Research
Published and Accepted Papers:
"Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals"
Forthcoming, Journal of Finance (JF) | 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 can predict 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.
"Climate Change and Adaptation in Global Supply-Chain Networks"
Accepted, Review of Financial Studies (RFS) | 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.
"Speed Matters: Limited Attention and Supply-Chain Information Diffusion"
Accepted, Management Science (MS) | 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.
Working Papers:
"Social Media as a Bank Run Catalyst"
R&R, Journal of Financial Economics | Link SSRN
with Tony Cookson, Corbin Fox, Javier Gil-Bazo, Juan Felipe Imbet
Presentations: NBER 2023
Social media fueled a bank run on Silicon Valley Bank (SVB), and the effects were felt broadly in the U.S. banking industry. We employ comprehensive Twitter data to show that preexisting exposure to social media predicts bank stock market losses in the run period even after controlling for bank characteristics related to run risk (i.e., mark-to-market losses and uninsured deposits). Moreover, we show that social media amplifies these bank run risk factors. During the run period, we find the intensity of Twitter conversation about a bank predicts stock market losses at the hourly frequency. This effect is stronger for banks with bank run risk factors. At even higher frequency, tweets in the run period with negative sentiment translate into immediate stock market losses. These high frequency effects are stronger when tweets are authored by members of the Twitter startup community (who are likely depositors) and contain keywords related to contagion. These results are consistent with depositors using Twitter to communicate in real time during the bank run.
"Financial Contagion in International Supply-Chain Networks"
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.
"Hacking Corporate Reputations"
R&R, Journal of Finance (JF) | 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 whether firms invest in rebuilding intangible capital following negative reputation shocks. Data breaches cause long-term reductions in firm value and burn reputational capital, creating an incentive for firms to rebuild intangible capital through activities such as CSR. Using firms' charitable contributions as a novel measure of CSR investment, we show that firms increase CSR investment and earn higher CSR scores after reputation-reducing data breaches. We find similar results using a broader sample of negative reputation shocks. Our paper is among the first to document how firms respond following the destruction of reputational capital.
"Global Supply-Chain Networks and Corporate Social Responsibility"
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.
"When Values Align: Corporate Philanthropy and Employee Turnover"
with Anthony Rice.
Presentations: WFA 2023, EEA 2022, CICF 2022, FMA New Ideas Session 2021
This paper studies how corporate philanthropy affects employee retention among high-skilled employees, focusing on the turnover of inventors. In a difference-in-differences-IV setting, we use large natural disasters as shocks to demand for disaster relief to identify exogenous variation in corporate charitable giving. We show that corporate philanthropy significantly reduces inventor turnover with a contributions-to-turnover sensitivity of -0.5. The effect is distinct from other CSR activities and more pronounced for firms with ex-ante weaker employee relations and inventors with greater outside options and stronger pro-social preferences. Our findings indicate that an alignment in values between employees and firms can increase employee commitment.
"The Cost of ESG Investing"
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
Even against increasing interest in socially responsible investing mandates, we find that implementing ESG strategies can cost nothing. Modifying optimal portfolio weights to achieve an ESG-investing tilt negligibly affects portfolio performance across a broad range of ESG measures and thresholds. This is because those ESG measures do not provide information about future stock performance, either in relation to risk or mispricing, beyond what is provided by other observable firm characteristics. That the stock market does not reflect significant equilibrium pricing of ESG information is rationalized in a model of responsible investing wherein investors differ in which ESG-related criteria are used to weight their portfolios.
"Do Countries Matter for Information Diffusion in Financial Markets? Evidence from Global Supply-Chain Networks"
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.
"Navigating Wall Street: Career Concerns and Analyst Transitions from Sell-Side to Buy-Side"
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.