a key influential role at Goldman Sachs, overseeing and driving the firm's strategy and leadership decisions by actively serving on multiple committees across the Asian Region. As one of the few women globally leading a multi-billion dollar private equity business traditionally dominated by men, Stephanie is an influential and leading professional and a true champion for women both at Goldman Sachs and in the broader community in Hong Kong. Under her leadership, the team has made significant long-term private equity investments in leading companies across Asia. Outside of her work she serves as mentor to many young talented women and advocates for diversity in the workplace. Entrepreneur of the Year Lori Granito Managing Director, Go Gourmet Group of Companies Culinary Incubator, Kitchen Sync Lori Granito is the co-founder of Kitchen Sync, Hong Kong's first culinary incubator for startup food entrepreneurs. The ongoing success of her companies is directly attributable to her vision, energy and skills. In her previous experience, she was a food consultant for five-star hotels in the Asian region and was the owner of innovative restaurants in the US and Hong Kong. She was featured on a TEDx talk about being a mother and entrepreneur and is being recognized as a real community leader not only with recognized achievements but also one whose work with people in real need of help is unprecedented. Non-Profit Leader of the Year Jenny Bowen Founder & CEO, OneSky for All Children Jenny Bowen's efforts in serving orphaned and abandoned children in China and other countries can be seen through her leadership at OneSky, a global NGO providing innovative programs offering cost-effective, scalable models for providing nurturing family like care and enrichment opportunities for the world's most vulnerable children. OneSky works closely with government partners at all levels and its Model for Children in Orphanages has had a far-reaching effect on China's social welfare system. Jenny is committed to training and promoting women from local communities; since 1998 OneSky has trained 13,000 women and continues to provide them with professional development opportunities. OneSky's programme has become the gold standard for care of initialized children and Jenny has been recognized as the most inspirational and impactful social entrepreneur working today in China. Master of the Arts Sandra L. Walters Director, Sandra Walters Consultancy Ltd. Sandra Walters has been active in the arts scene of Hong Kong and South East Asia for more than three decades. As owner and director of Sandra Walters Consultancy, she has worked for more than 20 years to implement comprehensive art programs for five-star hotels and leading financial institutions across the Asian continent. She served as the first female president for the Rotary International Club in 2001-02. She also published numerous catalogues and was invited as guest speaker and panelist to many events. In 1988 she was the recipient of the Chevalier de l'Ordre des Arts et des Lettres, presented by the Ministry of Culture of the French Government June. Young Achiever of the Year Sandra Leung COO, Market Development Division, Hong Kong Exchanges and Clearing Ltd. As one of the youngest Senior VPs at HKEX, and COO of Market Development Division, Sandra managed to establish different effective systems and policies, with a great impact on the division and the firm. Outside of the work environment she is involved in mentoring activities and giving back to the community by serving as a Board Member and CFO for Time Auction and a Fundraising Committee Member of KELY. As an amateur chef, she volunteers for Food Angel and Food Link to combat food waste. Her next plans include starting a social venture to tackle elderly issues and give back to the community. Anson Chan reached the pinnacle of achievement in the Hong Kong Government by becoming the first woman and the first Chinese to become head of the Civil Service. During her years as a senior member of the Administrative Service, she demonstrated outstanding leadership qualities, combined with absolute integrity and refusal to compromise her principles. Whilst in the civil service she placed great importance on