Working Papers

Marijuana Legalization and Firms' Cost of Equity, with Scott Guernsey and Cheng Yan.

After medical marijuana legalization (MML) by U.S. states, firms experience significant reductions in their cost of equity (COE), especially for those with more growth opportunities or a highly skilled workforce. This policy change also attracts inventors and highly skilled and educated workers to the legalizing states, leading to an increase in innovation productivity. Home prices and homeownership rates also rise after MML, reflecting increased local housing demand due to a growing labor supply. These findings align with theoretical models that link asset prices to labor markets and suggest that MML can lower firms' COE by mitigating labor search frictions.

Unveiling the Role of Director-Specific Quality in Creating Firm Value, with Dipesh Bhattarai and Tracie Woidtke.

We create a new measure called director-specific quality (DSQ) that isolates director attributes that are transferable across firms and time and show that DSQ accounts for a  significant fraction of the variation in firm value. Directors with higher DSQ also receive greater voter support, and investors respond more (less) favorably when they are appointed (die). Firms with higher board-level DSQ demonstrate improved decision making related to mergers and acquisitions, CEO compensation, innovation, and cash management. During the COVID-19 pandemic, they also experienced relatively higher stock returns. Our results suggest directors have unique value-relevant transferable attributes, and who firms hire matter.

Media Coverage

• Do Individual Directors Matter?, November 17, 2022, Columbia Law School Blue Sky Blog.