Working paper
The Salience of Dirty Supply Chains: Fund Mergers, Attention Spillover, and Environmental Performance (solo-authored)
The 3rd HEC-HKUST Sustainable Finance Workshop (2025);Â Massey Sustainable Finance Conference (MSFC, 2025)
Abstract:
Vertical cross-ownership (VCO) arises when a shareholder holds stakes in both a customer firm and its supplier. This paper examines mutual fund mergers where an environmental-oriented fund (E-fund) acquires a target non-E-fund that holds the supplier of its portfolio firms, creating VCO along the supply chain. Following such mergers, environmental performance improves for not only cross-owned suppliers but also spills over to other outside suppliers. These improvements occur because E-funds are 9.7% more likely to mention supply chain responsibility and 10.4% more likely to appoint managers with relevant expertise after the merger. Overall, VCO acts as an attention shock, enabling responsible investors to extend sustainability impact. [SSRN Link]
Paying for Failure: Director Compensation, Oversight Lapses, andNetwork Effects (with Sudipto Dasgupta and Ying Xia)
Abstract:
We examine how director compensation functions both as a mechanism for board accountability and as a strategic tool to divert shareholder attention from high pay packages following major oversight failures. Analyzing various corporate incidents, we find that the consequences are contingent on the nature of the failure. For events with diffuse responsibility, such as major environmental breaches, the entire board experiences a significant compensation reduction. In contrast, for failures with clear accountability, like financial misstatements, pay cuts are precisely targeted at directors on the responsible committees. We also provide evidence of a network governance channel: environmental failures, perceived as systemic risks, trigger preemptive pay reductions on connected boards that share a director with the violating firm. Importantly, these pay cuts are not merely strategic gestures; they are followed by substantive improvements in environmental performance at both the focal and connected firms, demonstrating that risk perceptions transmitted through director networks can drive meaningful governance and operational changes.[SSRN Link]