mentoring younger female colleagues and helping to prepare them for promotion and higher responsibilities. For years after retirement she maintained active acting as a mentor of her former school's students. She speaks regularly in public on women's issues, in particular the importance of equal educational opportunities for girls and the need to support victims of sexual violence. The following winners for two award categories were also honored: Champion for the Advancement of Women Ben Way CEO, Macquarie Group Asia Ben Way is a passionate champion of the belief that diversity is fundamental to Macquarie's success. After taking the position of Asia CEO in 2014 he established the Senior Female Leader networking groups across Macquarie's businesses in Asia. He also established employee network groups focusing on gender equality and diversity. He implemented "Unconscious Bias" training and a mentoring program across Asia for female and local talents. Outside of work, he is also member of different organizations that contribute to the advancement of women in the society and is regularly invited to speak to events championing diversity. With its regional headquarters in Hong Kong, Marriott International provides opportunities to create a diverse and inclusive environment to strengthen its company culture and give it competitive advantage. They were the first to establish a Women's Leadership Development Initiative (WDLI). Almost 60% of management positions are held by women. Through its female leaders in Asia, Marriott demonstrates that it has the leadership focus and representation to guide and maintain a gender balance workforce. In addition, its commitment to women-owned businesses in their supply chain shows that its focus extends to its external partners, ensuring that it has a broad effect on the business ecosystem. This is the thirteenth year since AmCham founded and spearheaded this much-anticipated annual event. This year's event was generously sponsored by Stamford American School, BNY Mellon, Goldman Sachs, Thomson Reuters, Harvest Global Investments, PVH, White & Case, CUHK Business School, Dell, Eversheds, JLL, Regal Springs, Deloitte, Pernod Ricard, and HLT. Other supporting organizations include The Women's Foundation, W Hub, Financial Times (Official News Media), Facebook (Official Social Media Partner), PRNewswire (Official Newswire Partner) and HR Magazine. More than 70 nominations for the Awards were received from June to September this year. A panel of 31 judges reviewed this year's nominations. -          Ms. Stella Abraham, National Director, Head of Residential Leasing & Relocation Services, HK, JLL -          Mr. Brian Brenner, Regional Director & Head of Tenant Representation Hong Kong Markets, JLL -          Ms. Rachel Chan, Founder and Chief Analyst, InnoFoco -          Ms. Fangfang Chen, SVP, Chief Administrative Officer, Head of Strategy, APAC, State Street             Corporation -          Ms. Diana David, Financial Times / Sarana Capital -          Ms. Rachel Farrell, Managing Director, Head of Sovereign and Institutional, Asia Pacific ex Japan,             J.P.Morgan Asset Management -          Mr. Thomas Gorman, Senior Advisor, FORTUNE China, CCI Asia-Pacific Ltd. -          Ms. Joanna Hotung, Founder & CEO, KG Group -          Ms. Susan D. Hutchison, Head of Human Resources APAC, KKR (Kohlberg Kravis Roberts) -          Ms. May Knight, Managing Director, Financial Services, Asia Pacific, Accenture -          Ms. Kirti Lad, Lead Consultant, Director -- Asia Pacific and Member of the Global Technology and             Board Practice, Harvey Nash Executive Branch -          Ms. Christine Lam, CEO, Citi China -          Ms. Eunei Lee, Board Director, Asia Art Archive -          Mr. Ignacio Lopez, SVP, Global Sourcing, Walmart -          Ms. Belinda Lui, Managing Director, Public Policy, Asia Pacific, Time Warner Inc. -          Ms. Esther Ma, CEO & Founder, Prestique Ltd. -          Ms. Shalini Mahtani, MBE, Founder Hospital Advisor & Founder The Zubin Foundation -          Ms. Adriana Alvarez-Nichol, Founder, Puerta Roja Limited -          Ms. Annika Payn, Head of Brand Management, APAC, Group Marketing & Communications,             Zurich Insurance (Hong