Fintech, Institutional Investors, Fixed Income, and Corporate Finance
Job Market Paper
Abstract: This paper examines how trading behaviors among institutional bond investors affect the cost of debt. Firms with a larger percentage of long-term investors have lower debt cost. By contrast, high short-term ownership results in the uncertainty of capital supply and high debt cost. These findings are not driven by investors’ or bonds’ characteristics after using the investors’ funding structure as an instrument. The results suggest that short-term investors’ capital uncertainty results in fragility problems in the corporate bond market. Conversely, long-term investors play an important role in enhancing corporate governance, thereby lowering the cost of debt.
With Sheen Liu and Chunchi Wu
Abstract: This paper examines the effects of collateral quality and counterparty risk on repo terms and yield spreads in the secondary MBS market. Using the triparty deal-level repo and time-series aggregate data, we find that collateral and counterparty risks have significant effects on repo spreads and haircuts in the repo market. Importantly, risks in the repo market have a spillover effect on yield spreads of MBS in the cash market. Borrower-lender relationship mitigates the effect during the financial crisis. The Fed’s QE policies reduce repo and MBS spreads through counterparty and collateral risk channels by helping attenuate both risks in funding markets.
With Brian Wolfe and Woongsun Yoo
Abstract: We study the effect of dual holders on corporate acquisitions. We find that firms with larger equity ownership by dual holders are less likely to undertake large and public acquisitions. To establish the causality, we rely on investors’ reaching for yield behavior as a potential shock to the presence of dual holders. Further analysis reveals that such effect concentrates on deals perceived to be risky for bidders, and that firms with higher dual holdings are less likely to engage in shareholder value destroying deals. These evidences are consistent with the conjecture that dual holders reduce both shareholder-creditor conflict and managerial agency conflict. Dual holdings are associated with favorably market reaction and superior operating performance post deals. Overall, we conclude that dual holders have real effect on corporate decisions via reduced shareholder-creditor conflict and manager-shareholder conflict.
With Kee Chung and Jack Jiang
Abstract: We study the effect of dual holders on corporate acquisitions. We find that firms with larger equity ownership by dual holders are less likely to undertake large and public acquisitions. To establish the causality, we rely on investors’ reaching for yield behavior as a potential shock to the presence of dual holders. Further analysis reveals that such effect concentrates on deals perceived to be risky for bidders, and that firms with higher dual holdings are less likely to engage in shareholder value destroying deals. These evidences are consistent with the conjecture that dual holders reduce both shareholder-creditor conflict and managerial agency conflict. Dual holdings are associated with favorably market reaction and superior operating performance post deals. Overall, we conclude that dual holders have real effect on corporate decisions via reduced shareholder-creditor conflict and manager-shareholder conflict.
“Asset Pricing and Systematic Liquidity Risk on Taiwan’s Stock Market.” (With Len-Kuo Hu)
Review of Securities and Futures Markets, 2012, Vol. 24, No.4., Pages 1-38.