Research
Working Papers
with Xiaoke Ye
Abstract: This paper presents new evidence that corporate customers play a governance role in disciplining managerial behavior. Using a comprehensive dataset of customer-supplier relationships, we show that major downstream firms respond to upstream firms' EPS manipulation - instrumented by variations in the incentive to manipulate - by severing business relationships. Ex ante, the threat of withdrawal by major customers appears to deter upstream firms from engaging in EPS manipulation. Suppliers with short-term incentives strategically reallocate trade credit among customers to retain their largest customers, which mitigates the ex-post impact of customer governance.
Presentations: 21st Corporate Finance Days (2024, scheduled); CICF (2024, scheduled); AEA Poster Session (2024); Junior Academics Research Seminars (JARS 2024); HEC Paris Brown Bag (2023); Finance and Product Markets Summer School (Seminar Session, 2023); FMA European Conference (2023); FMA European Doctoral Student Consortium (2023); 12th Portuguese Financial Network Conference (2023), European Financial Management Association Annual Meeting (2023); RES & SES Annual Conference (2023); Bayes Finance Workshop (2022), Bayes Finance PhD Research Day (2023, 2022)
with Giacinta Cestone and Paolo Volpin
Abstract: We investigate the redistribution effects among firm stakeholders of increased antitrust scrutiny. Using the cases opened by the European Commission between 1991 and 2019, we find that cartel investigations temporarily reduce profits for all firms in the affected industry and increase profits for their customers. In response to the negative shock to their profitability, firms engage in intense restructuring: they undertake mass layoffs and reduce employment; to lesser extents they increase leverage, cut investment and sell assets. The effects tend to be concentrated in firms that are less productive and closer to financial distress at the time of the shock.
Presentations: 7th NHH Centre for Corporate Finance Conference (2024); 50th Annual Conference of EARIE (2023); Fordham University (2023); CMA Microeconomics Unit (2023); SKEMA Corporate Restructuring Conference (2023); Conference on Mergers, Innovation & the Labour Market (2022); Bayes Finance Workshop (2022); Bayes Finance PhD Research Day (2021)
Does Knowledge Protection Spur Common Ownership? Evidence from the Inevitable Disclosure Doctrine
with Jiajun Tao
Abstract: What are the driving forces behind endogenous common ownership? In this paper, we exploit the staggered adoption of a trade secret protection law, the "Ineviable Disclosure Doctrine (IDD)'', to show that information-sharing is an important motive behind increasing common ownership. The effect is mainly led by long-term investors, and it is stronger for firms that rely more on human capital and for firms with more mobile employees. Our findings provide evidence on the efficiency-improving role of common ownership - firms located in states with an active IDD conduct more innovation activities and enjoy better operating performance when common ownership increases exogenously.
Presentations: LBS Transatlantic Doctoral Conference (2023); NFI-NBIM-Oxford Conference on Common Ownership (2023); RES & SES Annual Conference (2023); SGF Conference PhD Poster Session (2023); Bayes Finance PhD Research Day (2021)
Home Not-So-Sweet Home: Hometown Bias in Supply Chain Relationships
with Ruiqi Mao
Abstract: We study whether CEOs' hometown preferences influence firms' supplier base management. Firms maintain more stable relationships with CEOs' hometown suppliers, and are more likely to sever these ties if they have a new CEO coming from a different state. Consistent with the hometown bias hypothesis, we find that hometown preferences are stronger in firms with weaker governance, and performance improves when firms stop buying from CEO hometown suppliers. We find limited evidence on the hometown advantage hypothesis: firms buying from hometown suppliers only receive more trade credit when they are major customers.
Presentations: International Conference in Finance, Accounting and Banking (2024, scheduled); Bayes Finance PhD Research Day (2024)
Litigation Risk and Employment: Evidence from the Universal Demand Laws
Winner of the 2022 EFMA Larry Lang Corporate Finance Best Paper Award
Winner of the 2022 EFMA John A. Doukas Ph.D. Best Paper Award
Abstract: This paper investigates how shareholder protection affects other corporate stakeholders. I examine the changes in firms' employment decisions around the staggered passage of the Universal Demand (UD) law - a law that weakens shareholder litigation rights and reduces managers' litigation risk. My findings document an increase in corporate employment following the UD adoption, which can be explained by managers' risk taking. The UD-induced workforce expansion is concentrated in firms that rely more on high-skilled labor, indicating a potential improvement in their labor structure. On aggregate, the workforce expansion is inefficient and harms shareholder interests.
Presentations: Financial Markets and Corporate Governance Conference (2023); European Financial Management Association Annual Meeting (2022)
Work in Progress
Firm-Level Labor Conditions: Implications on Corporate Strategies
I construct a set of firm-level labor measures by applying textual analysis and machine learning to corporate filings and earnings conference calls. My measures span from proxies for the general labor conditions of a firm to its topic-specific labor conditions such as hiring, firing, wage & benefits, union, training, skill, discrimination, and health & safety. I show that my measures effectively capture heterogeneities in labor conditions at the firm level, and have valuable implications on firm outcomes.
Preliminary draft available.