Working Papers

Advising Sophisticated Customers: Evidence from Health Insurance Brokers [SSRN Link]

Abstract: Conventionally, receiving kickbacks by brokers is thought to be detrimental to customers. However, this might not be true if the customers are sophisticated. Focusing on the employer-sponsored health insurance market, this paper examines how brokers advise large employers and the consequences of brokers' incentive changes. I find that a reduction in brokers' kickbacks can adversely affect broker-intermediated plans, resulting in higher premiums and worse plan qualities, likely due to brokers' decreasing effort in information acquisition. Better-governed firms control premium increases by discontinuing the brokerage service. The negative effect on premiums occurs for public firms, but not for private firms that are less sophisticated and receive lower-quality advice even before. Firms in more competitive brokerage markets experience less premium distortion. Overall, regulations on brokers' compensation can have unintended consequences on sophisticated customers.


Fired Up or Burned Down: Wildfires and VC Investment (with Wen Wang and Zhengchu Zhang) 

(Draft available upon request)

Abstract: Using novel data on wildfires and smoke, this study examines the behaviors of Californian venture capitalists (VCs) and VC-backed startups following such events. Employing exogenous climate change-induced wildfires as a natural experiment, we compare outcomes for firms located within fire zones to those that are not. We find that venture capitalists increase their investments in ESG-oriented startups after experiencing wildfires and smoke, although their total investment amount declines. We also distinguish the effects of wildfires from those of smoke, revealing that wildfires exert a stronger impact on investment behavior. For VC-backed startups, our results show an increase in green patent production post-wildfires. However, wildfires have detrimental effects if encountered during the nascent stage of the startups. This study contributes to the literature on the determinants of ESG investing and the influence of personal experience on financial decisions.


Environmental Scandals and Green Products (with Wan-Chien Chiu, Po-Hsuan Hsu, and Kai Li)

(Draft coming soon)

In this paper, we apply a novel text-based classification procedure to identifying green trademarks in the USPTO trademark dataset and study the development of environment-friendly products and services in the US economy over the past forty years.

Publications

1. Bankrupt Innovative Firms (with Song Ma and Wei Wang) [SSRN link]

Management Science (2022)


2. Health Care Costs and Corporate Investment [SSRN link]

The Review of Financial Studies (2024)

Abstract: Health care costs for U.S. employers have tripled in the past twenty years. Using firm-specific health expense data, I show that firms negatively adjust capital expenditures and R&D expenses in response to changes in health care costs. The effects are more pronounced for firms that are financially constrained, employ more high-skilled workers, and have less bargaining power relative to insurers. Furthermore, policy uncertainty surrounding health care costs is substantial and discourages capital investment. The findings suggest that an elevated level of health care costs and the associated uncertainty limit a firm's ability to expand physically or through innovation.