Journal of Financial and Quantitative Analysis, accepted for publication
Best Paper Award in Behavioral Finance at the 2016 MFA Annual Meeting
Using data from the National Longitudinal Survey of Youth 1979, we find that households who were adversely affected by natural disasters are less likely to participate in risky asset markets. After a disaster shock, households become more risk-averse and lower their expectations of future stock market returns. Our evidence suggests that transient but salient experiences can be an important factor in explaining the limited stock market participation puzzle.
Best Paper Award at the 2022 AsianFA Annual Meeting
Presentations: 2021 International Symposium on Human Capital and Labor Markets, 2022 KAFA Brown Bag Seminar, 2022 FMCG, 2022 PKU-NUS Annual International Conference on Quantitative Finance and Economics, 2022 ABFER, 2022 ITFA, 2022 AFES, 2022 AMES, 2022 AsianFA, 2022 AFAANZ, 2022 ESAM, 2022 CIRF, 2022 SIF, 2022 Corporate Finance Day, 2022 FMA, Peking University HSBC Business School
Declining worker power has been advanced as an explanation for changes in the U.S. macroenvironment such as growing wealth inequality and the decline in labor’s share of national income. We investigate microeconomic implications by examining the effect of declining worker power on firm-level investment responses to mandated increases in the minimum wage. Over the past four decades, investment-wage sensitivities go from negative to insignificant as management becomes less constrained and can pursue outside options. Consistent with drivers of weakening worker power, investment-wage sensitivity changes are more significant for firms that are more exposed to globalization, technological change, and declining unionization.
Best Paper Award at the 2022 Joint Conference with the Allied Korea Finance Associations
Presentations: 2020 Boca Corporate Finance and Governance Conference, 2020 CAFM, 2021 International Conference of the French Finance Association, 2021 EFMA, 2021 AFAANZ, 2021 WFC, 2021 EEA, 2021 FMA, 2021 NZFM, 2021 NYCU International Finance Conference, 2021 EWMES, 2021 AFBC, 2022 HARC, 2022 FMCG, 2022 SOLE†, 2022 Allied KFA, 2022 ESEM†
†(withdrawn due to COVID travel restriction)
This paper identifies an externality of a firm's unionization that affects the capital structure decisions of other, non-unionized firms within a local labor market. We find that a union victory leads non-unionized firms to increase their market leverage ratios by 1.8 to 2.0 percentage points. This "shadow union" effect is more pronounced when the probability of unionization rises in a larger margin and firms face higher union rents conditional on being unionized, which is consistent with the heightened threat of unionization following shadow union organizing. The threat is credible enough to shape corporate financing decisions: shadow unions raise the wages of employees and increase the likelihood of subsequent union victories in the relevant labor market. The findings suggest that a shadow labor market institution creates a strategic incentive for non-unionized firms to use less conservative financial policies to combat the union threat.
General Research Fund from the Research Grants Council of Hong Kong (Project No. 21502018)
Presentations: 2020 UA-ASU Junior Finance Conference, 2020 NFA, WAPFIN@STERN 2020, 2nd Finance Junior Conference at Indiana University, 2020 Boca Corporate Finance and Governance Conference, 2020 AFBC, 2021 MFA, 2021 SOLE, 3rd Future of Financial Information Conference, 2021 FIRS, 2021 KIF-KAEA-KAFA, 2021 CICF, 2021 CAFM, 2022 HARC, 2022 ACDE, 2022 FMA Napa/Sonoma Conference, 2022 FMCG, 2022 SSES†, 2022 Business Identity and Networks (BINS) Conference, 2023 AFA, Arizona State University, Nanyang Technological University, Peking University HSBC Business School, Sungkyunkwan University, Bilkent University, Toulouse School of Economics
We show that the social capital embedded in employees’ networks contributes to firm value and provide evidence on the mechanisms. Using novel, individual-level network data, we measure a firm’s social capital derived from employees’ connections with external stakeholders. The directed nature of connections allows for identifying whether one party in a connection is a more valued contact. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being valued by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors.
Best Doctoral Paper Award in Corporate Finance at the 2017 SWFA Annual Meeting
Semi-finalist for Best Paper Award in Corporate Finance at the 2017 FMA Annual Meeting
Presentations: 2016 FMA Doctoral Student Consortium, 2017 SWFA, 2017 MFA, 2017 FMA Asia/Pacific, 2017 USC Marshall Ph.D. Conference, 2017 CICF, 2017 EFA, 2017 FIRN, 2017 FMA, 2017 Wellington Finance Summit, 2018 AsianFA, 2018 FDU, Arizona State University, Mississippi State University, Nanyang Technological University, Hong Kong Polytechnic University, City University of Hong Kong (Finance, Accounting), University of Sydney, Australian National University, Chinese University of Hong Kong, Hong Kong Baptist University, Peking University HSBC Business School
Firms reduce investment when facing labor cost stickiness, the inability or unwillingness to adjust wages downward. I construct labor cost stickiness measures and exploit staggered state-level changes in minimum wage laws as an exogenous variation in labor cost stickiness to document this fact. Following a one standard deviation increase in the minimum wage, firms reduce their investment rate by 2.68 percentage points. The investment cut cannot be explained by labor adjustment under capital-labor complementarities. Rather, I identify aggravation of debt overhang and increased operating leverage as mechanisms by which sticky labor costs impede investment. Finally, this friction enhances the firm value and production efficiency when firms are subject to other frictions causing overinvestment, which is consistent with the theory of second best.