Kong) -          Ms. May Tan, Chief Executive Officer, Standard Chartered Bank (HK) Ltd. -          Ms. Elizabeth Thomson, Chairwoman and Founder, The Amber Foundation Ltd. -          Ms. Su-Mei Thompson, CEO, The Women's Foundation -          Ms. Janelle Tong, Marketing Director, Pernod Ricard Asia -          Ms. Jennifer Van Dale, Partner, Eversheds -          Ms. Nancy Yang, Executive Director, Asian Charity Services -          Ms. Elaine Young, CEO, ECY Consulting Ltd. -          Dr. Andrew Yuen, Chairman of the Board, Le French May -          Ms. Catherine Zhu, Partner, Egon Zehnder Panel 1: Ourselves - Increasing our self-awareness and leadership effectiveness (Workshop) -          Divya Ahluwalia, Templar Advisors -          Rina Hiranand, Strategy Director, social @Ogilvy Hong Kong (Facilitator) -          Helene Liu, Executive Director, The Beauty Group (Introducer) Panel 2: Our Organizations -- Leading through complexity -          Vivian Cheung, Deputy Director, Airport Operations, Airport Authority Hong Kong -          Sammi Cho, Chief Executive Hong Kong Branch, Chief Operating Officer Asia Pacific Region,             BNY Mellon -          Marybeth Hays, Chief Merchandising, Marketing & Supply Chain Officer, Walmart China -          Christina Ma, Head of Greater China Equity Sales, Goldman Sachs (Asia) LLC -          Daphne Yiu, PhD, Professor and Chairperson, Department of Management, CUHK Business            School, The Chinese University of Hong Kong -          Anne O'Riordan, Senior Managing Director -- Global Life Sciences, Accenture (Moderator) Panel 3: Our Society -- Influencing wider societal change to enable opportunities for women and others -          Joanna Bowers, Director, Cheeky Monkey Productions Asia Ltd. -          Kathleen Ferrier, Co- Founder, Bright Hong Kong -          Shalini Mahtani, MBE, Founder, The Zubin Foundation and Hospital Advisor -          Vanina de Verneuil, General Counsel, Reliance Communications (Enterprise) & Global Cloud             Xchange -          Alia Eyres, CEO, Mother's Choice (Moderator) With close to 1,600 members, the American Chamber of Commerce in Hong Kong (AmCham) is one of the largest American Chambers outside the United States, the largest international chamber in Hong Kong, and one of the most dynamic and influential international business organizations in the Asia-Pacific region. AmCham's mission is to foster commerce among the United States, Hong Kong, and Mainland China; and to enhance Hong Kong's stature as an international business center.

The antibodies used for western blotting included anti-YAP/TAZ (1:1,000; 8418; Cell Signaling Technology, USA), anti-YAP (1:1,000; Cell Signaling Technology, USA), anti-pYAP (1:1,000; Ser 127, 4911S; Cell Signaling Technology, USA), anti-TAZ (1:1,000; ab84927; Abcam, UK), anti-JNK (1:1,000; 9252h; Cell Signaling Technology, USA), anti-pJNK (1:1,000; 9255; Cell Signaling Technology, USA), anti-CTGF (1:1,000; ab6992; Abcam, UK), anti-Gα (1:1,000; ab128900; Abcam, UK), anti-integrin β (1:1,000; 4702; Cell Signaling Technology, USA), anti-RhoA (1:1,000; ab54835; Abcam, UK) and anti-eNOS (1:1,000; BD Biosciences, USA). The antibodies used for immunostaining included anti-pYAP (1:100; Ser 127, 4911S; Cell Signaling Technology, USA), anti-YAP (1:100; Cell Signaling Technology, USA) and anti-pJNK (1:100; 9255; Cell Signaling Technology, USA). RNA was extracted by using TRIzol Reagent (Thermo) according to the manufacturer’s protocol. cDNA was synthesized using a High-Capacity cDNA Reverse Transcription Kit (Thermo). Quantitative PCR was performed using SYBR Select (Thermo) following the manufacturer’s protocol. GAPDH was used as the internal control. Primers used for quantitative real-time PCR were included in Supplementary Table 1. Cells or tissues were homogenized in cold RIPA lysis buffer supplemented with cOmplete Protease Inhibitors cocktail and phosSTOP phosphatase inhibitor (Roche). The protein concentration was determined using Bradford Assay (Bio-Rad). Ten micrograms of protein were resolved by SDS–polyacrylamide gel electrophoresis and transferred to the PVDF membrane (Bio-Rad). Target protein was detected using specific primary antibody. Bound antibodies were detected