Working Papers
Equity Lender Base and Limits to Arbitrage: Position-level Evidence from Mutual Funds with Xi Dong
Revise and Resubmit, Review of Financial Studies
MFA (2024), ABFER (2024)
Using newly available data on mutual funds' equity lending at the position level, we find a striking pattern that equity lending is persistent: for the same stock, a past lender fund is ten times more likely to have it on loan than a fund that did not lend. We argue that such persistence is driven by heterogeneity in funds' willingness to supply lendable shares and that conventional lending supply measures understate short-sale constraints. Consequently, when existing lenders sell their shares, equity lending supply drops and lending fees spike, even if lenders' selling is motivated by non-informational considerations. After lender exits, stock prices become less efficient and more likely to be overpriced.
(Re)call of Duty: Securities Lending and Proxy Voting with Tao Li
SFS Cavalcade NA (2024), Finance Down Under (2025), FIRS (2025), WFA (2025), FIRS (2025), CICF (2025)
Taking advantage of a novel dataset on individual mutual funds' securities lending activities, we provide the first systematic evidence that mutual funds, especially ESG funds, recall loaned shares prior to voting record dates. Funds' recall-voting sensitivities differ based on their stated lending policies, ownership stakes in portfolio firms, and holding horizons, indicating heterogeneity in funds' perceived values of voting rights. Recalled shares are more likely to be voted against management proposals, and in favor of shareholder proposals and dissident slates in proxy contests. Recall-sensitive funds attract higher fund flows and do not suffer poor performance because of foregone lending revenues.
The Growing Index Effect in the Corporate Bond Market with Sean Shin and Xing (Alex) Zhou
AFA (2026, scheduled), the 20th Central Bank Conference on the Microstructure of Financial Markets, 2025 Asia-Pacific Association of Derivatives (APAD) Conference, NUS RMI Annual Risk Management Conference
Media Coverage: Bloomberg, Matt Levine's Money Stuff, ETF Stream
The rapid expansion of investment funds in the corporate bond market has significantly increased index-driven bond trading. Leveraging data on actual transactions and high-frequency, minute-by-minute bond price estimates generated by machine learning algorithms, we show that this shift has fundamentally reshaped trading dynamics and liquidity conditions. Whereas bond trading was historically distributed more evenly throughout the day, it is now increasingly concentrated around specific time points, particularly index closing times. Using the Bloomberg Index closing time shift on January 14, 2021, we establish the causal effect of index tracking on bond trading and liquidity. While liquidity during other periods of the trading day has declined, liquidity at index closing time has improved, resulting in a net positive effect. However, during periods of market stress, when trading becomes one-sided, this concentration of activity diminishes the benefits of indexing and leads to higher liquidity costs.
Private Investments of Corporate Bond Mutual Funds with Jaewon Choi and Nan Qin
FIRS (2025), FMA (2024), FIFI (2025)
We investigate the primary vehicle for private investments by U.S. bond mutual funds—Rule 144A bonds—and the evolution of this market. We find that, compared with otherwise similar non-144A bonds, 144A bonds are issued with higher yield spreads and offer a significant return premium, which we attribute to the information opacity of the 144A issuers. Such yield and return characteristics of 144A bonds align with yield-reaching investor demand, boosting the performance of mutual funds holding these bonds and contributing to the growth of the 144A market, driven primarily by bond funds. We also highlight the cost of 144A investments, namely the illiquidity of these bonds, which can be exacerbated by fund flow fragility. During times of market distress, funds with a higher fraction of 144A holdings face increased flow risks, imposing fire sale risks to non-144A bonds in their portfolios.
