Working Papers

[14]Under Regulatory Pressure: Bank Stress Tests and Housing Prices, with Raluca Roman and John Sedunov, 2025

Abstract: We examine the impact of bank stress tests on housing price dynamics across U.S. counties. Counties exposed to greater pressure induced by stress tests exhibit higher housing price growth, after controlling for bank characteristics, county-level demographic, economic, and political factors. The underlying mechanism works through the credit exclusion channel: stress-tested banks curtail credit access to high-risk borrowers, leading to greater concentration of housing market activity among financially stronger borrowers. Additionally, counties experiencing more intense regulatory pressure witness more net population migration and a shift in the socioeconomic composition of the local population, highlighting the real effects of bank stress tests.

[15] Media, Partisan Ideology, and Corporate Social Responsibility, with Mahsa Kaviani, Hosein Maleki, and Pavel Savor 2025

Abstract: We study the effect of partisan media on corporate social responsibility (CSR) ratings using the staggered expansion of Sinclair Broadcast Group, the largest conservative network in the U.S. regional TV markets. After Sinclair entry, CSR ratings of local firms decline across all dimensions: environmental, social, and governance. The effect operates through two mutually non-exclusive channels: changes in ideology and reduction in local coverage. We provide evidence consistent with the first channel based on public opinion surveys, election results, and firms' political contributions. Consistent with the second channel, the effect is larger for firms with higher customer awareness, low institutional ownership, in sin industries, and in Sinclair-dominated markets.

Publications

[9] Media, Inventors, and Corporate Innovation, with George Gu, Mahsa Kaviani, Hosein Malek and Connie Mao, 2025, Journal of Empirical Finance, Forthcoming

Abstract: We examine the impact of Sinclair Broadcast Group, the largest conservative media network in the US local TV markets, on corporate innovation following its staggered expansion across the country. We find a significant reduction in innovation output two to three years after Sinclair entry. As a larger proportion of inventors self-identify as left-leaning, we find that the effect runs through two mutually non-exclusive channels: the inventor productivity channel and the talent replacement channel. Inventors become less innovative when they stay in Sinclair-exposed firms, and firms face challenges replacing departed talent upon the local ideology shock induced by Sinclair. 

[8] Bigger Pie, Bigger Slice: Liquidity, Value Gain, and Underpricing in IPOs, with Yang Guo and Hongda Zhong, 2025, Journal of Financial Markets, Vol 72

Abstract: Since investor participation is essential for successful IPOs, we hypothesize that issuers share value gain from IPOs with IPO investors, resulting in IPO underpricing. We test the positive relation between value gain and underpricing from the liquidity angle, as improved liquidity via IPO increases firm value. We find supporting evidence that underpricing is positively related to the expected post-IPO liquidity of the issuer. Using two regulation changes as exogenous shocks to share liquidity before and after IPO, we further show that underpricing is more pronounced with better expected post- IPO liquidity or lower pre-IPO liquidity.  

[7] Internal governance and corporate fraud, with Jay Choi, Oded Shenkar, and Jian Zhang, 2023, Journal of Accounting, Auditing, and Finance, Vol 38, 455-482

Abstract: This article examines whether internal governance in the form of managerial dissent between the CEO and subordinate executives reduces fraud likelihood. We model fraud as a rational decision in a cost–benefit framework and a collective activity by all executives. The model predicts a negative relation between dissent and fraud occurrence. We use three measures for higher dissent: a larger fraction of subordinates having joined the firm prior to the CEO, a lower CEO pay slice, and a smaller difference in pay performance sensitivity between the two; and find supporting evidence. We address endogeneity concerns by including firm-fixed effects, constructing a propensity score–matched sample, and conducting instrument variable analysis. We also find that fraud duration is negatively related to dissent.

[6]Symmetry in pay for luck, with Naveen Daniel and Lalitha Naveen, Review of Financial Studies, 2020, Vol 33, 3174-3204

Abstract: In this study, we take a comprehensive look at asymmetry in pay for luck, which is the finding that CEOs are rewarded for good luck, but are not penalized to the same extent for bad luck. Our main takeaway, which is based on over 200 different specifications, is that there is no asymmetry in pay for luck. Our finding is important given that the literature widely accepts the idea of asymmetry in pay for luck and typically points to this as evidence of rent extraction.

