Research
Research
When Speed Trumps Sustainability:
Environmental Disclosure Frequency and Environmental Investment Myopia
Conference and Workshop: Washington University, Nicholas Dopuch conference poster session, and 2024 FARS midyear conference (scheduled)
This study examines the effect of increased environmental disclosure frequency on firms' myopia in environmental investment choices between short-term solutions (end-of-pipe) and long-term investments (clean technologies). Clean technologies (e.g., adopting renewable energy) achieve long-term environmental efficiency by preventing pollution at its source but require a longer implementation period. In contrast, end-of-pipe solutions (e.g., scrubbers or filters) are immediate remedies for specific pollutants post-production are immediate remedies for specific pollutants post-production. Increased disclosure frequency, coupled with public scrutiny, could steer firms toward the immediacy of end-of-pipe solutions at the expense of sustainable clean technology. Examining a Chinese regulation transitioning from annual to daily mandatory emission reporting, I find that regulated firms increase end-of-pipe investments but reduce clean technology investments. Consistent with the limitations of end-of-pipe solutions, treated firms cut regulated pollutant emissions but increase unregulated carbon emissions. This myopia pattern strengthens for firms with more public oversight of pollution and for those more likely to violate pollution standards or face more severe consequences upon violations. However, firms receiving government subsidies for clean technologies experience a weaker effect. Amidst the growing demand for timely ESG information, this study highlights the adverse incentive created by the potential cost of such regulation.
Coauthors: Jeremy Bertomeu and Xiumin Martin
Conference and Workshop: Washington University, HEC Paris, Peking University, Rice University, University of Toronto, Baruch College of City University of New York, and the 2023 Bretton Woods Conference
This study examines the impact of government financial assistance during the COVID-19 pandemic on the demand for crypto assets and its effect on the stated goals of stimulus programs. Government lending to small businesses (PPP) significantly increased households’ interest in crypto assets. Using a Bartik instrument, we find that a one standard deviation increase in disbursements is associated with an increase of 0.1 standard deviation in crypto-related Google searches. A 100% increase in disbursements is accompanied by a 2% increased number of new wallets, 9% higher trading volume, 23% higher miners’ revenue, and a 1% shift from large to small addresses, suggesting that government assistance increases the demand for cryptos, particularly among new, retail investors. Roughly 8-11% of disbursements are diverted to crypto assets, rendering the aid less effective in maintaining employment. We rationalize these facts in a stylized model where investment in crypto and employment are affected by binding financial frictions during the pandemic.
Conference and Workshop: 2023 AAA Annual Conference, 2023 AAA Midwest Conference, 2023 FARS Midyear Conference
Companies have increasingly hired Wall Street analysts to fill investor relations (IR) positions. In this study, I investigate whether these analysts-turned IR officers provide a greater information advantage to their former analyst colleagues in the post-Reg FD period. Using detailed career data of 2653 IR officers, I conduct a difference-in-difference study to compare the performance of socially connected analysts with their peers after the transition to an IR role. The findings reveal that socially connected analysts have higher forecast accuracy, a greater price impact, and are more likely to be the first to issue earnings forecasts compared to their peers who cover the same firm after the IR turnover. Importantly, this paper shows that the information advantage primarily stems from decreased enforceability rather than the "mosaic" theory. Overall, the findings suggest the existence of a possible selective disclosure channel facilitated through the social connections between IR officers and analysts, underscoring the important role of IR officers as information providers.