Sehoon Kim
Prof. Sehoon Kim is an Assistant Professor in the Department of Finance, Insurance and Real Estate at the University of Florida, Warrington College of Business.
Prior to joining the University of Florida, he earned his PhD in Finance at The Ohio State University, Fisher College of Business. He also holds an MSc degree in Economics from the London School of Economics, and a Bachelors degree in Business Administration from Seoul National University.
Prof. Kim conducts research broadly in the areas of corporate finance and financial markets, focusing on issues related to corporate governance, sustainability, competition, and the impact of policies and regulations on corporations.
He teaches Financial Management, the capstone course for senior undergraduate Finance majors at the University of Florida.
Department of Finance, Insurance & Real Estate
Warrington College of Business
University of Florida
310 Stuzin Hall / PO Box 117168
Gainesville, FL 32611-7168
Phone: +1-614-579-2535
E-mail: sehoon.kim@warrington.ufl.edu
Research Interests
Corporate Finance, Financial Markets, Corporate Governance, Sustainability, Competition, Public Policy
Academic Appointment
Education
Publications
Journal of Financial and Quantitative Analysis, 2024, 59(2), 435-473
Conferences: Sustainable Finance Forum 2021, European Retail Investment Conference 2021, Virtual Asset Management Seminar Series 2020
Coverage: The Wall Street Journal, The Conversation, Cato Institute, CESifo Forum, VoxEU, PRI Academic Blog, e-axes 360 ECON VIEW
Abstract: We document fragile demand for socially responsible investments (SRI) by retail mutual fund investors. Using COVID-19 as an economic shock, we show funds with higher sustainability ratings experienced sharper declines in retail flows during the pandemic, controlling for fund characteristics. The decline in retail SRI fund flows is sharper than that of institutional flows, more pronounced when economies are hit harder by COVID-19, and unlikely to be driven by fund performance, past flows and size, or shifting investor attention. Corroborated by out-of-sample survey evidence, our findings highlight high sensitivity of SRI demand by retail investors with respect to income shocks.
Real Effects of Climate Policy: Financial Constraints and Spillovers (with Söhnke M. Bartram and Kewei Hou)
Journal of Financial Economics, 2022, 143(2), 668-696
Conferences: CEPR/EBRD/ECB Symposium on Climate Change, Finance, and Green Growth 2021, AFA 2020, WFA 2019, EFA 2019, EEA/ESEM 2019, Royal Economic Society 2019, ABFER/CEPR/CUHK Symposium in Financial Economics 2019, UConn Finance Conference 2019, FSU SunTrust Conference 2019, CEMA 2019, OU Energy and Commodities Finance Conference 2019, CUHK-Shenzhen Sustainable Finance Forum 2019, GRASFI 2019, SKBI-TBLI Sustainable Finance Conference 2019, EDHEC Climate Finance Conference 2019, ISEFI 2019, GEA 2019
Honors: Supported by OSU Risk Institute Research Fellowship and Grant 2018-2020
Coverage: VoxEU, PRI Academic Blog, Cato Institute
Abstract: We document that localized policies aimed at mitigating climate risk can have unintended consequences due to regulatory arbitrage by firms. Using a difference-in-differences framework to study the impact of the California cap-and-trade program with United States plant level data, we show that financially constrained firms shift emissions and output from California to other states where they have similar plants that are underutilized. In contrast, unconstrained firms do not make such adjustments. Overall, unconstrained firms do not reduce their total emissions while constrained firms increase total emissions after the cap-and-trade rule, undermining the effectiveness of the policy.
Other Publications
Reproducibility in Management Science (with Miloš Fišar, Ben Greiner, Christoph Huber, Elena Katok, Ali I. Ozkes, and the Management Science Reproducibility Collaboration)
Management Science, 2024, 70(3), 1343-1356
Note: As member of the Management Science Reproducibility Collaboration
Working Papers
Revise and Resubmit, Journal of Financial Economics
Conferences (Presented or Scheduled): WFA 2023, Cornell ESG Investing Research Conference 2023, NTHU Symposium on Sustainable Finance and Economics 2023, MFA 2022, UN PRI Academic Network Conference 2022, Oxford Sustainable Private Market Conference 2022, Univ of Delaware Weinberg Center/ECGI Corporate Governance Symposium 2022, OSU Finance Conference 2022, NEOMA Sustainable Finance Conference 2022, Wolfe Research QES ESG Investment Conference 2022, FMA 2021, Fixed Income and Financial Institutions Conference 2021, Paris December Finance Meeting 2021, Australasian Finance and Banking Conference 2021, Conference on Asia-Pacific Financial Markets 2021, Asia-Pacific Corporate Finance Online Workshop Series 2021
Coverage: Financial Times, PRI Academic Blog, Financier Worldwide
Abstract: Sustainable lending has flourished amid widespread issuance of sustainability-linked loans (SLLs) with spreads contingent on borrower ESG performance. These loans are issued between reputable firms and banks with superior ESG profiles that face greater stakeholder scrutiny, mostly as revolving credit facilities through banking relationships. SLLs vary widely in the transparency of publicly available information on sustainability related contract details. Consistent with greenwashing concerns, borrower ESG scores deteriorate after the issuance of low-transparency SLLs. Stock markets exhibit vigilance against potential greenwashing, responding positively to issuance announcements only for high-transparency SLLs. Our findings highlight the importance of transparency in ESG-contingent financing.
