Welcome to my personal homepage. Below you will find my current research projects. CV
Accepted and Published Papers:
Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes (with Pinar Karaca-Mandic, Xuelin Li, and Richard Thakor). 2024. American Economic Review, 114 (11), 3623-68. [AER][Online Appendix]
Sequential Reporting Bias (with Ilan Guttman and Evgeny Petrov). 2024. The Accounting Review, 99 (5), 1-33. [TAR]
Strategic Complexity in Disclosure (with Kevin Smith). 2023. Journal of Accounting and Economics, 76 (2-3), 101635. [JAE]
Managerial Myopia, Earnings Guidance, and Investment (with Tadashi Hashimoto). 2023. Contemporary Accounting Research, 40 (1), 166-195. [CAR][Online Appendix]
Do Mandatory Disclosure Requirements for Private Firms Increase the Propensity of Going Public? (with Richard Thakor). 2022. Journal of Accounting Research, 60 (3), 755-804. [JAR][Online Appendix]
IPO Peer Effects (with Richard Thakor). 2022. Journal of Financial Economics, 144 (1), 206-226. [JFE] [Online Appendix]
Aggressive Boards and CEO Turnover (with Tadashi Hashimoto). 2021. Journal of Accounting Research, 59 (2), 437-486. [JAR] [Online Appendix]
No Reliance on Guidance: Counter-Signaling in Management Forecasts (with Carlos Corona and Ronghuo Zheng). 2021. RAND Journal of Economics, 52 (1), 207-245. [RAND]
Strategic Timing of IPOs and Disclosure: A Dynamic Model of Multiple Firms (with Ilan Guttman). 2021. The Accounting Review, 96 (3), 27-57. [TAR] [Online Appendix]
Voluntary Disclosure with Evolving News (with Byeong-Je An). 2021. Journal of Financial Economics, 140 (1), 21-53. [JFE]
Information Arrival, Delay, and Clustering in Financial Markets with Dynamic Freeriding (with Tadashi Hashimoto). 2020. Journal of Financial Economics, 138 (1), 27-52. [JFE] [Online Appendix]
Debt Contract Enforcement and Conservatism: Evidence from a Natural Experiment (with Nan Li). 2018. Journal of Accounting Research, 56 (5), 1383-1416. [JAR] [Online Appendix]
Working Papers:
Mandatory vs. Voluntary Disclosure in the Dynamic Market for Lemons (with Shunsuke Matsuno), Revise and resubmit, Review of Financial Studies.
Abstract: We consider a dynamic adverse selection setting where a privately informed seller can choose to reveal or withhold past trade information to privately informed buyers. Buyers naturally receive less information when the seller can strategically withhold negative news relative to a setting where current buyers always observe the seller's history of trade, i.e., mandatory disclosure. Despite the informational disadvantage, we find that strategic disclosure by the seller can be a Pareto improvement and welfare-increasing relative to mandatory disclosure, under which past trade is always disclosed. This occurs because voluntary disclosure can attenuate the seller's incentive to engage in destructive signaling and can lead to more efficient trade.
The signaling role of seemingly myopic investment behavior (with Vivian Fang and Renhui Fu), Revise and resubmit, The Accounting Review.
Abstract: This paper exploits the 2003 mutual fund trading scandal to investigate firms' seemingly myopic investment behavior following negative stock price shocks. Firms affected by the scandal are more likely to meet or marginally beat earnings targets by cutting research and development and other investment. This behavior is greeted with a more favorable market reaction and analyst forecast revision to earnings surprise and a speedier price reversal following the scandal. These findings are predictably stronger among firms with greater information asymmetry, suggesting that cutting investment to boost earnings can be a signaling tool for temporarily underpriced firms to convey financial health.
When Private Equity Comes to Town: The Local Economic Consequences of Rising Healthcare Costs (with Jash Jain and Richard Thakor), Revise and resubmit, Journal of Finance.
Abstract: We examine the effect of increased healthcare costs on local economic conditions. We use private equity (PE) buyouts of U.S. hospital systems as a shock to the healthcare costs faced by firms in affected areas. Our primary identification strategy consists of the PE acquisition of a large-scale hospital chain, with hospitals dispersed across various communities in the U.S. We supplement this strategy with broader evidence including all PE buyouts of hospitals over a longer sample period. We provide evidence that PE buyouts of hospital chains result in higher healthcare insurance premiums paid by firms, and such rises in premiums lead to higher business bankruptcies, an increase in business loan volume, slower employment and establishment growth, and lower wages. We additionally provide evidence that increases in healthcare costs result in firms being more vulnerable to the financial crisis, suggesting that the negative economic consequences of rising healthcare costs are due to weakened firm balance sheets which cause firms to be more susceptible to negative economic shocks.
