Welcome to Yufeng's HomePage

Research Interest

• Corporate Finance, Financial Intermediation, Structural Estimation 

Papers:

1. Collateral, Taxes, and Leverage, with Shaojin Li and Toni Whited, Review of Financial Studies, 2016.

We quantify the importance of collateral versus taxes for firms’ capital structures. Using a dynamic contracting model, we estimate the value of preserving financial flexibility at 7.2% of firm assets, which is comparable to the tax benefit.

• Utah Winter Finance Conference presentation video

2. What's Behind the Smooth Dividends? Evidence from Structural Estimation, Review of Financial Studies, 2018. 

What's the driving forces behind the smooth dividends? I find that dividend smoothing is driven not only by shareholders' desire to communicate information but also by managers' career concerns. Managers cut investments and adjust external financing policies to accommodate this career concern-based dividend smoothing. These effects destroy firm value by 2.09%.

3. Managerial Control Benefits and Takeover Market Efficiency, with Wenyu Wang, Journal of Financial Economics, 2019.

How and to what extent do managerial control benefits shape the efficiency of the takeover market? We revisit this question by estimating both the dark and bright sides of managerial control benefits in an industry equilibrium model. Our estimation suggests that the relative magnitudes of the two effects vary widely across subsamples. Shareholders can gain from having high control benefit managers when their firms underperform. 

4. Low Interest Rates and Risk Incentives for Banks with Market Power, with Toni M. Whited, and Kairong Xiao, Journal of Monetary Economics, 2021.

Ultra-low-interest rates compress banks' profits from the deposit market because competition from cash becomes more intense.  When interest rates fall, banks' profit margins are squeezed and banks' franchise values can fall substantially. A decline in franchise value combined with limited liability moves banks closer to the convex part of their payoff distribution and thus leads them to more risk-taking in equilibrium.

5. Market Power and Monetary Policy Transmission: Evidence from a Structural Estimation, with Yifei Wang, Toni M. Whited, and Kairong Xiao, Journal of Finance, 2022.

We quantify the impact of bank market power on the pass-through of monetary policy to borrowers. Compared with the conventional regulation-based channels, bank market power explains a significant fraction of interest pass-throughs. In addition, the market power channel interacts with the bank capital channel, and this interaction can reverse the effect of monetary policy when the Federal Funds rate is low. 

• Winner of the XiYue Award for Best Paper at CICF 2019

• Utah Winter Finance Conference presentation video

6. Human Capital Portability and Careers in Finance, with Janet Gao and Wenyu Wang, Review of Financial Studies, 2024.

We estimate a  dynamic model with endogenous human capital accumulation and job separations using a novel data that contains M&A advisors' deal advising history and  career trajectory. Our estimation shows that a substantial portion of bankers' human capital is not portable across firms, despite that those firms perform highly similar tasks. Such non-portability  shapes bankers' career decisions and significantly influences the composition of the M&A advisory industry (the rise of boutique banks).

7. Ignorance Is Bliss: The Screening Effect of (Noisy) Information, with Felix Feng, Wenyu Wang, and Gaoqing Zhang, The Accounting Review, 2025. 

While more precise information allows the firm to make ex-post more efficient investment decisions, noisier information has an ex-ante screening effect that allows the firm to attract on-average better managers. The tradeoff between more effective screening of managers and more informed investment implies a non-monotonic relationship between firm value and information quality.

8. Investor Demand, Firm Investment, and Capital Misallocation, with Jaewon Choi, Mahyar Kargar, and Xu Tian, Journal of Financial Economics, 2025.

Fluctuations in investor demand dramatically affect firms' valuation and access to capital. To quantify this impact, we develop a dynamic investment model that endogenizes both the demand- and supply-side of equity capital. We estimate the model using indirect inference by matching the endogenous relationship between investors' portfolio holdings and firm characteristics. Our results suggest that fluctuations in investor demand can exacerbate the dispersion in MPK and contribute to 23.4% of TFP losses in the economy.

9. The Incentives of SPAC Sponsors, with Felix Feng, Tom Nohel, Xuan Tian, and Wenyu Wang, Accepted, Journal of Financial Economics

Using a structural model estimated with a comprehensive, hand-collected dataset, we find that SPACs create value by identifying and bringing high-potential firms to public markets. However, the distorted incentives of SPAC sponsors, driven by contractual frictions inherent in this market, skew the distribution of surplus and limit investor gains. Leveraging the estimated model, we evaluate which policy is more effective in enhancing the welfare and distributional outcomes of SPACs.

• Winner of the Bureau van Dijk Best Paper Award in Corporate Finance at the 36th Australasian Finance and Banking Conference. 