Paid Family Leave, Inventor Mobility, and Firm Innovation with Nianchen Han and Yaling Jin
Revise and Resubmit, Strategic Management Journal
We exploit the adoption of US state-level Paid Family Leave (PFL) laws to test whether family-friendly policies affect firm innovation. We find that PFL policies increase the innovation outputs of firms whose employees are more exposed to these laws. The stronger attraction and the higher retention of female inventors contribute to the output gains. Tests at the state level suggest that younger inventors move into states after PFL adoption, and the move-in inventors are generally more productive than the move-out inventors at the personal level. Further tests at inventor level show that females are less likely to drop out from the inventor career after PFL adoption. Overall, the behavior change in inventor career choices is the main channel through which PFLs affect firm innovation.
Recurring Demand for Corporate Bonds with Clemens Sialm and Sean Shin
We find that nearly all of the credit premium of investment-grade corporate bonds is earned during a narrow window around the turn of the month. During these periods, corporate bond yield spreads decline by approximately four basis points. This pattern can be explained by the monthly bond mutual fund reinvestment cycle, which is driven by the rebalancing methodology of the main bond index benchmarks. A back-of-the-envelope calculation estimates a price multiplier ranging from 0.91 to 2.72. Firms capitalize from this predictable demand by issuing bonds at the beginning of the month.
Credit Where It's Not Due: Misbenchmarking by Active Bond Funds with Caitlin Dannhauser, Michele Dathan and Michael Young
Misspecified benchmarks are prevalent among active bond mutual funds, due in part to the industry’s overreliance on the Bloomberg U.S. Aggregate Index. Active funds outperform their self-declared benchmarks by 3% over 36 months, but this outperformance is entirely driven by the selection of benchmarks with mismatched systematic risks. When matched to a more appropriate benchmark based on return correlations, funds underperform. Benchmark-adjusted returns drive future flows, providing incentives for managers to misbenchmark. While benchmark changes are infrequent, they are strategic: funds switch to easier-to-beat benchmarks following a period of underperformance and subsequently experience a short-term increase in flows.
The Social Cost of Corporate Short-Term Incentives with Tao Chen and Yaqi Wang
We examine how corporate short-term financial incentives compromise product quality, leading to socially costly product failures. Employing a regression discontinuity design around analyst earnings-per-share forecasts, we find that firms conducting share repurchases to narrowly meet earnings targets experience significantly more subsequent product recalls, especially those involving consumer safety issues. These firms also involve in more product-related negative incidents. This relationship is most pronounced among financially constrained firms. These results highlight the real economic consequences of earnings management and provide new evidence on how capital market pressures can create negative externalities for consumers.
Partisan Consumers with Chin Hui Hsieh, Angie Low, and Varun Sharma
We analyze micro-level data in consumer purchases from 2007 to 2020 and find an increase in partisanship in consumer purchases. Households identified as Republicans increasingly favor brands preferred by other Republicans, and vice-versa for Democratic-leaning consumers. This segmentation sorts brands into red products and blue products. Aggregating up to the firm level, the partisan imbalance of an average firm's consumer base increases in the earlier years but plateau shortly thereafter. Additional analysis indicate that firms respond to heightened product partisanship by offering products that appeal to both political factions as increased partisanship correlates with reduced firm profitability.
Underwriter Competition and Institutional Loan Pricing with Will Shuo Liu, Zheng Sun, and Chenyu Xiong
EFA (2023)
This paper studies how competition among potential underwriters affects the pricing process of institutional loans. Underwriters trade off between setting the initial loan rates aggressively low in order to win underwriting mandates and having to adjust the rates upward in the book-building process, which heightens the risk of losing borrowers' businesses in the future. We find that the intensity of underwriter competition negatively affects initial loan spreads and is associated with more upward rate adjustments. Using exogenous shocks that reduce banks' ability to underwrite future deals, we find lower subsequent rate adjustments in the affected market segments, supporting a causal interpretation.
Resting Working Papers
The Opioid Epidemic and Local Public Financing: Evidence from Municipal Bonds with Wei Li
Do Foreign Institutional Investors Deter Insider Trading? with Claire Yurong Hong and Weikai Li