[5] Dissecting bidder returns on payment methods, Journal of Banking and Finance, 2018, Vol 96, 207-219

Abstract: The choice of payment methods in M&A deals can affect bidder stock and bond value through two channels simultaneously: signaling and wealth transfer. We propose a method to disentangle these two effects by combining observed bidder stock and bond abnormal returns around deal announcements. Our findings indicate that the negative average bidder stock return in stock deals is mostly caused by signaling, and the negative average bidder bond return in cash deals is mostly due to wealth transfer. We also hypothesize that signaling is related to bidder information uncertainty, while wealth transfer is related to deal significance and bidder default risk. Cross-sectional analysis supports our conjecture. 

[4] Does corporate governance matter more for high financial slack firms? with Kose John and Jiaren Pang, Management Science, 2017, Vol 63, 1872-1891

Abstract: The effect of corporate governance may depend on a firm’s financial slack. On one hand, financial slack may be spent by managers for their private benefits; a high level is likely associated with severe agency conflicts. Thus corporate governance matters more for high financial slack firms (i.e., the wasteful spending hypothesis). On the other hand, financial slack provides insurance against future uncertainties; a low level may signal deviations from the best interests of shareholders. Then corporate governance is more effective for low financial slack firms (i.e., the precautionary needs hypothesis). We differentiate the two hypotheses using the passage of antitakeover laws to identify exogenous variation in governance. Consistent with the wasteful spending hypothesis, the laws’ passage has a larger negative impact on the operating and stock market performance of high financial slack firms. Further analysis shows that these firms do not invest more but become less efficient at cost management after the laws’ passage. 

[3] Evasive shareholder meetings, with David Yermack, Journal of Corporate Finance, 2016, Vol 38, 318-334

Abstract: We study the strategic scheduling of annual shareholder meetings. When companies move their annual meetings a great distance from headquarters, they tend to experience pronounced stock market underperformance in the six months after the meeting and announce earnings below expectations over the subsequent year. Companies appear to schedule meetings in re-mote locations when the managers have private, adverse information about future performance and wish to discourage scrutiny by shareholders, analysts, and the media. However, shareholders do not decode this signal, since the disclosure of meeting locations leads to little immediate stock price reaction. We find that voter participation drops when meetings are held at unusual hours, even though most voting is done electronically during a period of weeks before the meeting convenes. 

[2] A non-linear wealth transfer from shareholders to creditors around Chapter 11 filings, Journal of Financial Economics, 2013, Vol 107, 183-198

Abstract: Past literature has assumed that negative stock returns around Chapter 11 filing are solely due to new adverse information about firm value. This paper argues that there is also a nonlinear wealth transfer from shareholders to creditors causing shareholder loss. The magnitude of the wealth transfer can be quantified in a setting where equity is a call option on firm assets as in the Merton (1974) model. The wealth transfer originates from maturity shortening of the call option as a result of Chapter 11 filing. I present a parsimonious model to explain why Chapter 11 can be voluntarily filed by managers acting in the interest of shareholders with the existence of the wealth transfer. The model-predicted stock return has comparable magnitude as observed stock returns around filing, and explains the cross-sectional variation of the latter.

[1] Investing in Chapter 11 stocks: trading, liquidity, and performance, with Ken Zhong, Journal of Financial Markets, 2013, Vol 16, 33-60

Abstract: We address questions about Chapter 11 stocks regarding their trading environment, fundamental value, and performance. First, there exists active trading for Chapter 11 stocks throughout the bankruptcy process. Second, equity value after filing is positively related to asset value, asset volatility, risk-free rate, and expected duration and is negatively related to liabilities. Furthermore, the return correlation between bankrupt stocks and their matching samples exhibits non-linearity similar to out-of-money call options. Third, investing in Chapter 11 stocks incurs large losses. Consistent with heterogeneous beliefs and limits to arbitrage, stocks with higher levels of information uncertainty and more binding short-sale constraints experience more negative returns.