Research
Research
"The strategic use of corporate philanthropy: Evidence from bank donations" (with Raphael Jonghyeon Park and Simon Xu), 2023, Review of Finance
Semi-finalist of Best Paper Award for Financial Institutions & Markets, FMA Annual Meeting (2021)
Media coverage: MarketWatch
"Bank partnership and liquidity crisis" (with Yong Kyu Gam, Junho Park, and Hojong Shin), 2020, Journal of Banking & Finance
Semi-finalist of Best Paper Award for Financial Institutions & Markets, FMA Annual Meeting (2020)
"R&D investment decisions in business groups: Evidence from a natural experiment" (with Daewoung Choi, Yong Kyu Gam, and Hojong Shin), 2022, Corporate Governance: An International Review
"What do boards consider in CEO performance evaluation? Evidence from executive turnover" (with Jing Xu), 2022, Finance Research Letters
"Environmental regulation, pollution, and shareholder wealth" (with Ross Levine, Raphael Jonghyeon Park and Simon Xu)
Semi-finalist of Best Paper Award for Corporate Finance, FMA (2022)
AFA (2025), Loyola Financial Ethics Conference (2024), CICF (2023), Southwestern Finance Association Conference (2023), SFS Cavalcade Asia-Pacific (2022), 3rd Annual Boca Corporate Finance and Governance Conference (2022), Conference on “CSR, the Economy and Financial Markets” (2022), FMA (2022), FIRN Corporate Finance Meeting (2022), ICEF-CInSt International Finance Conference (2022), Portsmouth Business School International Conference (2022), Asia Conference on Business and Economic Studies (2022), GRETA CREDIT Conference (2022), 3rd Frontiers of Factor Investing Conference (2022), 4th CEPR Endless Summer Conference of Financial Intermediation and Corporate Finance (2022), Asia-Pacific Association of Derivatives Annual Conference (2022), Asian FA (2022), University of California, Berkeley (2021)
This paper investigates the stock market's reaction to changes in the interaction between local environmental regulations and a firm's polluting behavior. Our identification strategy uses county-level noncompliance designations induced by discrete policy changes in the National Ambient Air Quality Standards as a source of exogenous variation in local regulatory stringency. On average, the market responds positively to firms exposed to noncompliance designations compared to non-exposed firms. In the cross-section, firms' value initially increases with noncompliance exposure but declines at higher levels. Examining the mechanisms reveals that this nonlinear variation arises from the offsetting effects of noncompliance exposure on incumbent firms, encompassing a tradeoff between the benefits of competitive advantages and the costs of regulatory compliance. Furthermore, short-term market reactions to noncompliance designations are consistent with their long-term effects on firms' accounting performance. Overall, the evidence suggests that the stock market internalizes the perceived benefits and costs of local environmental regulation.
"Non-financial information in portfolio decisions: Evidence from environmental regulation and firm pollution" (with Raphael Jonghyeon Park and Simon Xu)
Runner-up, 3rd Annual FIASI-Gabelli School Student Research Competition on ESG (2023)
Best Paper Award, FMCG PhD Symposium (2023)
Best Paper Award, Melbourne Asset Pricing Meeting (2022)
Best Paper Award, Ivey-ARCS PhD Sustainability Academy (2022)
Semi-finalist of Best Paper Award for Investments, FMA Annual Meeting (2022)
Media coverage: NBS, B The Change
Selected presentations: SFS Cavalcade Asia-Pacific (2024), FMA Asia/Pacific Conference (2024), APAD Annual Conference (2024), Fordham University JAAF Symposium (2023), FIRN Asset Management Meeting (2023), Tongji Finance Symposium (2023), Inquire Europe Joint Spring Seminar (2023), Georgia Tech Scheller College of Business Finance Seminar (2023), EasternFA Annual Meeting (2023), MFA Annual Meeting (2023), JAAF ISB Symposium (2023), SWFA Annual Meeting (2023), Annual Hedge Fund Research Conference (Poster) (2023), FMCG PhD Symposium (2023), ARCS Annual Research Conference PhD Workshop (2023), AFFI PhD Workshop (2023), AsianFA Annual Conference (2023), EuropeanFA Annual Meeting (2022), CICF (2022), Yale Initiative on Sustainable Finance Annual Symposium (2022), OFR PhD Symposium (2022), AFBC PhD Forum (2022), FMA Doctoral Student Consortium (2022), LBS Trans-Atlantic Doctoral Conference (2022), CAFM Doctoral Student Consortium (2022), Ivey-ARCS PhD Sustainability Academy (2022), CEMLA/Dallas Fed Financial Stability Workshop (2022), GRETA CREDIT (2022), Melbourne Asset Pricing Meeting (2022), EBA Policy Research Workshop on Technological Innovation, Climate Finance and Banking Supervision (2022), Conference on CSR, the Economy and Financial Markets (2022), FMA Annual Meeting (2022), New Zealand Finance Meeting (2022), SouthernFA Annual Meeting (2022), GRASFI (2022), Frontiers of Factor Investing Conference (2022), UC Berkeley Haas School of Business Finance Seminar (2022), UC Berkeley Financial Economics Seminar (2022)
