"Cyber Risk and Bank Fragility" 

(Presentations: 2024 FMA European Conference)

This study investigates the impact of cyber risk on bank fragility. Using a novel firm-level measure of cybersecurity, I find that cybersecurity risk increases the probability of bank default. The effect is larger for banks with deposit withdrawal, but less pronounced for banks with liquidity buffer. The results are robust to using an instrumental variable approach and to using alternative measures. Further, I find that cyber risk leads to substantial increase in systemic risk. Findings provide suggestive evidence that cybersecurity risk exacerbates financial instability, but an adaptation strategy could build resilience to potential cyberattacks.

"Climate Change and Bank Default" 

(Presentations: 2024 Adam Smith Sustainability Conference & 2nd Annual Conference of the British Accounting Review)

This study investigates the impact of climate change on bank defaults. Using a novel bank-level measure of climate change, we find that climate change increases the probability of bank default. The effect is more pronounced for banks with a higher exposure to climate disasters and higher loan portfolio synchronicity. The detrimental impacts are amplified for banks experiencing deposit withdrawal. Further, we find that climate adaptation policy can lessen bank default risk due to climate change. Our results are robust to using an instrumental variable approach and to using alternative measures. Overall, our findings provide suggestive evidence that climate change exacerbates financial instability, but adaptation strategy could build resilience to adverse impacts caused by climate change. 

"Labor Mobility, Climate Disasters, and Corporate Cash Reserve"

This paper investigates the impact of climate disasters on the relation between labor mobility and corporate cash holdings. We show that firms increase their cash holdings in response to relaxing labor mobility constraints. The effect is more pronounced for firms affected by more frequent climate disasters. Further, we show that firms with higher skilled labor promptly increase their cash reserve by responding to intense climate disasters, whereas firms with higher routine-task labor remain unchanged. Overall, the findings provide suggestive evidence that firms with skilled workers who are exposed to severe climate disasters have a conservative financial policy to shield from the increased cost of labor adjustment caused by climate disasters. 

"Climate Change Exposure and Firm Cash Holdings" 

(Presentations: 2023 ICGS (International Corporate Governance Socienty) conference, University of Basel)

I find that firms significantly increase their cash holdings in response to increases in climate changes. The increase in cash holdings is more pronounced in firms with higher financial constraints, higher cash flow volatility, and less cash resilience. I find that, after Paris Agreement, firms exposed to more climate changes hoard more cash. I further find that firms in more vulnerable industries increase cash holdings more than firms in other industries.

"Climate Adaptation and Corporate Investment Decisions"

(Presentations: 2023 ICGS (International Corporate Governance Socienty) conference, 2023 World Finance Conference, University of Basel)

I document that climate uncertainty negatively affects corporate investment. The effect is more pronounced for firms with higher capital intensity, higher operating inflexibility, and less redeployable capital. Further, I find that climate adaptation plans mitigate the negative effects of climate uncertainty on corporate investment. The findings suggest that climate uncertainty can depress corporate investment, but climate adaptation plans shield firms from climate uncertainty contributing to the resilience of investment.

"The Impact of Bank Herding on Systemic Risk"

(Presentations: Yonsei University, Rutgers University)

I find herding by big banks interacts with boom period to provide a stronger predictive power of systemic risk to next period beyond what is predicted by bank herding and boom period individually. I attribute these results to evidence of too-many-and-big-to-fail. 

"Inflation, Heterogeneous Beliefs, and Mispricing"

(Presentations: 2023 SFiC (Sustainable Financial Innovation Centre), 2017 World Finance Conference, 2015 Hong Kong Joint Finance Research Workshop, 2015 Financial Management Association Annual Meeting, 2015PBFEAM, Rutgers University, Hong Kong Polytechnic University, Chinese University of Hong Kong, University of Sydney, Rensselaer Polytechnic Institute, Hitotsubashi University, International University of Japan) 

I find that, heterogeneous beliefs are particularly strong following periods of highly volatile inflation. To empirically test whether heterogeneous beliefs on inflation lead to mispricing, I entertain the possibility that anomalies at least partially reflect mispricing. I find that, following high inflation periods, anomalies are stronger and the returns on the short-leg portfolios are lower. The key explanation is that, following high inflation periods, the most optimistic belief about stocks tends to be overly optimistic, as a result, stocks tend to be overpriced.

"Happiness and Innovation around the World" with Fangfang Hou and Seongkyu “Gilbert” Park 

(Presentations: 2022 Greater China Area Finance Conference, 2022 Asian FA, 2021 APAD, 2018 ICAFEL, 2018 Asian Meeting of the Econometric Society, 2018 FMA European Conference, 2018 Midwest Economic Association, 2017 Asiatic Research Institute)

Using data from World Happiness Report, we document that happiness positively affects innovation. The effect is more pronounced in countries with national culture of muscularity, long-term orientation, and trust. Our results remain intact through all identification tests. We find that happiness promotes innovation through which channels of collaboration, productivity, and risk-tolerance. Overall, our results suggest that happiness fosters innovation around the world.

"Flu Epidemic, Limited Attention and Analyst Forecast Behavior" with G. Nathan Dong

(Presentations: 2014 Financial Management Association, 2014 China International Conference in Finance, 2013 Behavioral Finance Working Group Conference, Hong Kong Polytechnic University) 

This paper finds that higher flu intensity in the New York and New Jersey region is associated with lower degree of disagreement on target-price forecasts among financial analysts. We find analysts are more likely to over-predict target-price for high-performing stocks and under-predict target-price for low-performing stocks. 

"Climate Change, Bank Fragility, and Systemic Risk" Review of Corporate Finance, 4, 2024, 127-150.

(Presentations: 2023 Dolomites Summer Finance, 2023 Risklab/Bank of Finland/ESRB Conference on Systemic Risk Analytics, University of Basel)

I document that climate change affects financial stability. Both physical climate change and transitional climate change increase substantial systemic risk. The effect is more pronounced for banks with higher climate change exposure, higher loan portfolio synchronicity, and higher bank default probability. The results are robust to using an instrumental variable approach and to using various alternative measures. Further, exploiting staggered adoptions of climate change adaptation across states, I find that climate adaptation actions can reduce systemic risk due to climate change. Findings provide suggestive evidence tht climate adaption can build resilience to climate impacts. 

"Political Corruption, Dodd-Frank Whistleblowing, and Corporate Investment" with Qingjie Du, Journal of Corporate Finance, 73, April 2022, 102145.

(Presentations: 2020 FMA European Conference, 2019 CAFM, 2019 Australasian Finance and Banking Conference, 2019 FMA Asia-Elevator Pitch) 

We find firms in more corrupt states invest 7.66% less than firms in less corrupt states. The deterrent effect of corruption diminished after the Dodd-Frank Whistleblower Provision enacted. Our findings suggest political corruption hinders investment, but the change of legal environment can help firms reduce the decline in investment in highly corrupt states.

(Presentations: 2019 Midwest Finance Association Meeting, 2018 Financial Management Association Annual Meeting, 2018 CAFM)

In emerging economies, greater corruption is related to greater capital expenditures. In advanced economies, greater corruption is positively related to innovation. Our findings suggest that corruption leads firms to take more action in the areas that the economy has a competitive edge in.