PUBLICATIONS:

14) Do Social Movements Evoke Sympathetic Response? Evidence from Online Food Orders in Black-owned Restaurants after George Floyd’s Murder (with Sumit Agarwal and Jean Zeng) . Nature: Human Behavior (2024) 

ABSTRACT: We utilize the rise of Black Lives Matter (BLM) and the sentiment of racial sympathy to provide quantitative analyses on the interplay between the social movement and citizens’ sympathetic actions in supporting Black Lives. Using detailed food order flow information from one of the largest online food delivery platforms in the U.S, we find that the total number and the total dollar amount of food orders in Black-owned restaurants increase by about 39% and 36% relative to those in non-Black-owned restaurants within the same delivery zone in the 140 days following George Floyd’s death. Further analysis reveals that the platform company’s strategic traffic allocation acts as an accelerator, enhancing the sympathetic responses of individual citizens, but it does not drive the entire surge in food orders. Protests resulting in severe injuries and those linked to demands for defunding the police diminish or even eliminate the positive sympathetic responses, highlighting a potential risk associated with protests. Our study provides large-scale, micro-level evidence that social movements and increased sympathy can foster collective actions to support marginalized communities.

13) Wall Street and Product Quality: The Duality of Financial Analysts (with Yinghua Li, Xiaoqiao Wang, and Shijie Yang). The Accounting Review (2024)

ABSTRACT: We investigate the role of financial analysts in product quality failures. Relying on information about product recalls, we first show that analyst coverage on average reduces product quality, particularly when managers face greater short-term pressure from institutional investors. However, after identifying a subgroup of analysts who raise questions on product-related issues in earnings conference calls, we find that coverage by these “product analysts” enhances rather than compromises product quality. Firms with greater product analyst coverage are also more likely to retire low-quality products. Additional analysis demonstrates that product analysts help safeguard product quality by further probing into product-related matters and issuing more timely recommendation downgrades after firms announce product deficiencies. 

12) Trump Election and Minority CEO Pessimism (with Xiaoli Hu, Ya Kang, and Oliver Zhen Li). Review of Accounting Studies  (2024)

ABSTRACT: Ethnic tension in the U.S. became more salient after Donald Trump’s election on 9 November 2016. Exploring the variation in management forecasts, we show that after the Trump Election, minority CEOs exhibit more pessimism in earnings forecasts (underestimation of the mean of earnings), compared with their non-minority counterparts. This tendency toward pessimism is observed across CEOs from various minority groups and is particularly pronounced in firms led by less experienced or less confident minority CEOs. Further analyses reveal that minority CEOs make less specific and less precise forecasts. Minority CEO pessimism is not explained by terrorist attacks, minority CEOs’ political ideology or other confounding factors. Collectively, our research provides evidence that the Trump Election induces biased beliefs in the form of pessimism in ethnic minority CEOs.

11) Labor Mobility and Loan Origination (with Sumit Agarwal, Yunqi Zhang, and Zilong Zhang). Journal of Financial and Quantitative Analysis （2023)

 Best paper award at the 2021  AsRES

ABSTRACT: This paper examines the effect of loan officers’ labor mobility on loan origination. Relying on a spatial regression discontinuity design, we show that mortgage loans originated after the adoption of the inevitable disclosure doctrine (IDD) – a mechanism discouraging labor mobility – have a lower default probability, a higher loan modification rate, and a lower foreclosure rate. These effects are unaccompanied by any reduction in loan supply and contribute to more stable housing prices. Using the adoption of the Uniform Trade Secrets Act as an alternative identification generates consistent results. Overall, our findings suggest that restricting loan officers’ labor mobility leads to better ex ante screening and ex post monitoring, improving the origination efficiency for U.S. residential mortgage loans.

10) Banking Market Consolidation and Tax Planning Intermediation: Evidence from Client Firm Tax Haven Operations. (With JB Kim, Mao Ying, and Zheng Wang). The Accounting Review (2023) 

ABSTRACT: This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Our study documents an unintended consequence of bank M&As in enhancing banks’ tax intermediation capability, which has been largely overlooked by academia and regulators.

9) Short-Selling Pressure and Workplace Safety: Curbing Short-Termism through Stakeholder Independencies. (With Donal Crilly, Cuili Qian, Keyuan Zhang, and Alex Zhang). Organization Science (2022)

ABSTRACT: We advance a multi-stakeholder framework that highlights the influence of stakeholders in accentuating, and in tempering, short-termist responses to capital market pressures. When firms face pressure from short sellers in the capital market, they sometimes shift attention to short-term stock performance and neglect critical investments that pay off in the long run. Relying on a quasi-natural experiment and establishment-level data on workplace injuries, we find that short-selling pressure causes an increase in employee injuries. Critically, however, the degree to which the response is short-termist depends on the salience of core stakeholders (analysts, shareholders, employees, and managers). We discuss the implications for understanding firms’ relations with their stakeholders and, particularly, how these stakeholders influence corporate responses to capital market pressures in ways that matter for long-term value creation. This study also contributes to strategy research by highlighting the downside of capital market deregulation.