This study examines how mutual funds incorporate financially material non-financial information from environmental regulation into portfolio decisions. Using exogenous variation in regulatory stringency from counties newly designated as out of compliance ("nonattainment") with federal ozone standards under the Clean Air Act, we find that mutual funds actively rebalance their portfolios of polluting stocks based on expected changes in firm fundamentals due to binding compliance costs—underweighting (overweighting) firms whose cash flows covary negatively (positively) with the regulatory shock. These responses are driven entirely by the unexpected component of nonattainment designations and are stronger when compliance costs are likely to be higher. We find similar patterns following subsequent regulatory changes, as funds further underweight firms with existing nonattainment exposure when counties are escalated to more severe categories of noncompliance and overweight them when counties are redesignated to attainment. Firms with higher nonattainment exposure experience downward earnings forecast revisions, weaker operating performance, and higher realized compliance costs. The most underweighted of these firms exhibit lower cumulative abnormal returns, and funds that reduce exposure to them earn higher risk-adjusted returns.
"Every emission you create–every dollar you’ll donate: The effect of regulation-induced pollution on corporate philanthropy" (with Raphael Jonghyeon Park and Simon Xu)
Best Paper Award (General), Southwestern Finance Association Annual Meeting (SWFA) (2023)
Samsung Securities Best Paper Award, Annual Conference on Asia-Pacific Financial Markets (CAFM) (2022)
WRDS Best Empirical Finance Paper Award, New Zealand Finance Meeting (2022)
Best Paper Award in Green Finance, Asia Conference on Business and Economic Studies (2022)
Best Paper Award in Sustainability, Conference on Behavioral Research in Finance, Governance and Accounting (2022)
KDI Frontiers in Development Policy Conference Grant (2022)
Selected presentations: SFS Cavalcade North America (2023), Nanyang Business School Accounting Conference (2023), EasternFA Annual Meeting (2023), MFA Annual Meeting (2023), SWFA Annual Meeting (2023), Annual Conference on Asia-Pacific Financial Markets (CAFM) (2022), Australasian Finance and Banking Conference (2022), University of Sydney Business Financing and Banking Research Workshop (2022), Conference on Behavioral Research in Finance, Governance and Accounting (2022), KDI Frontiers in Development Policy Conference (2022), Haskell & White Academic Conference (2022), Portsmouth Business School International Conference (2022), Asia Conference on Business and Economic Studies (2022), GRETA CREDIT Conference (2022), 3rd Frontiers of Factor Investing Conference (2022), 8th IWH-FIN-FIRE-Workshop (2022), University of California, Berkeley (2022)
We examine how polluting firms use charitable giving to build reputational capital in local communities in response to changing incentives to pollute, analyzing donations from their corporate foundations to local nonprofits. Our empirical approach employs a regression discontinuity design, leveraging the National Ambient Air Quality Standards as localized exogenous shocks to incentives to pollute. We find that firms with stronger incentives to pollute donate more to local nonprofits, particularly those that derive greater reputational benefits from donations and those facing higher expected emissions costs. Our results are not driven by a substitution between pollution abatement and philanthropy. Firms reallocate donations to areas where pollution incentives are highest to maximize reputational benefits. Comparing the social benefits of donations to the social damages from pollution, we find that firms underpay for the reputational benefits of philanthropy. Overall, the evidence indicates that reputation-building motives are a key driver of polluting firms’ charitable giving.