by horseradish-peroxidase-conjugated secondary antibody and visualized by enhanced chemiluminescence (Cell Signaling Technology). Experiments were repeated three times and the target protein level was quantified by ImageJ and normalized to internal control (or pYAP was normalized to total YAP) (Extended Data Figs 6 and 7). Original western blot scans are included in Supplementary Fig. 1. HUVECs and human aortic ECs were purchased from Lonza (EGM, Clonetics, Lonza, Walkersville, Maryland, USA). Lonza guarantees that the cells express CD31/105, von Williebrand Factor VIII, and are positive for acetyated low-density lipoprotein uptake. We did not test for mycoplasma contamination during the experiments. HUVECs were maintained in EGM supplemented with EGS and FBS at 37 °C in an incubator with 95% humidified air and 5% CO and passaged every 3 days. Cells within seven passages were used for the in vitro study. GST-RBD recombinant protein was purified from BL21 (DE3) Escherichia coli and affinity conjugated to glutathione sepharose beads (Pharmacia). For GST affinity pull-down, 107 cells were lysed in 1 ml Weak Lysis Buffer (Beyotime) supplemented with protease inhibitors (Roche). Cell lysates were centrifuged at 15,000 g at 4 °C for 20 min to remove cell debris. Cell lysates were incubated in sepharose beads conjugated with 1 μg GST–RBD and incubated at 4 °C for 2 h with constant agitation, and precipitated by centrifugation at 1,000 r.p.m. for 10 min. After three washes, beads were collected by centrifugation and boiled in 2× SDS loading buffer for 5 min. The active RhoA was determined by western blotting. Animals were supplied by the University Laboratory Animal Services Centre and their use approved by the Ethical Committee of Animal Research (CUHK). The animals used in the present study included Sprague-Dawley rats, apolipoprotein E deficient (ApoE−/−) mice and EC-specific YAP overexpression transgenic mice. Male mice or rats were used in all in vivo studies. The animals were kept at a constant temperature (21 ± 1 °C) under 12/12-h light/dark cycle and had free access to water and standard chow unless specified. CAG loxp-stop-loxp-Yap mice were generated in a C57BL/6 background in Model Animal Research Center (Nanjing, China). Yap-COE mice were crossed with ApoE−/− mice and then Tie-2-Cre+/− mice. The 6-week-old ApoE−/−;Yap-COE;Tie-2-Cre+/− and ApoE−/−;Yap-COE;Tie-2-Cre+/− mice were bred and housed in temperature-controlled cages under a 12/12-h light/dark cycle with free access to water in Tianjin Medical University Animal Center. Study protocols and the use of animals were approved by the Institutional Animal Care and Use Committee of Tianjin Medical University (Tianjin, China). The mice were fed a Western diet (Research Diets, D12109) containing 40 kcal% fat, 1.25% cholesterol and 0.5% cholic acid for 4 weeks before being killed. Aortas were isolated to assess lesion formation and distribution by Oil Red O staining. Aortic roots were stained for pJNK, α-SMA and macrophages. Mouse aortas were fixed with 4% paraformaldehyde for 15 min. After permeabilization/blocking in 0.05% Triton X-100 (in PBS) and 1% BSA and for 0.5 h at room temperature, aortas were incubated at 4 °C overnight in incubation buffer containing 1% BSA and the primary antibody including YAP1 (Abcam, ab52771), CD31 (Abcam, ab24590). After being washed in PBS three times, aortas were incubated with Alexa-Fluor 488-, Alexa-Fluor 594-conjugated secondary antibodies (ZSGB-BIO, Beijing) for 1 h at room temperature. The fluorescent signal was detected by a Leica confocal laser scanning microscopy. Stenosis of the abdominal aorta of rats was induced using a U-shaped titanium clip, as described29, 30. Briefly, after anaesthetization with isoflurane, the rat was laid supine and a lower midline abdomen incision was made; the part of the intestine was gently lifted out of the abdominal cavity and kept moist with saline throughout the surgical procedure. The aorta, left and right common iliac artery were exposed and the accompanying vein was carefully separated. The clip was held with a pair of forceps and placed around the isolated segment (1 cm from the arterial bifurcation) to partly constrict the abdominal aorta. The