Working Papers:

Competition and Product Launching: Evidence from the Pharmaceutical Industry, with Yuanfang Chu and Sudipto Dasgupta [new] [draft coming soon] 

• Abstract: Innovative new products often cannibalize profits from current offerings, leading firms to delay their launches. This paper examines the pharmaceutical industry to understand how competition influences the timing of new product introductions. We find that heightened entry threats to existing products prompt firms to introduce novel products immediately, as these threats reduce the anticipated cannibalization and reinforce the entry-deterring effect of new launches. Our analysis indicates that these new products primarily function as improved substitutes for the threatened products, most of which have been technically ready but delayed for launch. Our findings highlight competition's role in fostering innovation by accelerating the commercialization of novel products. 

Launching for the “Greater Good: Spillover Effect of ESG Funds, with Linlin Ma, Yuan Wang, and Bo Xu [new] [draft]

• Abstract: We examine the incentives motivating a mutual fund family to launch ESG funds, aiming to understand the supply-side factors in shaping the ESG investment landscape. We find that the introduction of a new ESG fund results in a significant increase in cash inflows to other member funds in the family. However, we observe no corresponding changes in the ESG profiles or abnormal returns of these funds. Further evidence suggests marketing benefits as the driving force behind this spillover effect. Estimations indicate that this spillover accounts for nearly half of the incentive for families to integrate ESG funds into their product offerings. 

Mergers under the Microscope: Analysing Conference Call Transcripts, with Sudipto Dasgupta, Jarrad Harford, Daisy Wang, and Haojun Xie [Draft]

• Abstract: M&A conference calls held shortly after deal announcement are associated with positive market reactions, higher deal completion rates, and reduced information asymmetry, consistent with selective disclosure. However, the impact disappears when the call decision is instrumented, i.e., when the decision is presumably uncorrelated with the underlying deal value. Analysis of call content shows that managers can control the informativeness of conference calls by emphasizing different types of topics, such as soft versus hard information topics. Our findings highlight the selective transparency of M&A call disclosures, shedding light on the information environment that investors navigate when assessing merger values.   

Subjective CEO Pay and Long-term Incentives [Draft]

• Abstract: I find that corporate boards frequently link CEO compensation to subjective performance measures that are neither accounting ratios, nor based on stock price. Subjective compensation incorporates soft information privately observed by the board about the CEO’s contribution to long-term firm value. I show that the relative importance of subjective compensation is greater when the shareholder investment horizon is longer, consistent with optimal contracting. Moreover, boards increase the weight on subjective compensation when short-term incentives become more important, such as during periods when there is large vesting of equity awards. This attenuates the adverse impact of large vesting on long-term investment.

Published Papers:

EPS-Sensitivity and Mergers, with Sudipto Dasgupta and Jarrad Harford, Journal of Financial and Quantitative Analysis, 2024 [link]

• Abstract: Announcements of mergers very often discuss the immediate impact of the deal on the acquirer’s earnings per share (EPS). We argue that the focus on EPS reflects the difficulty of evaluating and communicating deal synergy in M&A practice, and provide supporting evidence. We show that the acquirer’s EPS focus affects how deals are structured, the premium that is paid, and the types of deals that are done. EPS-driven M&A decisions are also associated with costly distortions in the acquirer’s financial and investment policies. 

Motivating Collusion, with Sangeun Ha and Alminas Zaldokas, Journal of Financial Economics, 2024  [link]

• Abstract: We examine how executive compensation can be designed to motivate product market collusion. We look at the 2013 decision to close several regional offices of the Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue that this made collusion more appealing to the shareholders, and find that these firms increased the sensitivity of executive pay to local rivals' performance, consistent with rewarding the managers for colluding with them. The affected CEOs were also granted more equity compensation, which provides long-term incentives that could foster collusive arrangements.

Work  in Progress: 

The Real Effects of CEO Severance Pay, with Sudipto Dasgupta and Zijing Wang 

Shareholder Lawsuits in M&As, with Baixiao Liu and Donglin Gao