Research

• Forthcoming at Journal of Accounting Research 

• Abstract: This paper hypothesizes a flow of information from firms to large shareholders during activist campaigns and its consequences. Focusing on actively managed mutual fund families, we find that informed trading by large-holding fund families increases during activist campaigns relative to smaller-holding fund families invested in the same firms. The effect is stronger for firms that attend more invitation-only investor events, face greater threats from activist campaigns, and are harder to value. Consistent with information flowing from management to large-holding fund families, the effect strengthens when Regulation Fair Disclosure enforcement is lax and when the information is favorable to the firm. Furthermore, the increased information advantage is associated with more management-friendly voting behavior by these investors and a higher likelihood of target firms winning activist campaigns and retaining board seats. Overall, our findings are consistent with a potential quid pro quo in which investors’ access to information from management is associated with more pro-management behavior . 

SSRN 

• Abstract: Combining customer-supplier relationships with loan contract data, we first show that firms positioned more centrally in a production network are exposed to higher systematic risk. Secondly, we show that centrally connected borrowers whose banks are exposed to higher systematic risk reduce excessive risk-taking, leading to lower systematic risk and lower CEO wealth to stock volatility sensitivity (Vega) and CEO pay-performance sensitivity (Delta). The result suggests that firms internalize creditors’ objectives in their compensation design. I also document that conditional on having common bank relationships, more central firms reduce risky investment, increase cash holdings, and improve financial performance. Overall, the results highlight a mechanism based on executive compensation through which banks reduce ex-ante systematic risk.

• Abstract: Banks lending to firms in the same supply chain may acquire private information about connected borrowers that is difficult for competing lenders to replicate. This informational advantage can strengthen the bank’s bargaining position and weaken the borrower’s outside financing options. Using bank mergers as a plausibly exogenous shock and a stacked difference-in-differences design, we find that firms newly sharing a bank with a supply chain partner receive loans with 16.6% higher spreads—approximately 25 basis points relative to the sample median—and more covenants from the connected bank. These packages are 21% smaller, and average package size also declines from all lenders, consistent with a limited ability to substitute toward competing banks. The effects are stronger when borrowers depend more heavily on their relationship banks; when those banks expand their share of supply-chain lending; and for firms with greater asset specificity or larger supply-chain networks. Affected firms borrow more from suppliers but extend less trade credit to customers, partially offsetting the reduction in bank financing. Our results suggest that supply chain lending creates informational hold-up and alters borrowers' financing mix..

• Abstract: Using the 2004 SEC regulation that requires more frequent mutual fund disclosure, we examine whether increasing the frequency of mutual fund disclosure spills over to improve corporate financial reporting. In difference-in-differences tests, we find that an investee firm’s financial reporting quality improves after the regulatory shock to mutual funds. The effects are more pronounced when mutual fund managers face low fund flows, low cash holdings,  or poor fund performance and when corporate CEO compensation is more closely linked to short-term stock price. The mutual fund change is also associated with faster corporate stock price discovery around earnings announcements. Our results suggest that the frequent disclosure of fund performance alters mutual funds’ portfolios and preferences leading to improved corporate reporting.

• Abstract: We examine how institutional investors’ short-term focus influences portfolio firms’ scope expansion decisions. Using a difference-in-differences design centered on the 2004 SEC-mandated mutual fund portfolio disclosure regulation, we find that firms with greater ownership by affected mutual funds significantly increase their scope intensity following the shock. These effects are particularly pronounced among firms held by mutual funds whose managers face stronger career concerns, proxied by lower fund returns, weaker investor flows, limited cash reserves, smaller net assets, and higher ownership concentration. In this setting, scope expansion leads to improvements in firm value, sales growth, and SG&A efficiency through increased M&A activity and R&D investment. In contrast, firms that expand through traditional diversification do not exhibit comparable performance gains. Further analysis shows that the effects are stronger when portfolio firm CEOs have shorter pay duration and greater wealth sensitivity to stock prices. Overall, our findings highlight a potential bright side of short-term pressure from institutional investors: when combined with transparent disclosures and well-aligned managerial incentives, a short-term focus can encourage strategic scope expansion that enhances long-term value creation