10. Will Central Bank Digital Currency Disintermediate Banks? with Toni M. Whited, and Kairong Xiao, Revise&Resubmit, Review of Financial Studies

How would CBDC affect the banking system? We shed light on this question using a dynamic banking model with imperfect competition and financial frictions. We find that CBDC can replace a significant fraction of bank deposits, but its impact on credit supply is only moderate. 

• Seminars and conferences:  CUHK, Stanford GSB, LSE, University of Rochester, Vienna University of Finance and Economics, University of California at Irvine, USC, Penn State University, Bank for International Settlements, University of Georgia, Tsinghua University, Peking University, Columbia Business School, European Central Bank, Federal Reserve Bank of Chicago, Federal Reserve Bank of Dallas, Federal Reserve Bank of Atlanta, Ohio State University, Emory University, Macro Finance Workshop (2022), NBER Corporate Finance Program Meeting (2022), the JHU Carey Finance Conference (2022), the Brazilian Society of Econometrics Annual Meeting (2021), the Canadian Economic Association Special Session on Digital Currency (2022), the Desmarais Global Finance Lecture at McGill University (2022),  the Intermediation and Bank Liquidity Conference at the Federal Reserve Bank of Richmond (2022), and the UBC summer conference (2022).

11. Dirty Money: How Banks Influence Financial Crime, with Janet Gao, Joseph Pacelli, and Jan Schneemeier

On September 21st, 2020, a consortium of international journalists leaked nearly 2,500 suspicious activity reports (SAR) obtained from the U.S. Financial Crimes Enforcement Network, exposing nearly $2 trillion of money laundering activity.  We hypothesize and document empirical evidence supporting a strategic "advertising effect" of SAR---banks facing more profit-seeking pressure adopt more lax reporting policies, which help them to risk-shift by attracting criminal customers.

• Seminars and conferences: Bank of Portugal, Indiana University, University of Cincinnati, University of Massachusetts Boston, Georgetown University, Moscow Finance Conference (2021), CICF (2021), FSU SunTrust Beach Conference (2021), MoFiR Virtual Seminars on Banking (2021), SFS Cavalcade (2021), EFA (2022), MFA (2022), RCFS Winter Conference (2022), the Third International Research Conference on Anti-Money Laundering and Financial Crimes (2022).

12. Do Local Bank Branches Shape Mortgage Origination?, with Janet Gao, and Tim Zhang

Do banks delegate their mortgage lending decisions to local branches? Using a novel dataset that contains bank branch managers' career histories, we find that the managers' past mortgage approval and pricing decisions have persistent influence on their subsequent lending standards even after they switch employments across firms and locations.  Managers' past experience also influences how they passthrough monetary policy shocks at current branches. 

• Seminars and conferences: American University, CEMFI , George Mason University, The Office of the Comptroller of the Currency, University of Florida, University of South Carolina, FDIC Bank Research Conference (2023), MFA (2024), WFA (2024, scheduled)

13. Steering Labor Mobility through Innovation, with Song Ma and Wenyu Wang

Prior works have shown that firms use wages and non-wage benefits to achieve the goal of talent retention. However, do firms strategically make operational decisions to affect labor mobility and what are the long-term consequences of such decisions? We build a structural model of human capital investment and firm-worker bargaining.  Empirical estimates of the model suggest that firms' labor market considerations significantly influence the type of innovation they pursue.

• Seminars and conferences: American University, CKGSB, Ohio State University, University of Texas at Dallas, Vienna Graduate School of Finance, Virtual Corporate Finance Workshop, USC Macro-Finance Workshop (2023),  AFA (2024), UBC Winter Finance Conference (2024), Northeastern Finance Conference (2024), UIC Finance Conference (2024)

14. When Protectionism Kills Talent, with Mehmet Canayaz, Isil Erel, and Umit Gurun

We examine the repercussions of protectionist policies implemented in the United States since 2018 on the composition of workforce and career choices within the semiconductor industry. We find that the shift towards protectionism, aimed at reviving domestic manufacturing and employment, paradoxically resulted in a significant drop in hiring domestic talent. The effect is stronger for entry-level and junior positions.

• Seminars and conferences: Penn State University, CSEF-RCFS Conference on Finance, Labor and Inequality (2024), Finance, Organizations and Markets (FOM) Conference (2024), University of Kentucky Finance Conference (2025), WFA (2025), 12th Annual Conference of the Asian Bureau of Finance and Economic Research, MFA (2025), Labor and Finance Group Conference (Spring 2025).

• Best Paper Award at 2024 CSEF-RCFS Conference on Finance, Labor and Inequality.

Work in Progress

• Banking Competition with Bundling: Evidence from Brazil, with Marco Bonomo, Joao De Mello, and Fabio Sanches (2020).