Publications

Derrien, François, Ambrus Kecskés, and Phuong-Anh Nguyen, 2023, Labor force demographics and corporate innovation, Review of Financial Studies 36, 2797-2838

Abstract: Firms in younger labor markets produce more innovation. We establish this by instrumenting the current labor force with historical births in each local labor market in the United States. Analyses of firms and inventors allow us to rule out unobservable heterogeneity across local labor markets and firms, life cycles, and other effects. Corporate innovation in younger labor markets reflects the innovative characteristics of younger labor forces, and its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel.

Best Paper Award, Eurasia Business and Economics Society Conference, 2022
Best Paper Award for Corporate Finance, Academy of Finance Conference, 2020
Best Paper Award, Vietnam International Conference in Finance, 2019
Best Paper Award, World Conference on Business and Management, 2019
Best Paper Award in Corporate Finance and Financial Institutions, Financial Management Association Asia/Pacific Conference, 2018

Bernile, Gennaro, Vineet Bhagwat, Ambrus Kecskés, and Phuong-Anh Nguyen, 2021, Are the risk attitudes of professional investors affected by personal catastrophic experiences?, Financial Management 50, 455-486

Abstract: We adopt a novel empirical approach to show that the risk attitudes of professional investors are affected by their catastrophic experiences – even for catastrophes without any meaningful economic impact on these investors or their portfolio firms. We study the portfolio risk of U.S.-based mutual funds that invest outside the U.S. before and after fund managers personally experience severe natural disasters. Using a difference-in-differences approach, we compare managers in disaster versus non-disaster counties matched on prior disaster probability and fund characteristics. We find that monthly fund return volatility decreases by roughly 60 basis points in year +1 and the effect disappears by year +3. Systematic risk drives the results. Additional analyses do not support wealth effects (using disasters with no property damage) or managerial agency, skill, and catering explanations.

Top Three Published Paper, Financial Management, 2021
Semifinalist for Best Paper Award, Financial Management Association Conference, 2019

Nguyen, Phuong-Anh, and Ambrus Kecskés, 2021, Technology spillovers, asset redeployability, and corporate financial policies, European Financial Management 27, 555-588. Reprinted in Harnessing Digitalization for Sustainable Economic Development: Insights for Asia, John Beirne and David G. Fernandez, eds., Asian Development Bank Institute, 2022.

Abstract: Prior research shows that technology spillovers across firms increase innovation, productivity, and value. We study how firms finance their own growth stimulated by technology spillovers from their technological peer firms. We find that greater technology spillovers lead to higher leverage. This is the result of technology spillovers increasing asset redeployability, as evidenced by more collateralized borrowing and asset transactions. Borrowing costs also decrease. Exogenous variation in the R&D tax credits of other firms allows us to identify the causal effect of technology spillovers on a given firm.

Lead article
Best Paper Award on Firm Growth and Innovation, Northern Finance Association, 2017
Semifinalist for the CFA Institute Research Award, Financial Management Association Asia/Pacific Conference, 2017

Nguyen, Phuong-Anh, and Ambrus Kecskés, 2020, Do technology spillovers affect the corporate information environment?, Journal of Corporate Finance 62, 101581

Abstract: Technology spillovers across firms affect corporate innovation, productivity, and value, according to prior research, so information about technology spillovers should matter to investors. We argue that technology spillovers increase the complexity and uncertainty of value relevant information about the firm, which makes information processing more costly, discourages it, and thereby increases information asymmetry between insiders and outsiders. We find that not only does information asymmetry increase, but so does avoidance by sophisticated market participants, uncertainty, and insider trading. We also find that investors do not misestimate short-term earnings, but they underestimate long-term earnings, consistent with the higher future stock returns that we also find.

Nguyen, Phuong-Anh, Ambrus Kecskés, and Sattar Mansi, 2020, Does corporate social responsibility create shareholder value? The importance of long-term investors, Journal of Banking & Finance 112, 105217

Abstract: We study the effect of corporate social responsibility (CSR) on shareholder value. We argue that long-term investors can ensure that managers choose the amount of CSR that maximizes shareholder value. We find that long-term investors do increase the value to shareholders of CSR activities, not through higher cash flow but rather through lower cash flow risk. Following prior work, we use indexing by investors and state laws on stakeholder orientation for identification. Our findings suggest that CSR activities can create shareholder value as long as managers are properly monitored by long-term investors.

Research Award, Rotman International Center for Pension Management, 2017

Harford, Jarrad, Ambrus Kecskés, and Sattar Mansi, 2018, Do long-term investors improve corporate decision making?, Journal of Corporate Finance 50, 424-452

Abstract: We study the effect of investor horizons on a comprehensive set of corporate decisions. We argue that monitoring by long-term investors generates decision making that maximizes shareholder value. We find that long-term investors strengthen governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Innovation increases, in quantity and quality. Shareholders benefit through higher profitability that the stock market does not fully anticipate, and lower risk.

