Program 2025

February 7, 11 am - 12:30 pm EST

Full paper has presentation time for 18 minutes, discussion for 7 minutes, and Q&A for 5 minutes.

Early idea has 15 minutes where you ask questions during the presentation. 

Title: Do Share Repurchases Increase the Value of Non-repurchasing Firms?

• Presenter: Byungwook Kim (University of California, Irvine)

• Discussant: Hae mi (Amy) Choi (Loyola University Chicago)

• Abstract: This paper shows that flows generated by share repurchases increase the value of non-repurchasing firms through institutional investors’ portfolio rebalancing. Firms use cash to repurchase shares, mainly from institutional investors since they have large ownership of shares. After selling shares in repurchasing firms, institutional investors reinvest most of the proceeds into shares of non-repurchasing firms since they follow rigid asset allocation rules (e.g., 80% equity and 20% bonds). The resulting flows lead to higher portfolio returns of non-repurchasing firms by up to three percentage points per quarter without reversals. Operating with investment styles, institutional investors primarily reinvest in non-repurchasing firms with similar characteristics as repurchasing firms (e.g., size, book-to-market, industries). Their style-aligned reinvestment affects realized returns of risk factors (e.g., SMB, HML) and industry portfolios. Inferences using the granularity of share repurchases support a causal interpretation that uninformed flows from share repurchases have material effects on the valuation of non-repurchasing firms.

Title: Mandatory Disclosure and ESG Profiles: Evidence from the Smaller Reporting Company Rule

• Presenter: Jewon Shin (Pennsylvania State University)

• Discussant: Hyun Joong Kim (University of Southern Denmark)

• Abstract: I examine the impact of reduced mandatory disclosure on ESG profiles. Using the SEC’s 2018 rule reform for smaller reporting companies, I find that treated firms reduced their ESG disclosure quality and score when their disclosure obligations decreased, particularly in environmental and governance dimensions. This negative effect is intensified for financially constrained firms but is mitigated for firms with strong ESG commitments, such as gender-diverse boards, ESG-linked executive compensation, ESG-focused investors, and strong governance. However, I find no significant changes in real ESG activities among firms that disclose this information, such as emissions and donations. These results indicate that information availability is a fundamental driver of ESG scores and suggest that firms adjusting their ESG profiles are not prioritizing ESG, providing insights into how firms may react to the SEC’s upcoming 2022 ESG disclosure obligations.

Title: On Exploitative Homophily in Venture Capital Markets

• Presenter: Hyun Joong Kim (University of Southern Denmark)

• Co-authors: Fan Li (University of Utah), Hisan Yang (Hong Kong Polytech University)

• Abstract: In the venture capital industry, each joint partnership for developing an early-stage project may accompany substantial friction and transaction costs between its founder (investee) and venture capitalist (investor). Hence, a collaboration between entities with similar ethnic or cultural backgrounds may reduce the costs of screening, monitoring, and other fees and fill the equity gap in the VC industry, especially when these groups are considered minorities. Meanwhile, relatively low transaction costs between those entities may drive an exploitative relationship and contract terms stemming from imbalanced bargaining power allocation and low expenses for fixing potential misalignments in the future. This paper uses theoretical and empirical methods to study how the ethnic and cultural closeness between VC market participants affects their contract terms and generates exploitative relations, amplifying hold-ups.

Title: Tax Revenue Elasticity and Bond Valuation

• Presenter: Yun Joo An (Indiana University)

• Local governments face heterogeneous frictions in raising property tax revenue. I document these frictions using the elasticity of property tax revenue to property market value. A local government’s elasticity commands a risk premium in a no-arbitrage asset pricing model that prices municipal bonds based on the surpluses of the local government. On average, local governments raise less property tax revenue than the changes in property market value. The cross-sectionally heterogeneous elasticities of local governments carry positive prices of risk, leading to a risk premium on municipal bonds and resulting in yields that deviate from risk-free rates. Municipal bond yield spreads increase by 23 basis points for bonds issued by local governments whose property tax revenue is more elastic to property market values. This study highlights that a local government’s revenue-raising capacity shapes the municipal bond market.

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