Research
Research
The Impact of ESG Disasters on Green and Brown Firms
Abstract: I investigate the effect of a firm’s prior ESG reputation on the market response to ESG incidents. I find that firms with a better ESG reputation, i.e., higher ESG ratings, experience less negative stock-market reactions and analysts' forecast revisions compared to firms with a poorer ESG reputation. Managers of green firms with strong ESG reputations, when producing earnings guidance, do not forecast a lower impact of these incidents on future earnings. Similarly, actual decreases in future earnings following these incidents are not significantly different between green and brown firms. Altogether, the evidence suggests that investors and analysts underreact to ESG incidents when the affected firms have a stronger prior ESG reputation.
Presentations: Australasian Finance and Banking Conference 2024, New Zealand Finance Meeting 2024 , SMU Summer Finance Research Camp, SMU Brown Bag
Fraud Risk and Corporate Performance
Abstract: I examine the impact of ex ante fraud risk on a firm's stock market performance and how firms respond to this risk. Using a detection-controlled estimation framework and new instrumental variables, I estimate the ex ante probabilities of a firm (1) committing fraud and (2) being detected for fraud. I find that firms with a high fraud detection probability have low returns, which is consistent with the large negative stock returns observed upon the revelation of fraud. In contrast, firms with a high probability of committing fraud have higher returns, which is consistent with the view that fraudulent firms are riskier on average. Additionally, firms with a high probability of committing fraud are observed to hold less cash, invest less, and increase payouts, while those with a high probability of detection tend to hold more cash.
Presentations: SMU Brown Bag, SMU PhD Reading Group
Environmental and Social Concerns and Litigation Risk
Conditional Relationship between Distress Risk and Stock Returns, 2022, Global Business & Finance Review 27, 16 (with Jung-Min Kim).