Working Papers
“Mutual Fund Flows and Capital Supply in Municipal Financing” with Manuel Adelino, Jaewon Choi, and Ji Yeol Jimmy Oh.
NBER Working Paper w30980.
Revise and resubmit, Review of Financial Studies.
Presented at 2023 AFA, 2023 FIRS, 2022 FMA - semifinalist for best paper award, 2022 AIM Investment Conference at UT Austin, 2023 Penn-NYU Law and Finance Conference, 2024 Virtual Municipal Finance Workshop, 2023 MFA, 2023 Global AI Finance Research Conference, 2022 Brookings Municipal Finance Conference, 2022 Paris December Finance Meeting, 2022 Paris Financial Management Conference, 2022 SFS Cavalcade Asia-Pacific, 2022 Asian FA, 2022 APAD, 2022 CAFM, University of Illinois Urbana-Champaign, University of Iowa, City University of Hong Kong, HEC Montreal, and ESSCA School of Management
Abstract: This paper investigates how capital supply fluctuations from mutual funds affect municipal bond financing, making three key contributions. First, we introduce an identification strategy using the mechanical update of Morningstar ratings for five-year-old funds, isolating supply-side effects from fund and issuer fundamentals. Results indicate that exogenous fund flows increase bond issuance probability and decrease yields. Second, these fund flows lead to more issuances when funds, issuers, and underwriters are connected through relationships, highlighting relationship lending in municipal bond financing. Third, municipal issuers leverage favorable financing conditions for quicker, low-cost bond issuances, such as non-general-obligation and non-green bonds, reflecting the role of transactional frictions in municipal finance.
“Foreign Investors and Carbon Emissions in Emerging Markets” with Jaewon Choi, Sangeun Ha, and Ji Yeol Jimmy Oh
Under Review
2023 Cornell ESG Investing Research Conference Best Paper Award
Presented at 2024 SFS Cavalcade North America, 2023 Cornell ESG Investing Research Conference, 2024 Day Ahead Conference at Federal Reserve Bank of San Francisco (Scheduled), 2024 Paris December Finance Meetings (Scheduled), 2024 FMA Applied Finance, 2024 CICF, 2024 WEFIDEV, 2023 ISB Summer Research Conference, 2023 EGB-ECG workshop, 2023 Conference on CSR, the Economy and Financial Markets, 2022 Global AI Finance Research Conference, 2023 KFA-TFA Joint Conference, 2023 AFFI, 2023 APAD, 2023 EEA, 2023 FMA, Australian National University, ESSCA School of Business, Federal Reserve Bank of Chicago, Copenhagen Business School, Korea Money and Finance Association, Rutgers University, Symposium on ESG Research at NCCU, Tsinghua University, University of Illinois Urbana-Champaign, University of New South Wales, Victoria University of Wellington, and Yonsei University
Abstract: We examine whether foreign institutional capital promotes green growth in emerging-market firms, using firm-level and China A-shares’ market-level inclusions in the MSCI Index as shocks to foreign capital. While foreign capital boosts output in emerging-market firms, emissions rise disproportionately, leading to substantial increases in emissions intensity. In contrast, emissions intensities of developed-market firms tend not to increase with foreign capital. These increases in emissions intensity are concentrated in emerging markets with weaker environmental regulations and firms held by funds driven more by financial incentives, consistent with financial concerns dominating environmental concerns in emerging market investors. Overall, results suggest that environmental considerations are assigned lower priority when emerging-market firms utilize foreign capital for growth.
“Ratings-Driven Mutual Fund Flows, Stock Prices, and Corporate Equity Issuance” with Manuel Adelino, Jaewon Choi, and Ji Yeol Jimmy Oh
Abstract: Measuring mutual fund flows orthogonal to the underlying firm fundamentals has been a challenge in the literature. In this paper, we isolate non-fundamental-driven fund flows resulting from upgrades in Morningstar star ratings by comparing upgraded funds against matched control funds with similar recent fund performance. Investors respond strongly to Morningstar upgrades, leading to a sizeable temporary stock price pressure among firms held solely by upgraded funds compared to those held only by matched control funds. In response, managers are more likely to undertake seasoned equity offerings (SEOs) with substantially larger issuance proceeds, accompanied by a significant increase in corporate investment and R&D activities, reaffirming the findings of the literature in a clean empirical setting free from potential measurement and endogeneity issues.
“Employee Benefit, Productivity, and Firm Value: Evidence from Paid Parental Leave”
Presented at Indiana University, ESCP Europe, City University of Hong Kong, University of Kansas, Yonsei University, and Sungkyunkwan University
Abstract: I show the causal relationship between employee satisfaction and firm performance, using paid parental leave as a proxy for employee satisfaction. The difference-in-differences design using state level legislation shows that mandating paid parental leave increases productivity by 4.0% of standard deviation and ROA by 0.4%. The results are persistent for the firms who were mandated by state to providing paid parental leave, and does not exist for the firms who already chose to provide generous maternity leave.
“JOBS Act Spillover Effects in the Syndicated Loan Market” with Matthew T. Billett and Sudip Gupta
Presented at Indiana University, Summer Research Conference 2017 in Finance at Centre for Analytical Finance and Indian School of Business, and Sungkyunkwan University Graduate School of Business
Abstract: The JOBS Act directly affects access to public equity for emerging growth companies (EGCs) by lowering regulatory requirements to conduct initial public offerings (IPOs). Indirectly, improved access to equity markets may alter how other capital providers engage with EGC firms, which may further accelerate EGC firm growth, regardless of and prior to IPO. Using regression discontinuity, we find syndicated loans to EGCs have lower credit spreads, less collateral, larger revolvers, and greater bank participation. These results suggest the JOBS Act not only has a direct effect via IPO access, but also indirectly enhances EGCs’ access to the syndicated loan market.
“Brand Equity and Firms’ Investment Decisions”
Presented at Indiana University
Abstract: I look at how firms’ investment choices are affected by changes in brand equity, which is one of the most fundamental forms of intangible asset. Using a new consumer-generated data on brand equity, I examine how product market generated intangible asset influences firms’ investment behavior in other tangible/intangible assets. I use two natural experiments, first a court case that exogenously and significantly reduced brand protection, and second a law passage that increased it, to establish causality between brand equity and investment decisions.
“Are Green Bonds Valuable to Institutional Investors?” with Jaewon Choi and Ji Yeol Jimmy Oh
Presented at Korean Derivatives Association
Abstract: Institutional investors are facing increasing pressure to improve the ESG profile of their investment portfolios. With these recent developments, green bonds are likely to become an integral part of their bond portfolios in the future. We construct the most comprehensive and up-to-date dataset of green bonds issued around the world. We then utilize this dataset to examine the issuance and secondary market pricing characteristics of both the international and the Korean markets for green bonds. We document the existence of a sizeable discount among Korean green bonds even after controlling for issuer and bond characteristics, suggesting that green bond investment in Korea needs not imply a sacrifice in terms of expected returns. However, during the COVID-19 outbreak, these bonds encounter deeper price discounts relative to their peers, emphasizing the need to carefully monitor these assets during periods of market crisis.