Working Papers:
Political Power and Corporate Social Responsibility: Evidence from U.S. House Committee Chair Turnovers, Under Review
with Michael Zheng
Manuscript Posted Soon
We examine how shifts in local political power impact corporate environmental behavior. Exploiting plausibly exogenous turnovers in U.S. House committee chairmanships, we find that firms realign their pollution and performance to match the new representative’s policy priorities. A pro-growth chair boosts profits but drives toxic releases up by roughly 25%, whereas a pro-environment chair trims emissions by 20% at the cost of slower profit growth. We further provide evidence that firms benefit from a pro-economy committee chair by receiving more regulatory protection despite generating more pollution, while they receive more financial favors from a pro-environmental committee chair to compensate for slower economic growth. Our paper is the first to document that firms may respond to political shocks in different directions depending on the politician’s political priority.
How Do Private Equity Buyouts Affect Employee Pension Plans?, Under Review
See the latest version at SSRN
2024 FMA Best Paper Award Semifinalist
Listed on SSRN's Top Ten download list for: ERN: Econometric Studies of Private Equity, Venture Capital, Entrepreneurship, & Innovation (Topic).
Using data from Form 5500 filings, this study examines the impact of private equity (PE) buyouts on the retirement benefits of target firms. PE buyouts increase the likelihood of DB plan termination or freeze by 14.2 percentage points and reduce annual employer contributions by 22.2 log points per DB plan. Pension liabilities and assets decline, while the discount rate rises, though funding ratios remain unchanged. Post-buyout, pension portfolios shift toward riskier equity allocations, increasing by 2.4 percentage points without improved returns. Contributions to DC plans also decline, with employer contributions falling 26.5% and match ratios decreasing by 5.1 percentage points. Subsample analysis reveals that these effects are more pronounced in PBGC-covered plans, suggesting moral hazard as PE firms take more aggressive actions. Overall, these results suggest that PE buyouts may negatively affect the retirement benefits of employees in target firms.
From Healthcare to Clean Air: How Employee Benefit Mandates Yield Environmental Dividends, Under Review
with Michael Zheng
See the latest version at SSRN
We examine whether expansions in employer-sponsored health insurance affect industrial pollution. Using the staggered adoption of state-level dependent care mandates from 1990 to 2011, we estimate that regulated establishments reduce toxic emissions by 16-21% relative to unaffected plants. The decline is driven by increased pollution abatement and shifts toward cleaner production technologies. Evidence suggests that rising employer health liabilities incentivize firms to internalize pollution-related risks. Overall, our analysis reveals that such mandates generate unintended environmental benefits, highlighting the potential for alignment between social policy and sustainability objectives.
When Mayors Become Heroes for Zero: The Effect of Local Governments' Environmental Programs on Their Cost of Debt
with Ioannis Branikas, Xuanyu Bai, and Z. Jay Wang
Manuscript Posted Soon
Do local environmental programs have similar effects on municipal debt as a green bond label? We examine this question by studying the effect of the Mayors Climate Protection Agreement(MCPA) on the US municipal bond yields and bond fund holdings of municipal bonds through 2005-2010. Our staggered difference-in-difference analysis shows that after joining MCPA, new issuance yields are on average 3.3 bps lower, and spread of new issuances are on average 5.5 bps lower. This effect is almost solely driven by bonds that are issued for purposes other than new project financing, and by bank-qualified bonds. After joining MCPA, MCPA participant bonds are more likely to be held by bond funds, with bond funds increase the weight of MCPA participant issued bonds by 62.8%.
Import Competition and Labor Share
with Xi Li and Youchang Wu
Manuscript Posted Soon
Using the conferral of permanent normal trade relations status to China by the U.S. in 2000 as an exogenous shock, we show that the effect of import competition on labor share depends on the unit of analysis. Among the publicly traded U.S. non-multinational manufacturing firms, import competition reduces capital income more than labor income, thus increasing the labor share. At the industry level, which includes both public and private firms, import competition reduces labor income and value-added by similar magnitudes, leaving an insignificant effect on the labor share. By contrast, the county-level import competition significantly reduces county-level labor share. Our results suggest that risk sharing between labor and capital leads to a richer relation between import competition and labor share than previously documented.
The Impact of COVID-19 on Firms' Market Values: Estimates from Geographical Networks
with Ioannis Branikas
Manuscript Posted Soon
In 2020, due to the COVID-19 pandemic, the governments of most countries issued policies that impose limitations on human mobility, affecting not only people’s daily lives but also the stock market. Using data on companies’ stock market returns and geographical footprint in the U.S., in conjunction with data on the confirmed cases in the U.S. counties, we estimate the impact of the pandemic on firms’ market values. Controlling for the fixed effects of firms as well as the fixed effects of days, we show that the daily infection rate in the counties where a firm operates has a significant negative effect on its returns, in the months of February and March. The result is driven by companies with geographically dispersed operations. At the same time, the infection rate solely in the county where a firm is headquartered has a mute impact. Among the 48 Fama-French industries, the industries of entertainment, books, consumer goods, rubber, weapons, utility, telecommunication, personal services, electronic chips, measuring equipment, paper, boxes, transportation, banks, insurance and retail are affected the most. In the later months of April, May, June and July, the impact of a firm’s geographic exposure to COVID-19 on its stock market returns becomes insignificant.