Hidden in Plain Sight: The Role of Corporate Board of Directors in Public Charity Lobbying (with Changhyun Ahn and Joel Houston)
Revise and Resubmit, Management Science
Conferences: AFA 2021, FMA 2020
Coverage: Philanthropy Daily, Capital Research Center
Abstract: We show that public charities with corporate directors on their boards are more likely to lobby on behalf of connected corporate interests. We document this result using granular fixed effects, alternative measures and subsamples, and shocks to board connections. The effects of connections are stronger when firms have greater political incentives, indicated by ex-ante lobbying demand and political connections as well as ex-post political benefits in the form of governmental procurement contracts. Governance improving policies help discipline charities who seek funding benefits through pro-corporate lobbying activities. Our results highlight executive charitable engagement as a complementary avenue for corporate political activities.
Reject and Resubmit, Management Science
Previously titled "Hedge Fund Activism and Internal Capital Markets"
Conferences: WSIR 2018, FMA Asia Pacific 2018, EFA 2018, SGF Conference 2018, FMA 2017, PFMC 2017, CQA Fall Conference 2016
Honors: FMA Asia Pacific Best Paper Award Finalist 2018
Abstract: Hedge fund activism reduces the diversification discount in targeted conglomerates. Associated with this reduction, targets increase investments in segments with better opportunities while alleviating divisional financial constraints. These improvements are stronger for financially constrained targets, and associated with subsequent increases in CEO replacements by outsiders or candidates without social ties with divisional managers, higher divisional manager turnovers, more incentive-based compensation for divisional managers, increased payout, and less low-specificity innovation. While some targets divest poorly performing segments post-targeting, the efficiency improvements are not driven by refocusing, indicating that activist hedge funds unlock value by optimizing internal capital markets in conglomerates.
Conferences (Presented or Scheduled): EFA 2024, FMA Asia/Pacific 2024, Clemson ESG and Policy Research Conference 2024, International Review of Finance 25th Anniversary Conference 2024
Abstract: Carbon offsets enable firms to lower their carbon footprints by purchasing and retiring credits issued by other entities that reduce emissions. These financial instruments have emerged as a tool to aid corporate carbon-transition efforts. Using rich hand-collected data, we provide the first systematic evidence on the landscape of carbon offset projects and the determinants of carbon offset usage by publicly listed firms around the world. Consistent with offsets being a transition tool, larger firms with higher institutional ownership and net-zero commitments are more likely to use offsets to reduce their carbon footprints. However, offsets are used intensively by firms in low-emission industries. We provide causal evidence that after an exogenous ESG rating downgrade, triggered by a leading ESG rating agency's methodology change, low-emission firms in industries with small emission gaps retire larger quantities of cheap, low-quality offset credits. In contrast, high-emission firms in large-gap industries reduce their own emissions directly rather than use offsets, and become more likely to retire high-quality offsets when they use offsets. Our results are inconsistent with the notion that carbon offsets enable high-emission firms to transition to low-carbon business models, but more consistent with firms using these instruments strategically for certification and ranking benefits.
One Hundred and Thirty Years of Corporate Responsibility (with Joel Houston and Boyuan Li)
[New Paper - Draft Available Upon Request]
Conferences (Presented or Scheduled): FIRS 2024, CICF 2024, Loyola Maryland Financial Ethics Conference 2024
Abstract: U.S. history is punctuated by public discourse about the externalities and responsibilities of business in time-varying context. Applying natural language processing (NLP) techniques that account for context evolution in historical news text, we develop a monthly time-series index dating back to the late 19th century that measures public attention to environmental and social issues related to business (ESIX). We explore the properties of ESIX, and relate it to macroeconomic fluctuations, asset prices, and corporate decisions. Public attention to social issues stemming from business arises during times of macroeconomic and social instability, whereas attention to environmental issues are afforded during times of relative prosperity. At the firm-level, positive exposure to such public attention is associated with lower future stock returns. Heightened environmental and social concerns reduce the level of corporate investments and weaken the link between corporate investments and Tobin's q.
