Yeonjoon Lee

WORKING PAPERS

“Financial Intermediaries and Agency Problems With and Without Vertical Incentives” 2nd Round Revise and Resubmitted (minor revision) at Management Science

Winner of the Outstanding Doctoral Student Paper, Southern Finance Association 2020

I study agency problems between brokers and investors in the retail bond market. The presence of suitability or fiduciary regulations, which govern transactions in this setting, can lead to tensions for brokers between maximizing their own profit and acting in the best interests of their customers. This paper measures the degree to which these conflicting incentives influence brokers by examining the U.S. reverse convertible bond market. While brokers do consider the profits of investors when making decisions, I estimate that their own profits are roughly three times more important, suggesting the existence of severe agency problems that reduce consumer welfare. Moreover, despite "arms-length transaction" regulations requiring that vertical relationships do not influence broker activities, I show that brokers are sensitive to the markups of their vertically integrated upstream firms. Counterfactual analysis shows that vertical incentives also reduce consumer surplus, although to a smaller degree than the agency costs.

PEER-REVIEWED PUBLICATIONS 

Scott Frame, Ruidi Huang, Erica Xuewei Jiang, Yeonjoon Lee, Will Shuo Liu, Erik Mayer, Adi Sunderam. 2025. “The Impact of Minority Representation at Mortgage Lenders” Journal of Finance 

Jung-Eun Kim, Yeonjoon Lee. 2024. "Racial Disparities and Potential Channels in the NBA Digital Collectibles Market" Applied Economics

Yeonjoon Lee. 2022. "Measuring the Impact of Rarity on Price: Evidence from NBA Top Shot" Marketing Letters. (click link)

In Ho Lee and Yeon Joon Lee. 2008. "Learning and Herding: An Account of Hwang Woo-Suk Scandal" Journal of Economic Theory and Econometrics 19 (2), 77-94.

The views expressed here do not necessarily reflect the position of the Federal Reserve Bank of Richmond or the Federal Reserve System.