Professor of Finance, Executive Dean

Educational Background

Ph.D.  Managerial Economics and Decision Sciences, Kellogg Graduate School of Management, Northwestern University, 1987
M.S.    Mathematics, University of Oregon, 1983
B.S.    Mathematics, East China Normal University, Shanghai, China, 1982

Research Areas

Corporate Finance (Financial Policy, Valuation, M&A, Risk Management),International Financial System, Regulation and Management of Financial Institutions, Labor Economics, Economic Reforms and Development.

Becoming the World's Top Institute for China Financial Research

He was the first Chinese scholar ever to teach finance in a university in the United States, as well as the first full professor with tenure in a U.S. university who returned to China and took a full-time position. Embracing his adventurous spirit, he embarks on an exciting journey at Shanghai Advanced Institute of Finance. With tireless devotion to research on China’s economic transformation and financial reform, deep passion for classical music and his hobby of swimming, Professor Chun Chang shares his experience and insights with us in the interview. As the Executive Director at SAIF, he set its goal of becoming a top institute for China financial research around the world.

Enjoy Experiencing New Things, with an Adventurous Spirit

“I like to try new things, keeping my spirit of adventure.” says Professor Chun Chang. He began teaching at China Europe International Business School (CEIBS) a decade ago, and served as Associate Dean responsible for research. Prior to joining CEIBS, he taught at Carlson School of Management, University of Minnesota for 17 years. He also served as a consultant for the World Bank, Northwest Airlines, among others. Back in those days, when finance was still quite novel to most Chinese citizens, it is indeed not easy for any professor to be the first one to join the full-time faculty in a U.S. university.

From the year of 2000, Professor Chang had the chance to come back to his hometown more often and pursued his keen interests in local research. The advent of the 21st century witnessed rapid development in China's economy. As he sees the speed of China's economic restructuring and financial reform, although it wasn’t as fast as expected in the past few years, he firmly believes that China will speed up the transformation in three to five years. In this scenario, because of the need for finance experts across the nation, he is certain that they will have promising future in the field of education and research.

After coming back to China, Professor Chang received job offers from top business schools such as Cheung Kong Graduate School of Business (CKGSB) and CEIBS. However, he was expecting a stage with an atmosphere of more innovation, rather than limits inside the box of the current education system. Eventually, the newly established SAIF impressed him a lot. “One of the advantages of SAIF is that it finds a balance between being inside the education system and thinking outside the box. Thus, compared with CKGSB’s or CEIBS’s, SAIF has a newer mode, which will lead us to an even brighter future if we steer it in the right direction. Moreover, my research interest is closer to the focus of financial research at SAIF,” he says.

From 2004 to 2009, Professor Chang was the Executive Editor of China Economic Review, the leading English-language academic journal on the Chinese economy. As he recalls, the journal provides research in the broader sense, including not only the financial aspect, but also China's economy. Consequently, in terms of China financial research, he has broadened his perspective of research. “Now, my research area also includes China's macroeconomic development, such as issues of monetary policy, financial system, and exchange rate. That is what I benefit from the experience at China Economic Review,” he says.

Professor Chang received his Ph. D. in Managerial Economics and Decision Sciences from Kellogg Graduate School of Management, Northwestern University in 1987. His current research interests are corporate finance, bank regulation and risk management, international financial system, financial reform and economic development. In 2010, he published a paper about how a firm’s capital structure choice affects the informational efficiency of its security prices in the secondary markets. Two new determinants of capital structure were identified in this paper: liquidity premium and informational efficiency. “The topic is what I investigated in my dissertation in 1985. A few years ago, I started to reconsider the issue. This time, we came up with a new viewpoint and theory, exploring the effects of capital structure changes on the market prices of the firms' securities. We examined negative debt as the optimal capital structure,” he explains.

Capital structure is about how a firm finances its overall operations and growth. A large way of measuring capital structure is a firm’s debt-to-equity ratio, the ratio between total liabilities and shareholders' equity. Whether they have more debt than equity, or how high this ratio is, questions like these are the most fundamental ones in the corporate finance. They are also the most important and the most intractable problems in the world of finance nowadays. According to Professor Chun Chang, how a firm’s capital structure choice affects the informational efficiency of its security prices in the secondary markets is a topic has not been studied before. It is an innovation.

Concerning the Blood Vessels of the Economy, Financial Reform Cannot be an Experiment

On the opening ceremony of SAIF 2012 MBA program and MF program, Professor Chang pointed out that it is difficult for China's current financial system to serve the development of the real economy effectively. China could face more risks if it does not implement financial reform. Regarding the risk of financial reform, he draws an analogy between the blood vessels in a human body and financial reform. “We may conduct experiments to a particular industry. At the end of the day, we can survive it, even if it turns out to be a failure, because one industry functions as an arm or a leg. However, if the blood vessels are damaged, it will influence the body as a whole. The risk of financial reform is in the same situation,” he says.

