Setbacks, Shutdowns, and Overruns, with Curtis Taylor, Mark Westerfield, and Feifan Zhang

• Econometrica, 92(3), 815-847

• Although overruns and cancellations are commonly viewed as failures of project governance, such outcomes are necessary features of the optimal project management when random setbacks arise naturally during development. 

In Search of a Unicorn: Dynamic Agency with Endogenous Investment Opportunities, with Yifan Luo and Beatrice Michaeli

• Journal of Accounting and Economics, forthcoming

• We study the optimal dynamic contract that provides incentives for an agent to find and exploit investment opportunities/targets. The model generates empirically relevant predictions for internal project selection, M&A, HFA, VC, and SPAC.

Ignorance Is Bliss: The Screening Effect of (Noisy) Information, with Wenyu Wang, Yufeng Wu, and Gaoqing Zhang

• The Accounting Review, forthcoming

• Conventional wisdom suggests that firms should design their internal information systems as precise as possible. We highlight a novel mechanism through which a firm, when facing an adverse selection problem arising from unobservable managerial ability, may benefit from designing a noisy information system in order to facilitate the screening of managers.

Dynamic Resource Allocation with Hidden Volatility, with Mark Westerfield

•  Journal of Financial Economics, 140(2), 560-581

• We study a firm's internal resource allocation problem in a dynamic principal-agent model with endogenous cash flow volatility. The optimal contract can be implemented with a constant pricing schedule: a static, decentralized, linear mechanism that rationalizes the use of hurdle rates above firms’ cost of capital and transfer prices above the marginal cost.

Dynamic Compensation under Uncertainty Shocks and Limited Commitment 

• Journal of Financial and Quantitative Analysis, 56(6), 2039-2071 

• Excessive risk-taking, lower bonus hurdles, and substantial compensation to corporate managers during a financial crisis? They can be part of an optimal contract when firms face systemic uncertainty shocks but cannot fully commit to long-term contracts.

Renegotiation and Dynamic Inconsistency: Contracting with Non-Exponential Discounting, with Doruk Cetemen and Can Urgun 

• Journal of Economic Theory, 208, 105606

• We study a dynamic contracting problem with renegotiation and dynamic inconsistency arising from non-exponential discounting and provide a novel argument for the existence and characteristics of the solution.

Foreign Competition and CEO Risk-Incentive Compensation, with Tor Erik-Bakke, Hamed Mahmudi, and Caroline Zhu

• Journal of Corporate Finance, 76, 102241

• How do firms optimally adjust CEO risk-incentive compensation in response to increased foreign competition? The answer is theoretically ambiguous but can be empirically identified through a quasi-natural experiment.

Productivity and Liquidity Management Under Costly Financing, with Jianyu Lu and Jing Wang

• Journal of Corporate Finance, 63, 101258

• More productive firms could demand less capital assets and hold more liquid assets compared to less productive firms when financing costs are sufficiently high.

Caught in the Crossfire: How the Threat of Hedge Fund Activism Affects Creditors, with Qiping Xu and Caroline Zhu

• Journal of Empirical Finance, 64, 128-143

• Firms under the threat of hedge fund activism on average experience significant losses of outstanding bondholder wealth and receive inferior terms when initiating new loans.

The Incentives of SPAC Sponsors, with Tom Nohel, Xuan Tian, Wenyu Wang, and Yufeng Wu

• Reject and resubmit: Journal of Financial Economics

• Bureau van Dijk best paper award in Corporate Finance, 2023

• Estimating a structural model using a hand-collected comprehensive dataset of Special Purpose Acquisition Companies (SPACs), we find that SPACs on average add value by identifying and bringing the high-potential firms public. However, contractual frictions skew the distribution of spoils away from SPAC shareholders and towards sponsors and target owners. Nonetheless, shareholder excess returns are positive once redemptions are accounted for, and regulatory measures aiming to improve the welfare of SPAC investors may yield mixed results.

• Presented at: Annual Conference on Financial Market Regulation, Bayes M&A Research Center Conference, Northeastern University Finance Conference, ENTFIN, FMARC, NFBCM, PFMC, Owners as Strategists Conference, SPAC Europe Conference, Dartmouth, Indiana, Iowa, Iowa State, Imperial College, Kansas, Notre Dame, Washington, EPFL, SFI, Tsinghua PBC, CKGSB 

Buying In and Selling Out: The Dynamic Returns to Investing in Expertise, with Mark Westerfield

• A unified framework for studying the incentives for young knowledge workers to build hidden, durable, and unalienable expertise based on dynamic contracting and serial employment.

• Presented at: University of Washington, FTG (NYU), Econometric Society NASM, St. Gallen Workshop on Dynamic Contracts and Learning, Stony Brook ICGT

Dynamic Real Earnings Management and Investments, with Beatrice Michaeli

• The persistent effect of real earnings management can lead to both under- and over-investments at time-varying degrees and imply a strong investment-to-cash-flow sensitivity.

• Presented at: AEA, AES winter retreat, SIOE, IIOC, Econometric Society EWM, DSE Winter School, AEFIN Finance Forum, CIRF, CMES, EARIE, ENTFIN, University of Zürich

The Optimal Duration of Incentives and Projects, with Yifan Luo and Mark Westerfield

Operating Risk and Capital Management, with Henry Friedman, Beatrice Michaeli, and Kai Chiu Yang

The Timeliness of Reporting and Intervention, with Gaoqing Zhang

University of Washington: Financial Theory and Analysis, Financial Strategy and Planning, Business Finance (Global EMBA)

University of Notre Dame: Intermediate Microeconomic Theory, Asset Pricing Theory

Duke University: Advanced Microeconomic Analysis, Advanced Topics in Financial Economics, Introduction to Econometrics, Time Series Analysis

Summary of teaching evaluations