extent of clipping was controlled by placing a stopper of given size between the two arms of the forceps. Two weeks later, the rat was euthanized by intoxication with 100% carbon dioxide, and the aorta was perfusion-fixed with 4% (w/v) paraformaldehyde at 120 mm Hg. The fixed aorta was embedded in paraffin blocks for immunohistochemical staining. Partial ligation of carotid artery was generated as described before31. Briefly, ApoE−/− mice were anaesthetized by intraperitoneal injection of xylazine (10 mg/kg) and ketamine (80 mg/kg) mixture. A ventral midline incision (4–5 mm) was made in the neck. Left carotid artery was exposed by ventral midline incision (4–5 mm) in the neck. Left external carotid, internal carotid and occipital arteries were ligated, while the superior thyroid artery was left intact. Mice were monitored until recovery in a chamber on a heating pad after surgery and fed the Western diet immediately after surgery until killed. Immunohistochemical staining was performed on serial sections (5 μm thick) of paraffin-embedded rat abdominal aortas and ApoE−/− mouse aortas using pYAP (Cell Signaling), EC- and SMC-specific markers (that is, vWF and α-SMA, respectively) (Merck Millipore). Briefly, the sections were de-waxed in xylene, rehydrated in descending grades of alcohol and permeabilized by incubating for 10 min in sodium citrate for 10 min at 95 °C. Sections were cooled down to room temperature and blocked with blocking reagent (Merck Millipore) for 30 min. One section was incubated with antibody against pYAP (1:100) overnight at 4 °C, followed by Alexa-Fluor 594-conjugated goat-anti-rabbit IgG (1:1,000; Invitrogen) secondary antibody in blocking reagent for 1 h at room temperature. The secondary section was incubated with antibodies against vWF and α-SMA (1:100 each) overnight at 4 °C, followed by Alexa-Fluor 594-conjugated goat-anti-rabbit IgG and Alexa-Fluor 488-conjugated goat-anti-mouse IgG (1:1,000; Invitrogen) secondary antibodies in blocking reagent for 1 h at room temperature. Nuclei were co-stained by DAPI (Invitrogen) in PBS for 5 min. The sections were spin-dried and mounted with ProLong Gold (Invitrogen) on glass coverslips. Images were acquired and analysed using a Zeiss fluorescence microscope with Axiovision image analysis software. ApoE−/− mice (male, 12 weeks old) were fed a Western diet, and MnCl was administered through voluntary water consumption. Water consumption rate was predetermined by monitoring the volume of water remained. MnCl was supplemented to drinking water to achieve 5 mg/kg body weight. Mice body weight and water consumption were adjusted weekly to adapt to the change of body weight and water consumption. After feeding on the Western diet for 3 months, the mice were killed and the atherosclerotic plaque formation was determined by Oil Red O staining. The ApoE−/− mice were killed by CO asphyxiation. Mouse aortas were dissected in cold PBS and cut open to expose the atherosclerotic plaques. After fixation in 4% formaldehyde for 16 h at 4 °C, the tissues were first rinsed in water for 10 min and then in 60% isopropanol. The aortas were stained with Oil Red O for 15 min with gentle shaking, and rinsed again in 60% isopropanol and then in water for three rinses. The samples were fixed on the cover slides with the endothelial surface facing upwards. The images were recorded using an HP Scanjet G4050. The plaque areas were determined using National Institutes of Health ImageJ software and calculated by expressing the plaque area relative to the total vascular area. The experiments were approved by the Hospital Human Subjects Review Committee (IRB approval number TSGHIRB 2-103-05-132) of Tri-Service General Hospital in Taipei and were conducted under the guidelines established by the Ethics Review Board of National Health Research Institutes, Taiwan. Written informed consent was obtained from all individuals. Human aortic tissue specimens were from patients with acute type-A aortic dissection. These samples were collected during emergency aortic surgery. The diseased segments of aorta (that is, dissecting aortic aneurysm) in these patients were all resected and replaced by an artificial inter-position graft. Specimens were fixed in