8) Enforceability of Noncompetition Agreements and Forced CEO Turnover. (With Florian Peters and Hojun Seo). Journal of Law & Economics (2022)

ABSTRACT: We examine whether corporate boards factor the potential cost of competitive harm caused by a departing CEO into the forced CEO turnover decision. Using staggered changes in the state-level enforceability of Covenants Not to Compete (CNC) for identification, we find that enhanced CNC enforceability increases both the likelihood of forced CEO turnover and the sensitivity of forced CEO turnover to firm performance. We present additional cross-sectional evidence that shows such effects are more pronounced when firms face more severe product market threats or operate in industries with greater potential threats of predatory hiring. Investors react to turnover announcements more positively when CNC enforceability increases, indicating that enhanced CNC enforceability increases efficiency in CEO replacement decisions.

7) Tax Incidence in Loan Price. (With Oliver Zhen Li and Kang Ya). Journal of Accounting & Economics (2021)

ABSTRACT: We investigate tax incidence reflected in the pricing of syndicated loans and argue that loan spread increases in bank income taxes of borrowers’ home states. We compare borrowers in states with differing bank tax rates and demonstrate the presence of tax incidence on borrowers with causality coming from bank taxes. Tax incidence on borrowers increases with local loan market concentration and pre-existing lending relationships. Further, a lack of tax deductibility of loan loss provisions enhances tax incidence. We conclude that bank income taxation, though specifically targeted at banks, is partially passed through to borrowers and increases their cost of debt.

6) Employee monitoring and Firm Risk-Taking Behaviors: Evidence from Employee Deposit Program from Japan (with Sudipto Dasgupta, Takeshi Yamada, and Zilong Zhang). Review of Corporate Finance Studies ( 2019 )

Invited article 

Best paper award in Asian Finance Association 2013

ABSTRACT: Unlike broad-based equity ownership by employees, ownership of company debt by rank-and-file employees has not received much attention. We argue that company debt held by employees in the form of in-company deposits can monitor risk-taking and facilitate risk discovery. Employee deposits have historically been widely used in Japan. For a sample of 2104 Japanese firms, using an identification strategy that utilizes a new law in 2003 that changed the priority of employee deposits in bankruptcy and led to large scale withdrawals of employee deposits, we find that employee deposits mitigate firms’ risk-taking behavior and reduce the agency cost of debt. 

5) Institutional Ownership, Peer Pressure, and Voluntary Disclosures (With Mao Ying and Zheng Wang).  The Accounting Review (2018), 

ABSTRACT: We document peer effect as an important factor in determining corporate voluntary disclosure policies. Our identification strategy relies on a discontinuity in the distribution of institutional ownership caused by the annual Russell 1000/2000 index reconstitution. Around the threshold of the Russell 1000/2000 index, the top Russell 2000 index firms experience a significant jump in institutional ownership compared with their closely-neighbored bottom Russell 1000 index firms due to index funds’ benchmarking strategies. The increase in institutional ownership and resultant improvement in the information environment of the top Russell 2000 index firms create pressures on their industry peers to increase voluntary disclosures. Consistent with this prediction, we find that the discontinuously higher institutional ownership of the top Russell 2000 index firms significantly increases industry peers’ likelihood and frequency of issuing management forecasts. Further analyses show that such an effect could be driven by firms’ incentive to compete for capital.

4)Trade Secrets Law and Corporate Disclosure: Causal Evidence on the Proprietary Cost Hypothesis (With Yinghua Li, and Liandong Zhang)  Journal of Accounting Research (2017), 56, 265-308.

ABSTRACT: This study exploits the staggered adoption of the inevitable disclosure doctrine (IDD) by U.S. state courts as an exogenous shock that generates variations in the proprietary costs of disclosure. We find that firms respond to IDD adoption by reducing the level of disclosure regarding their customers’ identities, supporting the proprietary cost hypothesis. Our results are stronger for firms in industries with a higher degree of entry threats, for firms in more volatile industries, and for firms with a lower degree of external financing dependence. Overall, this study represents one of the first efforts in identifying and quantifying the causal effect of proprietary costs of disclosure on the supply of disclosure.

3) On the Benefit of Audit Market Consolidation-Evidence from Merged Audit Firms (With Oliver Zhen Li, Gong Qihui, and Wu Liansheng). The Accounting Review (2016).