Recent Working Papers

1. Meme stocks and individual investor trading: Evidence from Reddit outages, with Yuhao Xuan, Xinran Zhang, and Gaoping Zheng, 2023

 During exogenous outages of Reddit, the predictability of retail order imbalance on future returns for meme stocks (i.e., stocks discussed extremely enthusiastically in the subreddit wallstreetbets) increases dramatically. This result is robust to various model specifications. The improved predictability is stronger for stocks discussed more fanatically before the outages, especially when influencers endorse fanatic views. Our results suggest that heated discussions on social media lead to “fanatics” pushing retail investors to make less informative trading. Our findings cannot be explained by the drop in attention. The overall market quality, such as return volatility and stock liquidity, does not change significantly. 

2. Does social media make banks more fragile? Evidence from Twitter, with Yong Kyu Gam and Chunbo Liu, 2023 

Analyzing U.S. commercial banks from 2009 to 2022, we show that uninsured deposit flows, not insured ones, become more sensitive to bank performance once banks are discussed more on Twitter, especially when performance is abnormally bad and when these discussions receive more engagement among Twitter users. Moreover, the effect is entirely driven by banks that heavily rely on uninsured deposits. The magnifying effect of social media on flow-to-performance sensitivity is better explained by stimulating depositors’ panic rather than disseminating news on bank performance. We establish causality using the relaxation of character limits by Twitter in November 2017 as shocks to the banks’ social media exposures. Overall, our findings highlight the role of social media in shaping bank fragility. 

Selected Publications

4. Internet searching and stock price crash risk: Evidence from a quasi-natural experiment, with Yuhao Xuan and Gaoping Zheng, 2021, Journal of Financial Economics  

In 2010, Google unexpectedly withdrew its searching business from China, reducing investors’ ability to find information online. The stock price crash risk for firms searched for more via Google before its withdrawal subsequently increases by 19%, suggesting that Internet searching facilitates investors’ information processing.

3. Anticorruption regulation and firm value: Evidence from a shock of mandated resignation of directors in China, 2018, Journal of Banking and Finance  

China’s broad anti-corruption campaign includes a regulation that requires bureaucrats to resign from director positions in listed companies. Using this particular event to test the effect of the anticorruption regulation, we find that this regulation costs firms with banned directors on average 4%.

2. Monetary stimulation, bank relationship and innovation: Evidence from China, with Gaoping Zheng and Shuxun Wang, 2018, Journal of Banking and Finance  

Using China’s four trillion yuan stimulus package of 2008 as an exogenous shock, we find that monetary stimulation could benefit the real economy to some extent. Specifically, compared with propensity-score-matched control firms, firms more likely affected by the stimulus plan (e.g., bank connected firms) are granted with 18% to 24% more patents afterwards.

1. The sensitivity of corporate cash holdings to corporate governance, with Qi Chen, Xiao Chen, Katherine Schipper, and Jian Xue, 2012, Review of Financial Studies 

The average cash holdings of Chinese-listed firms decreased significantly after the split share structure reform in China, which specified a process that allowed previously nontradable shares held by controlling shareholders to be freely tradable on the exchanges. Our results are consistent with the premise that the reform removed a significant market friction, which led to better incentive alignment between controlling shareholders and minority shareholders and relaxed financial constraints.