paraformaldehyde, paraffin-embedded and cut into 5 μm sections. YAP Ser127 phosphorylation was determined by immunofluorescence imaging. HUVECs were transfected with pWCXIH-Flag-YAP-S127A (a gift from K. Guan, Addgene 33092) and 3× Flag pCMV5-TOPO TAZ (S89A) (a gift from J. Wrana, Addgene 24815) or pEGFP-N1 by Neon transfection system (Invitrogen, USA)32, 33. Four hours after transfection, cells were harvested and RNA was extracted using RNeasy Mini Kit (Qiagen, Germany). The extracted RNA samples were sent to Beijing Genomics Institute (BGI) for RNA-sequencing analysis. P < 0.05 and fold change >1.5 was used as a threshold for different regulated genes. DAVID tools were used for the pathways enrichment analysis and GlueGo was used for the Gene Ontology analysis. Ibidi flow system (IBIDI, Germany) was used to generate USS and disturbed flow (12 dyn cm−2 for USS and 0.5 ± 6 dyn cm−2, 1 Hz for disturbed flow). μ-slide I 0.4 Luers (IBIDI, LLC) was used for immunofluorescence studies. The slide was coated with 50 μg/ml fibronectin for 24 h. Seven thousand HUVECs were seeded onto the slide. After cells were adapted to medium containing 2% FBS (10% fatty acid free BSA for disturbed flow) for 6 h, the slides were mounted onto the Ibidi flow system. For immunostaining of USS-induced YAP/TAZ nuclear exportation, cells were subjected to USS for 6 h. For western blotting and reverse transcription real-time PCR analysis, the μ-slides were replaced with a custom-built flow chamber, which could accommodate more cells. Glass slides (75 mm × 38 mm; Corning) were coated with fibronectin (50 μg/ml). HUVECs were seeded on slides and allowed to attach on the bottom for 16 h. For USS, the medium was replaced with EGM supplemented with 2% FBS for 6 h. For disturbed flow, cells were incubated in EGM supplemented with 10% fatty-acid-free BSA (Sigma). The slides were mounted onto the flow chamber and connected to the Ibidi flow system. The cells were then subjected to USS or disturbed flow. For USS-induced YAP phosphorylation, 15 min of shear force was applied unless otherwise noted. For USS-induced YAP translocation, 6 h of shear force was applied. For reverse transcription real-time PCR analysis, 4 h of shear stress was sufficient to inhibit the expression of YAP/TAZ target genes. For reporter gene assay, 48 h of shear forces were applied to HUVECs. To construct the reporter plasmids for adhesion molecules, human genomic DNA was purified from HUVECs using a Universal Genomic DNA Extraction Kit Ver 3.0 (Takara, Japan). The promoters of ICAM1, SELE, CCL2 and CXCL1 were PCR amplified from human genomic DNA using the primers listed in Supplementary Table 1. A 2.1 kb fragment (−1784 to +328) from the ICAM1 promoter, a 2.2 kb fragment (−1807 to +475) from the SELE promoter, a 4 kb fragment (−3992 to +73) from CCL2 promoter and a 1.3 kb fragment (−1256 to +84) from CXCL1 promoter were amplified. The PCR products were gel purified by gel extraction kit (Takara, Japan) and digested with restriction enzymes. The digested fragments were gel purified and ligated to pGL3 reporter plasmid digested by corresponding restriction enzymes. The ligation products were then heat inactivated at 65 °C for 15 min and transformed into the DH5α competent cells. The Pro32Pro33 integrin was derived from pcDNA3.1-beta-3 (a gift from T. Springer, Addgene plasmid 27289) by point mutation34. Primers used for plasmids construction were included in Supplementary Table 1. To generate the adenovirus shuttle vector pShuttle-U6, the U6 promoter and 1.9 kb stuffer sequence was excised from pLKO.1 (a gift from D. Root, Addgene plasmid 10878) with NotI/XhoI and ligated into pShuttle plasmid pre-digested with restriction enzymes accordingly. Short hairpin RNA targeting mouse Taz was generated using a protocol similar to pLKO.1 shRNA plasmids (Addgene) construction protocol. Taz shRNA sequence, TRCN0000095951, which was validated by Mission shRNA (Sigma Aldrich), was used to generate shuttle plasmids for Taz shRNA. Recombinant adenovirus was generated using the AdEasy system35. Briefly, pShuttle-U6 vector containing shRNA was digested with PmeI and co-transformed with adenoviral backbone plasmid pAdEasy-1 for homologous recombination in E. coli BJ5183 