Research

(Publications)

Why is Stock Market Concentration bad for the Economy? (with Kee-Hong Bae and Warren Bailey) Journal of Financial Economics (2021) 140-2, 436-459

The stock market should fund promising new firms, thereby breeding competition, innovation, and economic growth. However, using three decades of data from 47 countries, we show that concentrated stock markets dominated by a small number of very success- ful firms are associated with less efficient capital allocation, sluggish initial public offering and innovation activity, and slower economic growth. These findings are robust to alternative sample periods, econometric specifications, and competing explanatory variables. Our evidence is consistent with the paradox that the capital market of a competitive economy can impede the continuing competitiveness of that economy.

Nominal Stock Price Anchors: A Global Phenomenon? (with Utpal Bhattacharya, Kee-Hong Bae and S. Ghon Rhee) Journal of Financial Markets (2019) 44, 31-41

Weld et al. (2009) find that the average nominal U.S. stock price has been approximately $25 since the Great Depression. They report that this “nominal price fixation is primarily a U.S. or North American phenomenon.” Using a larger data set from 38 countries, we show that this nominal price fixation is a global phenomenon. We exploit the introduction of the euro in 1999 to show that stock splits maintain these nominal stock price anchors. Generally, firms in countries with larger drops in nominal prices had fewer stock splits after stock prices were displayed in euros.

(Working)

Can Mandatory Gender Quotas Break the Glass Ceiling? Evidence from the Reforms of Boards of Directors in Europe (with Kee-Hong Bae, Jung Chul Park, and K. C. John Wei)

The main objective of imposing gender quotas on boards of directors is to increase female representation in top positions and to reduce gender pay gaps in the corporate sector. Using a sample of director-firm-year observations from 16 European countries between 2001 and 2016, we conduct a difference-in-differences analysis to examine the effect of government-imposed gender quotas on closing the gender gap in pay and in hiring practices. We find that even after governments implement reforms to address these gender disparities, female directors are less likely to take on leadership roles on boards of directors or top executive positions. We also find little evidence of decreases in gender pay gaps among top executives following the implementation of the reforms. Overall, our study suggests that the reforms targeting to close the gender gap appear to do little to break the glass ceiling, at least in the short term.

Why Are CEOs of Public Firms Paid More Than CEOs of Private Firms? Evidence from the Effect of Board Reforms on CEO Compensation (with Kee-Hong Bae, Sadok El Ghoul and Albert Tsang): 2020 American Finance Association

CEOs of public (listed) firms earn more than their counterparts in similar private (unlisted) firms. This can either be because rent extraction is easier in public firms than in private firms, or because managing a public firm involves more legal and institutional responsibilities than managing an otherwise similar private firm. We show that corporate board reforms from 29 countries that strengthen board diligence of public firms result in a significant increase in the pay of CEOs of public firms relative to private firms. This result is consistent with the efficient contracting view of CEO compensation.

(Work-in-progress)

Severe Weather Events and ESG Performance (with Frank Xu)

Stock Market Concentration and Volatility (with Rui Duan and Kee-Hong Bae)