Published papers

Financial Development and Productivity Growth of Stagnant Industries with Ha Nguyen and Emma Schultz,  Applied Economics (Forthcoming)

Best paper award at VICIF conference in Vietnam, 2018

We investigate the effect of financial development on the productivity growth of stagnant industries. Testing reveals that, while financial development, triggered by banking deregulation has an insignificant effect on productivity growth experienced by progressive industries, stagnant industries experience remarkable post-reform productivity growth improvements. Moreover, post-deregulation employment share declines in stagnant industries, ameliorating Baumol’s cost disease. Results are most pronounced in small states or those where stagnant industries experience lower (higher) pre-deregulation productivity growth (employment share), and are likely the outcome of improved capital allocation. Taken together, findings highlight the vital role of enhanced financial access in abridging productivity gap among sectors.

Does Shareholder Litigation Risk Cause Public Firms to Delist? Evidence from Securities Class Action Lawsuits (with Jonathan Brogaard, Duc Duy (Louis) Nguyen, Vathunyoo (Ben) Sila), Journal of Financial and Quantitative Analysis (2023)

Using three exogenous shocks to ex ante litigation risk, including federal judge ideology and two influential judicial precedents, we find that lower shareholder litigation risk reduces a firm’s propensity to delist from the U.S. stock markets. The effect is at least partially driven by indirect costs of litigation and that being a private firm can significantly reduce the threat of litigation. Overall, the results suggest that mitigating excessive litigation costs for public firms is crucial to ensure the continued vibrancy of the U.S. stock market. 

Intra-industry Spillover Effects - Evidence from Bankruptcy Filings (Nhan Le and Phong Ngo), Journal of Business, Finance and Accounting (2022)

Firms contract capital expenditure and reduce new debt issuances following the bankruptcy of an industry-peer. The effect is strongest for financially constrained firms or firms operating in industries that are nascent, dependent on external finance, or geographically concentrated. The effect weakens in diversified firms and in concentrated industries. Taken together, these findings suggest that financing constraints, firm opacity and industry competition are important amplification factors of the industry spillover effects. We establish causality by identifying idiosyncratic bankruptcies and implementing an instrumental-variables estimation to mitigate the confounding effect of general industry conditions.

Local Information Environment and Accounting Fraud (Jens Hagendorff, Nhan Le, Duc Duy Nguyen), Journal of Money, Credit and Banking (2020)

This paper shows that the likelihood that firms commit corporate fraud is affected by their local information environment. We find that the local information environment affects the likelihood that fraud is detected, speeds up the detection of fraud, and decreases the propensity of local firms to engage in fraud. Our results cannot be explained by the clustering of firms in urban areas, geographic proximity to regulators or other location effects. Overall, our study identifies a spatial dimension in the detection and prevention of corporate fraud.

Local Bankruptcy and Geographic Contagion in the Bank Loan Market (Jawad Addoum, Alok Kumar, Nhan Le and Alexandra Niessen-Ruenzi) Review of Finance (2020)

This paper examines whether corporate bankruptcies influence the bank loan characteristics of geographically proximate firms. We find that, controlling for industry contagion and local economic conditions, firms headquartered near a bankruptcy event experience a 7 basis point increase in loan spreads over the subsequent year, even when the credit default risks of local firms do not increase. There is also an increase in the proportion of secured loans among non-filing local firms. Local bankruptcy has a stronger impact on lenders with geographically concentrated loan portfolios, but even lenders with low exposure to the local economy increase their spreads. The adverse effects of bankruptcy weaken as the distance to bankrupt firms increases. Collectively, these results suggest that lenders are sensitive to local bankruptcies and induce geographic contagion in the bank loan market.

Does risk of shareholder litigation affect corporate information environments? (Nhan Le, Duc Duy Nguyen and Vathunyoo Sila), Journal of Financial Markets (2020)

Finalist for the Corporate Finance best paper award sponsored by CSMAR, FMA Asia 2019.

Using the staggered adoption of universal demand laws, this paper shows that the reduction in shareholder litigation risk deteriorates firms’ information environments. This reduction in transparency is due to firms changing the way they invest, rather than obfuscating or withholding firm-specific information. Further tests suggest that the reduction in litigation risk is associated with more efficient investments and a lower propensity of stock price crashes. Overall, despite causing a deterioration in firms’ information environments, the reduction in litigation risk does not appear to harm shareholder wealth. Our paper offers novel insights into the net economic benefits of shareholder litigation laws.