cells. Positive recombinants were linearized by PacI digestion and transfected into HEK-293A cells for virus packaging. The medium and cells were collected until the cytopathic effect was apparent. After three cycles of freeze and thaw to release the virus, the cell debris was removed by centrifugation at 3,000 r.p.m. for 15 min. The virus-containing supernatant was collected by PEG precipitation, followed by dialysis against saline with 100K MWCO dialysis tubing (Spectrum Labs). Lentiviral shuttle plasmids for YAP (TRCN0000300325), TAZ (TRCN0000370007), Gα (TRCN0000036885) and ITGB3 (TRCN0000003236) shRNA were purchased from Sigma. Plasmid cocktail containing 1 μg of resultant shuttle plasmid, 750 ng of psPAX2 packaging plasmid and 250 ng of pMD2.G envelope plasmid were co-transfected to HEK-293FT cells. The medium was changed 15 h after transfection; 48 and 72 h after transfection, the medium containing the lentiviral particles was harvested then passed through 0.45 μm filters to remove cell debris. The virus was precipitated with PEG and suspended in PBS containing 4% sucrose. The lentiviral solutions were then aliquoted to vials and stored at −80 °C. YAP1 S127A was amplified from pWCXIH-Flag-YAP-S127A (a gift from K. Guan, Addgene 33092) and ligated to pAAV-MCS (Stratagene) to generate the pAAV-YAP1 S127A shuttle plasmid. A similar strategy was used to generate the pAAV-TAZ S89A from 3× Flag pCMV5-TOPO TAZ (S89A) (a gift from J. Wrana, Addgene 24815). pX601-AAV-CMV: NLS-SaCas9-NLS-3xHA-bGHpA;U6::BsaI-sgRNA (a gift from F. Zhang, Addgene plasmid 61591) was used to generate the EC-specific Cas9 for Yap in vivo genome editing28. Three sgRNA sequences for Yap were predicted by CCTop (CRISPR/Cas9 target online predictor)36. ICAM2 endothelium-specific promoter from human was synthesized by GenScript and replaced the CMV promoter in pX601-AAV-CMV14. Primers used for sgRNA were included in Supplementary Table 1. The shuttle plasmids were co-transfected into HEK-293T with endothelial enhanced RGDLRVS-AAV9-cap plasmid (provided by O. J. Müller, Universität Heidelberg, Germany) and pHelper plamid (Stratagene)37. After co-transfection for 72 h, the AAV viral particles were isolated according to the protocol reported in ref. 38. Briefly, the cells were harvested and re-suspended in 1× restore buffer and the nuclei were extracted by homogenization. Viral particles were extracted by using nuclear lysis buffer. The viral particles were purified by PEG concentration, followed by dialysis against saline with 100K MWCO dialysis tubing (Spectrum Labs) to remove impurities, and concentrated. The viral titration was determined by qPCR and adjusted to 1010 plaque-forming units per ml in PBS containing 4% sucrose. For adenovirus-mediated Taz shRNA, viruses (109 plaque-forming units) were administered to ApoE−/− mice (male, 12 weeks old) that had been fed on Western diet (Research Diets) for 4 weeks, through tail vein injection. The mice were then fed on Western diet for 2 more months. The atherosclerotic plaque formation was visualized by Oil Red O staining. For AAV-mediated CA-YAP/TAZ overexpression and YAP-Cas9, the viruses (109 plaque-forming units) were administrated to ApoE−/− mice (male, 12 weeks old) through tail vein injection before feeding on Western diet or receiving the carotid partial ligation surgery. Statistics analyses were performed using GraphPad Prism 5.0. The sample sizes were not predetermined by statistical methods. The samples were not randomized and the investigators were not blinded to allocation during experiments and outcome assessment. At least three independent experiments were performed for all biochemical experiments and the representative images were shown. Results represent mean ± s.e.m. Student’s t-test (unpaired two-tailed) was used in the analysis. No samples, mice or data points were excluded from the reported analysis. Levels of probabilities less than 0.05 were regarded as significant. The RNA-seq data that support the findings of this study have been deposited in BioSamples database ( under accession number SAMN04565728. All other data are available from the corresponding authors upon reasonable request.

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