Endogenous Offer Arrival in the Market for Lemons (with Tadashi Hashimoto)
Abstract: We allow buyers to choose the timing of offers in a dynamic adverse selection model with a single seller. Buyers have private information and can delay their one-time private offers to learn from other buyers by observing trading behavior. We find that the equilibrium exhibits maximum delay in the sense that all buyers delay their offers until the last period. In the infinite horizon limit, buyers do not make offers in finite time. Moreover, the presence of many buyers exacerbates delay, leading to a high probability of delay in trade even under optimistic initial beliefs. The results suggest that endogenizing the timing of offer arrival in adverse selection markets critically affects equilibrium behavior.
Mandatory vs. Voluntary ESG Disclosure, Efficiency, and Real Effects (with Byeong-Je An).
Abstract: In this study, we examine the equilibrium effects of ESG quality disclosure in both voluntary and mandatory regimes. A firm manager makes a private investment decision in an environmentally friendly or unfriendly project that affects future cash flows and the social externalities produced by the firm. We build from Shin (2003) and allow an informed manager to make potentially disparate disclosure decisions on multiple interdependent outcomes---future financial performance and ESG quality. We find that mandating ESG quality disclosure results in over-investment in the sustainable technology. That is, the manager often implements sustainable investment even though this is overall less preferred by shareholders. Moreover, a voluntary disclosure regime can be more efficient for investment than a mandatory regime, from the perspective of shareholders. The results also show that mandating ESG disclosure leads to a greater prevalence of sustainable investing. The results provide insights that can be relevant for public policy considerations regarding mandatory ESG disclosure as well as implications that can help to guide empirical research.
Enforcement and the regulatory risk of voluntary disclosure (with Haibing Shu).
We examine the effect of enhanced regulatory enforcement on firm voluntary disclosure decisions. We use China's anti-corruption campaign to identify firms subject to enhanced enforcement and scrutiny on the integrity of business relationships and transactions. The results show that affected firms exhibit a sharp and large decrease in their voluntary disclosure of major business relationships following the campaign. The results are stronger for firms which are politically connected and for firms in provinces where corruption was more pervasive prior to the reform. The results highlight an important role of heightened enforcement and scrutiny in shaping firms' disclosure decisions and show that increased regulatory scrutiny can lead to less transparency by firms.
The (going) public option: Equity market financing in the hospital industry (with Jash Jain and Richard Thakor)
Abstract: We examine the role of public equity financing in the hospital sector. We find that the transition to public equity markets by hospital systems leads to dramatic and persistent increases in profitability, net income, and net patient revenues for the system's individual hospitals following the initial public offering. This focus on profitability does not result in a reduction in care quality, but instead the increase in revenues is accompanied by expansions in both capacity and equipment, allowing hospitals to accommodate more patients and increase service offerings. The results additionally show that recently public systems use the raised capital to accelerate acquisitions of hospitals located in close geographic proximity to hospitals already owned by the system. The expanded network of the system can help to explain the large observed increase in profits after going public---greater regional market power enhances the system's bargaining posture with insurers, allowing them to demand higher reimbursement rates, thereby driving up prices for hospital services. These results improve our understanding of how access to public equity markets influences the healthcare landscape.
More investors, more problems? Bond market liberalization and innovation (with Renhui Fu, Richard Thakor, and Yanhui Wang)
Abstract: In this study, we examine the relationship between bond markets and firm innovation outcomes. Using the liberalization of one of China's primary bond markets as an exogenous shock that opened access to foreign investors, we find that firms affected by the reform---those with bonds trading on the affected exchange prior to liberalization---significantly decreased their innovative output. Examining the channels underlying this result, we find evidence that the effect is driven by foreign investors providing greater monitoring of firms, thus inducing firms to take on fewer innovative projects. In contrast, we find no systematic evidence that the result is driven by an increased reliance on debt financing by firms. The results point to the importance of bond markets on the incentives of firms to innovate.
Observational Learning, Endogenous Timing, and Information Acquisition.
Abstract: This study investigates a dynamic model of observational learning where the ordering of actions and agents' information endowments are endogenously determined. Agents are probabilistically informed and can increase their informedness through information acquisition. The main results show that agents choose to be imperfectly informed, even when information acquisition is costless. This arises from the incentive to induce a more timely action by the other agent. Additionally, information acquisition is decreasing in the underlying variance of the state variable. The results share features of the data with the sell side security analyst industry and offer novel empirical predictions.