"Greener rules, bigger dues: Environmental regulation, firm pollution, and audit pricing" (with Raphael Jonghyeon Park and Simon Xu)
We examine how firms' exposure to environmental regulations through their polluting activities affects audit pricing. Our identification strategy leverages county-level nonattainment designations under the U.S. Clean Air Act, which introduce significant uncertainty into polluting firms' operations and financial positions---heightening financial reporting risk and the likelihood of internal control deficiencies. To capture regulatory exposure, we construct a firm-year measure that combines facility-level ozone emissions with county-level nonattainment status, allowing us to identify whether a firm's pollution triggers compliance obligations. We find that firms with greater nonattainment exposure incur significantly higher audit fees, with the effects more pronounced among firms facing greater regulatory intensity and operating risk. Auditors respond by exerting more effort, and are more likely to issue going concern opinions and disclose material weaknesses in internal controls. Collectively, our results suggest that auditors incorporate environmental regulatory compliance risks into their pricing decisions.
"Environmental regulations and CEO compensation" (with Ross Levine, Raphael Jonghyeon Park, and Simon Xu) [NBER Working Paper No. w32663]
Shinhan Securities Best Paper Award, APAD (2024)
Korea Financial Investment Association Best Paper Award, Joint Conference with the Allied Korea Finance Associations (2024)
Best Paper Award (ESG), Southwestern Finance Association Annual Meeting (2024)
KDB (Korea Development Bank) Best Paper Award, CAFM (2023)
Best Paper Award, Financial Information Society of Korea (2023)
Media coverage: Harvard Law School Forum on Corporate Governance
APAD Annual Conference (2024), SFS Cavalcade North America (2024), SWFA (2024), Boca Corporate Finance and Governance Conference (2023), CAFM (2023), AFBC (2023), BAR Annual Conference (Harvard) (2023), Haskell & White Academic Conference (2023), Financial Information Society of Korea (2023), Hanyang University (2023, 2024)
Although corporate finance theory suggests how adverse shocks influence shareholder preferences toward corporate risk-taking and executive compensation, few researchers explore this relationship empirically. We construct a firm-year measure of unexpected shocks to environmental regulatory stringency. We find that adverse environmental regulatory shocks typically prompt corporate boards to reduce the risk-taking incentives of CEO compensation. However, this pattern is not uniform. Financially distressed firms exhibit milder reductions in compensation convexity, with some even increasing it, suggesting a "gambling for resurrection" strategy. Moreover, the strength of corporate governance influences shareholders' capacity to align executive incentives with changing shareholder risk preferences.
"Making news salient"
AEA Annual Meeting (2022), FIRN Corporate Finance Meeting (2021), FMA Annual Meeting (2019), Queensland University of Technology (QUT), Özyeğin University, The 13th Conference on Asia-Pacific Financial Markets (CAFM), University of New South Wales
CEOs have incentives to communicate with their investors after news releases if the market misinterprets the news. I examine how CEOs communicate with the market through their trading pattern. I find that CEOs are more likely to purchase shares after positive and negative news release, suggesting that they want to confirm their positive news if the market underreacts to the positive news and want to mitigate the market overreaction to their negative news by purchasing shares. These patterns vary conditional on information environment and news categories. My results suggest that CEOs can enhance communication with their investors through their trading pattern.
"Does bank competition increase bank liquidity creation? A state-level perspective"
The 12th Financial News & KAFA Doctoral Student Dissertation Award (2018)
AEA Annual Meeting (2022), New Zealand Finance Meeting (2018), FMA Annual Meeting (2018), FMA Asia/Pacific Conference (2018), FMCG (2018), The 12th Conference on Asia-Pacific Financial Markets (CAFM), FIRN Annual Meeting (2017), Conference on Competition in Banking and Finance (2017)
One purpose of regulations regarding bank competition is to encourage depressed local credit market. Does enhanced competition through bank deregulation revive local economy? Exploiting staggered bank deregulation events in the United States, I document that state-level bank deregulation does not, on average, significantly affect state-level bank liquidity creation, while bank-level analysis finds that enhanced bank competition decreases bank liquidity creation. In addition, I find that states and banks respond to the state-level deregulation events differently. My results suggest that the policy, that is applied to all heterogeneous banks and states in the same way, does not fit all.