Accepted, Journal of Financial Economics | Link SSRN
with Tony Cookson, Corbin Fox, Javier Gil-Bazo, Juan Felipe Imbet
Presentations: NBER 2023
After the run on Silicon Valley Bank (SVB), U.S. regional banks entered a period of significant distress. We quantify social media's role in this distress using comprehensive Twitter data. During the SVB run period, banks with high pre-existing exposure to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1 2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention by tech community members who are likely depositors in SVB, as well as tweets that mention running and contagion.
Journal of Finance (JF), Forthcoming | ECGI Working Paper | Link SSRN
with Tony Cookson and Marina Niessner.
Presentations: AFA 2022, Boston College, Wharton, Denver University, SFI Lugano, Tilburg University, Washington University in St. Louis, UC Irvine, University of Kansas, University of Oregon, Indiana University, University of Notre Dame, European Comission’s Directorate General for Competition, 2022 UW Summer Conference, 2022 NFA, 2022 UT Dallas Finance Conference, 2022 Santiago Finance Workshop, 2022 TAU Finance Conference, 2021 Cass M&A Research Centre (MARC) Annual Conference, 2021 Eastern FA
This paper studies whether social media sentiment predicts merger withdrawals. We find that a standard deviation increase in social media sentiment after a merger announcement is associated with a 0.64 percentage points lower probability of withdrawal (16.6% of the average). This effect is unexplained by abnormal price reactions, traditional news, and analyst recommendations. Consistent with manager learning, the informativeness of social media strengthens after firms start corporate Twitter accounts. The informativeness is driven by longer acquisition related tweets by fundamental investors, rather than memes and price trend tweets. These findings suggest that social media signals can be important for corporate decisions.
The Review of Financial Studies, Volume 37, Issue 6, June 2024, Pages 1729–1777 | https://doi.org/10.1093/rfs/hhad093
Lead Article, Editor's Choice
with Nora Pankratz.
GRASFI 2019 Best Paper Award
Presentations: 2020 AEA Annual Meeting, 2019 LBS Summer Finance Symposium, the 2019 IWFSAS, GRASFI, EDHEC Finance of Climate Change, and the Paris December Finance Meeting
This paper examines how physical climate risks affect firms' financial performance and operational risk management in global supply-chains. We document that weather shocks at supplier locations reduce the operating performance of suppliers and their customers. Further, customers respond to perceived changes in suppliers' climate-risk exposure: When realized shocks exceed ex-ante expectations, customers are 6-11% more likely to terminate existing supplier-relationships. Consistent with models of experience-based learning, this effect increases with signal strength and repetition, is insensitive to long-term climate projections, and increases with industry competitiveness and decreases with supply-chain integration. Customers subsequently choose replacement suppliers with lower expected climate-risk exposure.
Management Science (MS), Forthcoming | Link SSRN
with Michael Hertzel and Ling Cen.
Presentations: University of Kentucky Finance Conference 2018, SFS Cavalcade Asia/Pacific 2017, CICF 2017, EFA 2017, NFA 2017
We develop a measure of the speed of firm-level information diffusion, study how it is affected by limited attention, and examine its effect on real corporate decisions. Using local flu epidemics as exogenous attention shocks, we show that inattention from dual-covering analysts and cross-holding institutions reduces the speed of information diffusion from customer to supplier stock prices. We find that the speed of information diffusion along the supply chain affects the price feedback effect for corporate investment decisions and facilitates coordination between customers and suppliers. Our findings demonstrate that co-attention from key market participants affects information efficiency and generates real economic outcomes.
Review of Finance, Conditionally Accepted | Link SSRN
with Pat Akey, Stefan Lewellen, and Inessa Liskovich.
Presentations: 2017 LBS Summer Symposium, 2018 NBER Summer Institute IT & Digitization poster session, 2018 NFA Meetings, 2018 Conference on CSR, the Economy, and Financial Markets, 2019 AFA Meetings, 2019 CUHK-RCFS Conference, 2019 UN PRI Conference
We exploit unexpected corporate data breaches to study the loss and repair of corporate reputation. Reputation loss decreases equity value and brand value, increases customer churn and prompts more negative media coverage. Firms repair their reputation by increasing their charitable donations (a novel measure of CSR investment), political contributions, employee wages and investment in IT. These actions are targeted to stakeholders that are particularly important or in situations that are particularly salient to their stakeholders. We observe similar dynamics of reputation loss and repair following the release of negative news about firms’ social behaviors.
R&R, Journal of Financial Economics (JFE) | Link SSRN
Bank of Canada 2018 Graduate Student Paper Award, MFA 2017 PhD Travel Award, SWFA 2017 Best PhD Paper Award
Presentations: European Economics Association (EEA) 2021, FRB Conference on the Interconnectedness of Financial Systems (2021), SFS Cavalcade 2018, 2017 Summer Institute of Finance (SIF) Conference, NFA 2017 Doctoral Session, FMA 2017, MFA 2017, SWFA 2017
This paper studies the role of cross-border supply-chains for international financial contagion. Following large country-level shocks abroad, such as country-index return jumps and natural disasters, the dynamic conditional correlation (DCC) of stock returns between US suppliers and their international customers increases by 7% of a standard deviation relative to matched placebo firm-pairs. This increase is beyond any country- or industry-effects and persists for 8 to 10 weeks. Consistent with a credit-chain mechanism (Kiyotaki and Moore, 1997), contagion is increasing with trade credit usage, customer shock exposure, and cost of bankruptcy resolution, increases supplier CDS spreads, and is absent for positive country-level shocks.
