Working papers

Workfoce Mobility and Corporate Misconduct: The Governance Effects of Noncompete Agreements (with Kentaro Asai and Qianru Zhang)

This paper examines how cross-state variation in the enforceability of noncompete agreements (NCAs) influences corporate misconduct at the establishment level. We find that stricter NCA enforcement significantly reduces misconduct, with the deterrent effect amplified when labor turnover is more costly and weakened in industries where labor is easily substituted by technology. Further analysis suggests that reduced labor mobility and heightened unemployment risk serve as stability and discipline mechanisms that curb misconduct. These findings highlight the pivotal role of workforce mobility in shaping firm conduct and ethical standards, revealing an unintended consequence of NCA enforceability and offering new insights into the governance implications of labor market regulation.

When Markets Move, People Move: Industry Competition and Employee Turnover (with Jonathan Brogaard, Duc Duy (Louis) Nguyen, and Vathunyoo Sila)

This paper examines how product market competition influences employee turnover, finding that intensified industry competition significantly increases employee turnover. This relationship is robust across multiple measures of competition and is further validated using an instrumental variable approach. The effect is especially pronounced in firms with high financial leverage and weaker workforce-related governance, but is attenuated in states recognizing the Inevitable Disclosure Doctrine (IDD). We identify increased labor mobility, heavier workloads, and heightened job insecurity as key mechanisms driving this effect. Overall, our findings highlight the governance challenges in managing human capital under competitive pressure and underscore the critical role of effective governance---particularly in talent retention, incentive design, and workplace stability---in mitigating labor risks associated with intensified market competition.

Do Paid Sick Leave Mandates Impact CEO Pay? (with Antje Berndt and Justin Nguyen)

This paper investigates the effect of Paid Sick Leave (PSL) mandates on CEO compensation. We find a significant reduction in CEO pay following state-level PSL mandates, particularly in states with higher maximum PSL hours, competitive industries, and firms with low profit margins, high labor intensity, and elevated health risks. Additionally, we observe increased firm value and improved income for low-wage workers post-PSL mandates. Given that the U.S.

is the only industrialized nation without a national paid sick leave policy, our findings offer valuable insights for regulatory reforms that can balance between employee welfare, CEO pay, and corporate performance.

The Sensitivity of Bank Performance to Local Housing Prices - Evidence from Diversified and Local Banks (with Christopher James, Duc Nguyen and Takeshi Yamada) R&R

This paper investigates the sensitivity of geographically diversified and nondiversified banks’ performance to local housing prices. We show that despite being constrained in their diversification capacity, nondiversified banks experience lower performance sensitivity with respect to housing prices than their diversified counterparts. Further analysis reveals that nondiversified banks better manage their loan quality, adopt a conservative capital strategy, capture underserved market segments and achieve strong competitive advantages in customer satisfaction and loan pricing. Taken together, our findings highlight the resilience of nondiversified banks and explain why they have successfully coexisted with diversified banks over the recent waves of consolidation in the banking industry. 

Merger Synergies and Local Wages: Evidence from Bank Mergers and Acquisitions (with Emma Schultz and Sayla Sowat Siddiqui)

This paper investigates the impact of commercial bank mergers on local labor banking markets. We find that merger events have a positive effect on local bank wages. The effect increases with the likelihood of high-synergy mergers, the competitiveness of local employers, and the availability of outside job opportunities. The results are robust to controlling for the endogeneity of merger events and the influence of local economic conditions. These findings provide further insights on the recent rise of wages in the banking industry and emphasize the advantages of generalized labor skills in the current business environment characterized by rapid technological advancement.

Stock Market Cycles and Investment of Unlisted Firms (Nhan Le, Mattias Nilsson and Yitao Zheng)

We investigate the impact of stock market cycles on unlisted firms' investment activities. We .find that bull markets is associated with increased capital expenditures, new establishments, and employment growth in the unlisted corporate sector, while bear markets is associated with a decrease in these investment activities. The favorable effect takes one year to materialize while the adverse effect takes place contemporaneously. Both effects are transitory and vanish after two years. The effects are stronger for unlisted firms with high capital requirements and facilitated in areas with a dense presence of listed firms. In addition, the magnitude of the effect is attenuated depending on the availability of alternative .financing sources such as private equity and bank lending. We also .find evidence suggesting stock market cycles partly impact the unlisted firm market through merger and acquisition activities by publicly listed firms.

Contagious Negative Sentiment and Corporate Policies - Evidence from Local Bankruptcy Filings (Jawad Addoum, Alok Kumar, Nhan Le and Alexandra Niessen-Ruenzi)

This study shows that corporate bankruptcy events affect the investment and financing policies of geographically proximate firms. Following the bankruptcy of a local peer, non-filing local firms significantly reduce investment expenditures, reduce capital structure leverage, and hold more cash. The effects of local bankruptcy are more pronounced when the CEO of the filing firm is dismissed, and stronger among firms managed by CEOs who are relatively young, have fewer qualifications, and relatively short tenure. Firms that have board connections with the bankrupt firms also react more strongly to the distress events. Importantly, the spillover effects associated with geographic proximity cannot be explained by intra-industry or supply chain effects documented in the extant literature. We also find that the effects cannot be explained by shocks to the local economy. Collectively, these results suggest that corporate managers follow the availability heuristic and become overly conservative in their investment and financial policies in response to local distress events.

When more is less: The impact of Large Cash Holdings on the Recovery of Firms' Performance

The paper investigates the impact of cash holdings on firm performance following an abrupt performance decline. Cash rich firms underperform cash poor ones following the performance shock. Low cash firms cut-off their assets and tighten capital expenditure, whereas high cash firms do not follow this pattern. The effect is more pronounced for firms with high propensity of managerial entrenchment, and less severe for firms operating in competitive product market, with ample investment opportunities or large institutional holdings. The analysis provides evidence on the potential downside of large cash reserves even in the context when cash is presumably most needed.