Research Award, Rotman International Center for Pension Management, 2016
WRDS Best Conference Paper Award, European Financial Management Association, 2016
Best Paper Award, Financial Management Association Applied Finance Conference, 2015
Best Paper Award in Corporate Finance, Southern Finance Association, 2015
WRDS Best Paper Award, Mid-Atlantic Research Conference in Finance, 2015

Kecskés, Ambrus, Roni Michaely, and Kent Womack, 2017, Do earnings estimates add value to sell-side analysts' investment recommendations?, Management Science 63, 1855-1871

Abstract: Sell-side analysts change their stock recommendations when their valuations differ from the market's. These valuation differences can arise from either differences in earnings estimates or the non-earnings components of valuation methodologies. We find that recommendation changes motivated by earnings estimate revisions have a greater initial price reaction than the same recommendation changes without earnings estimate revisions: about +1.3% (-2.8%) greater for upgrades (downgrades). Nevertheless, the post-recommendation drift is also greater, suggesting that investors underreact to earnings-based recommendation changes. Implemented as a trading strategy, earnings-based recommendation changes earn risk-adjusted returns of 3% per month, considerably more than non-earnings-based recommendation changes. Evidence from variation in firms' information environment and analysts' regulatory environment suggests that recommendation changes with earnings estimate revisions are less affected by analysts' cognitive and incentive biases.

Derrien, François, Ambrus Kecskés, and Sattar Mansi, 2016, Information asymmetry, the cost of debt, and credit events: Evidence from quasi-random analyst disappearances, Journal of Corporate Finance 39, 295-311

Abstract: We hypothesize that greater information asymmetry causes greater losses to debtholders. To test this, we identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers. We find that the loss of an analyst causes the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) is roughly 100-150% higher. These results are driven by firms that are more sensitive to changes in information (e.g., less analyst coverage). The evidence is broadly consistent with both financing and monitoring channels, although only a financing channel explains the impact of the loss of an analyst on firms' cost of debt.

Derrien, François, and Ambrus Kecskés, 2013, The real effects of financial shocks: Evidence from exogenous changes in analyst coverage, Journal of Finance 68, 1383-1416

Abstract: We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. Using a difference-in-differences approach, we find that firms that lose an analyst decrease their investment and financing by 2.4% and 2.6% of total assets, respectively. These results are significantly stronger for firms that are smaller, have less analyst coverage, have a bigger increase in information asymmetry, and are more financially constrained.

Derrien, François, Ambrus Kecskés, and David Thesmar, 2013, Investor horizons and corporate policies, Journal of Financial and Quantitative Analysis 48, 1755-1780

Abstract: We study the effect of investor horizons on corporate behavior. We argue that longer investor horizons attenuate the effect of stock mispricing on corporate policies. Consistent with our argument, we find that when a firm is undervalued, greater long-term investor ownership is associated with more investment, more equity financing, and less payouts to shareholders. Our results do not appear to be explained by long-term investor self-selection, monitoring (corporate governance), or concentration (blockholdings). Our results are consistent with a version of market timing in which mispriced firms cater to the tastes of their short-term investors rather than their long-term investors.

Kecskés, Ambrus, Sattar Mansi, and Andrew Zhang, 2013, Are short sellers informed? Evidence from the bond market, The Accounting Review 88, 611-639

Abstract: We examine whether short sellers in the equity market provide valuable information to investors in the bond market. Using a sample of publicly traded bond data covering the period from 1988 to 2011, we find that firms with high short interest have lower credit ratings and are more likely to have their ratings downgraded. We also find that firms with highly shorted stocks are associated with higher bond yield spreads (about 24 basis points). Evidence of causality from short interest spikes and a natural experiment based on the SEC’s Regulation SHO pilot program confirms our findings. Overall, our results suggest that equity short sellers provide predictive information to creditors in the bond market.

Derrien, François, and Ambrus Kecskés, 2009, How much does investor sentiment really matter for equity issuance activity?, European Financial Management 15, 787-813

Abstract: We study the extent to which investor sentiment matters for aggregate equity issuance activity. We focus on firms that are susceptible to investor sentiment and for which accurate measures of economic fundamentals are available. While sentiment on its own matters for equity issuance, it matters relatively little once we control for accurately measured fundamentals. Collectively, proxies for sentiment explain roughly 10 percentage points of the time-series variation of equity issuance beyond the roughly 40% explained by fundamentals. We conclude that investor sentiment does not seem to matter very much for aggregate equity issuance activity.

Derrien, François, and Ambrus Kecskés, 2007, The initial public offerings of listed firms, Journal of Finance 62, 447-479

Abstract: A number of firms in the United Kingdom list without issuing equity and then issue equity shortly thereafter. We argue that this two-stage offering strategy is less costly than an initial public offering (IPO) because trading reduces the valuation uncertainty of these firms before they issue equity. We find that initial returns are 10% to 30% lower for these firms than for comparable IPOs, and we provide evidence that the market in the firm’s shares lowers financing costs. We also show that these firms time the market both when they list and when they issue equity.