R&R, Journal of Financial Economics (JFE) | Link SSRN
WFA 2018 Cubist Systematic Strategies PhD Candidate Award for Outstanding Research, PRI Award for Outstanding Research - PhD Student Prize
Presentations: SFS Cavalcade 2019, Michigan State University, University of Florida, Arizona State University, Ohio State University, INSEAD, HEC Paris, IESE, Georgetown, George Washington University, Darden School of Business, Indiana University, Notre Dame University, SFS Cavalcade 2019, Western Finance Association (WFA) 2018, FIRS (Job Market Session) 2018, EFA (Doctoral Session) 2018, PRI Academic Network Conference 2018, Mid-Atlantic Research Conference (MARC) 2018, Trans-Atlantic Doctoral Conference (TADC) 2018
This paper examines the role of supply-chain relationships for the transmission of corporate Environmental and Social (E&S) policies, and the resulting impact on real E&S outcomes and firm performance. I show that E&S policies propagate from customers to suppliers, especially when customers have higher bargaining power and suppliers are in countries with lower ESG standards. This transmission mechanism matters: suppliers subsequently reduce their toxic emissions, litigation and reputation risk decreases, and financial performance improves. I use staggered E&S regulation changes around the world to establish causality. Global supply-chains act as a transmission mechanism for regulatory requirements and standards across borders.
with Anthony Rice.
Presentations: WFA 2023, EEA 2022, CICF 2022, FMA New Ideas Session 2021
We study how corporate philanthropy affects employee retention and productivity, using comprehensive resume data from a popular professional networking website. Using large natural disasters as shocks to the demand for disaster relief to identify exogenous variation in corporate charitable giving, we show that corporate philanthropy significantly reduces employee turnover by 5.9% to 7.8%. The effect is distinct from other CSR activities, and more pronounced for employees with volunteering experience and for female and younger employees, even within the same firm and year. Our findings indicate that an alignment in values between workers and firms can increase employee commitment.
with Laura Lindsey and Seth Pruitt.
Presentations: 2022 AFA Meeting, 2022 Kentucky Finance Conference, 2022 Oklahoma Energy and Climate Finance Research Conference, 2022 ABFER Meeting, 2022 Mid-Atlantic Research Conference, 2022 GSU-CEAR Asset Pricing Conference, 2022 Young Scholars Finance Consortium, 2022 Rotman Sustainability Roundtable, 2022 Clemson ESG conference, and 2022 Kroner Center for Financial Research (KCFR), Georgetown University, CUHK
Optimal stock portfolios can be adjusted to achieve responsible-investment goals without sacrificing returns---that is, ESG investing can cost nothing. We find no evidence of an ESG-specific alpha or factor using a comprehensive set of measures, further demonstrating that well-known E or S alphas vanish when using conditional betas. Nonetheless, we do not conclude that ESG information is purely noise because of a third result: ESG information can yield significant information about a firm's exposure to non-ESG aggregate risks. This finding reveals that different measures can make opposing statements about firms' risk premia, exposing an important economic dimension of disagreement.
with Craig Doidge and Ling Cen.
NFA 2016 Best PhD Paper Award
Presentations: SFS Cavalcade 2017, CICF 2017, NFA 2016, Bank of Canada 2016, Rotman School of Management 2015
We document large cross-sectional variation in the speed of information diffusion between international principal customers and their U.S. suppliers. Based on Karolyi (2015)'s rigorous and comprehensive framework of six dimensions of risks in emerging markets, we find that market operating efficiency and corporate transparency are the strongest country-level characteristics among six dimensions in explaining this cross-sectional variation. Our results are robust under both panel data analysis and a quasi-natural experiment based on exogenous short-selling regulation changes. We suggest that country-level characteristics play an important and distinct role in determining diffusion of firm-specific information in international financial markets.
with Chayawat Ornthanalai and Ling Cen.
Presentations: AFA 2018, 30th Australasian Finance and Banking Conference (AFBC) 2017
Existing studies find that sell-side analysts who make less accurate and less optimistic forecasts are more likely to be terminated, suggesting that career concerns affect their forecasting decisions. Using employment data collected from LinkedIn, we find that 40% of equity analysts that exited the sell-side industry find immediate employment at buy-side institutions. These prospective buy-side analysts do not make less accurate or more biased forecasts than analysts who remain in the sell-side industry. In fact, those with superior forecasting ability ended up at a hedge fund or a private equity firm. We find that analysts with specialized education related to the industry they cover are more likely to switch to the buy-side. Relatedly, buy-side funds hire a sell-side analyst for her expertise on stocks that the fund already holds relatively large positions. Our findings suggest that analysts' exit from the sell-side industry is often a voluntary decision resulting from a worker-employer skill matching. For those leaving for the buy-side, their job turnover depends less on career-concern determinants.