He continues, compared with common types of economic reforms, financial reform is harder, because we cannot make it an experiment. It matters to the whole system. Take the marketization of interest rates for example. Any change in interest rate policy will affect the whole economy. Professor Chang claims that China's reform is progressive, usually setting up a pilot project in a city, and then spreading to more places. In doing so, it can reduce risk. But financial reform cannot be accomplished in this way. Even so, the biggest challenges in financial reform is exactly the key aspects that our current financial system needs to reform, including the marketization of interest rates and exchange rates, the liberalization of capital account, and the internationalization of the nation's currency.

In 2012, Chinese financial reform has furthered the marketization of interest rates, he suggests. However, according to PwC’s Analysis of China’s Top 10 Listed Banks Results for First Half of 2012, although their non-performing loan (NPL) ratio declined, the total overall balance increased by RMB 5.3 billion as compared to the end of 2011, reaching RMB 356.65 billion, indicating an upward risk of NPLs. When it comes to the increase in NPLs, according to Professor Chang, one of the causes is a stagnant real economy, and another is the monopoly position of major banks and strict government controls over lending and borrowing rates. As a matter of fact, interest rates should be determined in a market with supply and demand, instead of being controlled by the government, he explains, “Why interest rates are controlled by the government so far? Largely because of a lack of competition among the banks, it is safer if the government control the interest rate risk. On the other hand, as the government controls interest rates more intensively, banks with less ability to compete and financial freedom were caught in a vicious cycle.”

He continues to suggest, due to negative interest rates of banks last year, large amounts of money have flowed through the banking system into the underground banks. Interest rates of underground banking system are determined by the market, without risk control. The private lending crisis in Wenzhou in 2011 has aroused our attention. Professor Chang says that the ultimate solution to this problem is the marketization of interest rates. Although in a certain period of time after marketization reform of interest rates, banks may find it difficult to make money with more intense competition. Just like a child learning to walk, he needs to take action first, even though he is going to fall. Yet, if he is not allowed to walk at the first place, it will make him fall even harder in the future. This is the game with options, short-term pain or long-term pain.

Keep Abreast of International Standards, and Dedicate Ourselves Fully to Chinese Finance Research

Apart from teaching and doing research, Professor Chang devotes himself to the duties of the Executive Director at SAIF. He finds a balance between both of them. “I would like to spend more time on research, especially on China financial research. How to reform China's financial system? What would good proportion of direct financing and indirect financing for banks be after the marketization? How do banks' internationalization strategies implement? How to achieve the internationalization of China’s Currency, Chinese Yuan? These are all crucial questions that our nation really needs to solve,” he suggests with a determined look on his face, during the discussion on his research plans and goals.

In recent years, domestic universities make significant progress on educating finance talents, achieving higher levels of internationalization. Established by Shanghai Jiao Tong University and keeping abreast of international standards, SAIF is aiming to build a leading and world-renowned institute of finance in the education system. “I am really attracted by this innovation. It is an entrepreneurial process with exploration and continuous progress,” says Professor Chang. He pointed out that SAIF’s biggest advantage is combining teaching and research. This is exactly the same as the mode of best business schools in the world. At SAIF, we cultivate top finance talents as we make cutting-edge research.

Looking into the future, Professor Chang predicts that China will overtake US GDP at its fastest pace in a decade. Although the current financial market of China is not as sophisticated as that of developing countries across the world, it has promising prospects for development within a decade, undoubtedly. China is bound to enjoy a pivotal position in the world. The importance of researching financial market in China will increase accordingly. "As long as we dedicate ourselves fully to Chinese finance research, as long as Chinese capital market plays an increasingly important role in the international arena, therefore, SAIF, as the world's top institute, will be exactly the place for scholars from home and abroad to conduct financial research. It is impossible for Harvard or MIT to surpass us in China financial research. We have an advantage in this regard," he says with the confidence in the future development of SAIF, carrying high expectations.

In order to achieve quality in teaching, research and management responsibilities, Professor Chang keeps a busy schedule every day. Our interview started right after his meeting. Even though there are phone calls and documents for him to answer and sign during the interview, he patiently answered each of our questions in the interview. How does he relax and spend his leisure time? “Ever since I was a child, I have been enjoyed swimming. I remember swimming across the Yangtze River. That was 16000 kilometers. Now, I still go swimming frequently.” Apart from swimming, he loves classical music. “Bach is my favorite composer. I can talk a lot about his works,” he says excitedly and takes a look at his iPhone music, “I have got more than ten different versions of Bach's works. Sometimes I compare them to each other. Any work of Bach can be played in different ways.”