Short-Run Income Shocks and Long-Run Distortions in Household Investments (with Minsoo Kim, Yoon Kang Lee, and Hoonsuk Park)
[New Paper - Draft Available Upon Request]
Conferences (Presented or Scheduled): Boulder Summer Conference on Consumer Financial Decision Making 2024
Abstract: We show that short-run income shocks can create surprisingly long-run distortions in household investment behavior. Using transaction-level data, we find that households deposit significantly less money into their brokerage accounts for at least two years after a transitory unemployment shock compared to before. This response is stronger for larger shocks and among more constrained households, and driven more by changes in active rather than passive brokerage flows. In particular, deposits remain persistently lower after a household has missed out on higher stock market returns during an unemployment shock. On the other hand, we do not find similar effects for consumption or savings. Overall, our findings are consistent with long-lasting distortions caused by psychological anchors (i.e., "off-ramp effect"), but not fully explained by risk-based explanations.
Conferences: AFA 2018, MFA 2017, Villanova MARC Conference 2017, EFA Doctoral Tutorial 2016, FMA Doctoral Consortium & PhD Sessions 2016
Awards: MARC Outstanding Paper Award 2017, MFA Travel Grant Award 2017, EFA Doctoral Tutorial Best Paper Prize 2016
Abstract: Corporate cash holdings impact firms' product pricing strategies. Exploiting the Aviation Investment and Reform Act of the 21st Century as a quasi-natural experiment to identify exogenous shocks to competition in the airline industry, I find that firms with more cash than their rivals respond to intensified competition by pricing more aggressively, especially when there is less concern of rival retaliation. Financially flexible firms based on alternative measures respond similarly. Moreover, cash-rich firms experience greater market share gains and long-term profitability growth. The results highlight the importance of strategic interdependencies across firms in the effective use of flexibility provided by cash.
Conferences: MFA 2017
Abstract: We propose a parsimonious measure based solely on daily stock returns to characterize the severity of microstructure frictions at the individual stock level and assess the impact of frictions on the cross section of stock returns. Stocks with the largest frictions command a value-weighted return premium as large as 10% per year on a risk-adjusted basis. The friction premium is stronger among small, low price, volatile, value, and illiquid stocks. Return spreads associated with momentum and idiosyncratic volatility are smaller and statistically less significant than previously documented after screening out stocks with high microstructure frictions. Using UK data, we show that our measure is useful in settings where the availability of quality data on trading volume, bid-ask prices, and intraday high-low prices is limited.
Book Chapters
Book chapter in Climate Change and Climate Finance: Current Experience and Future Directions, edited by Fariborz Moshirian and Cyn-Young Park, Asian Development Bank, 2023, 165-179
Media Coverage and Non Peer-Reviewed Articles
The Conversation, "SEC approves first US climate disclosure rules: Why the requirements are much weaker than planned and the implications", 2024
Financial Times, "Business school sustainability research: What is read most?", 2023
Texas Comptroller of Public Accounts, "The ABCs of ESG investing", 2023
The Conversation, "Fed rate hikes, recession fears and political backlash leave ESG investors at a crossroads", 2023
The Wall Street Journal, "Investors are all for ESG. Except, that is, when times are tough", 2023
Financier Worldwide, "Sourcing sustainability: The maturation of ESG lending", 2022
PRI Academic Blog, "Sustainability-linked loans: A strong ESG commitment or a vehicle for greenwashing?", 2022
Cato Institute, "Real effects of climate policy: Financial constraints and spillovers", 2022
Cato Institute, "Wide world of ESG: Understanding investor demand", 2021
CESifo Forum, "ESG investments and investors' preferences", 2021
VoxEU Column, "Tackling climate change requires global policies", 2021
Capital Research Center / Philanthropy Daily, "Another dark-money tributary?", 2020
PRI Academic Blog, "Do retail investors continue to invest in sustainability during an economic crisis?", 2020
e-axes 360 ECON VIEW, "COVID and climate change - Change in ESG investing", 2020
VoxEU Column, "Sustainability preferences under stress: Mutual fund flows during COVID-19", 2020
PRI Academic Blog, "Gobal warming, local policies", 2020
Awards, Grants, and Honors
The Ohio State University Risk Institute Research Fellow and Grant Recipient - 2018-2020
Financial Management Association Asia Pacific Conference Best Paper Award, Finalist - 2018
Villanova University Mid-Atlantic Research Conference in Finance Outstanding Paper Award - 2017
Midwest Finance Association Travel Grant Award - 2017
European Finance Association Doctoral Tutorial Best Paper Prize - 2016
René M. Stulz Scholar Development Award, The Ohio State University - 2016
Shinhan Bank & KAFA Scholarship for Ph.D. Students - 2016
American Finance Association Doctoral Student Travel Grant - 2016
Teaching Experience
Financial Management
Undergraduate, University of Florida, 2017 to present
Instructor Rating (Average): 4.8/5.0 (Dept. Average: 3.9/5.0, College Average: 4.3/5.0)
Corporate Finance
Undergraduate, The Ohio State University, 2015
Instructor Rating: 4.6/5.0 (University Average: 4.3/5.0)
Preparatory Workshop for the Specialized Master in Finance (SMF) Program
Graduate, The Ohio State University, 2015 - 2016
Introduction to SAS Programming for incoming Finance Ph.D. Students
Graduate, The Ohio State University, 2014