Yan Wang

Assistant Professor of Finance

Finance and Business Economics

DeGroote School of Business

McMaster University

Email: ywang@mcmaster.ca

Phone: +1(905)525-9140 ext. 23984


Working Papers

Price fragility and its implications

Abstract: We highlight an important but overlooked characteristic of financial fragility: “fragile” stocks have lower price impact because they are sensitive to non-fundamental liquidity shocks. This reduces their sensitivity to corporate actions with price impact and affects the firms’ incentives to engage in such actions. We show that fragile firms have lower share repurchases, issue more equity, and invest more. We establish causality by relating changes in corporate actions to exogenous changes in fragility induced by mergers of asset managers. Our results suggest that financial fragility has direct but unexpected real implications for corporate actions.

Abstract: This paper analyzes the relation between ownership concentration and corporate bond volatility. We show that increased ownership concentration is associated with higher volatility of corporate bonds. This relation is stronger among more illiquid bonds, during periods of heightened bond market illiquidity, and among the bonds held by corporate bond funds that invest in more illiquid assets and experience higher or correlated liquidity shocks. Using a sample of mutual fund mergers, we further show that increases in bond volatility are not driven by the endogenous ownership structure of bonds but rather the non-fundamental liquidity demand of large concentrated asset owners.

Labor and corporate finance

Abstract: We show that an increase in the cost of unskilled labor leads to more labor-saving innovation. Larger minimum wage increases are associated with larger increases in automation patent applications and citations received by automation patents. These findings are stronger in states with a higher binding wage percentile, i.e., where the minimum wage increase has more ‘bite’. The increase in automation patents following minimum wage hikes contributes to poorer employment outcomes for unskilled workers employed in routine tasks. We conclude that minimum wage legislation spurs innovation that displaces the very same workers the legislation was designed to help.

Abstract: Using the near universe of online job postings from 2007 to 2019, we construct a firm-level metric of local labor market concentration. We find that firms hiring in more concentrated labor markets tend to have higher financial leverage. The positive relation between labor market concentration and financial leverage is more pronounced when the firm hires low-skilled workers and workers from routine-intensive occupations. To establish causality, we exploit the establishment of Amazon HQ2 in Crystal City, Virginia as an exogenous shock to the local labor market concentration, and find results that are consistent with our baseline result.

Abstract: This paper presents evidence that exposure to automation technologies has a positive impact on a firm’s financial leverage. The effects are more pronounced in firms with greater labor costs, routine task intensity, firing costs, and union coverage. The results are robust when we instrument a firm’s exposure to automation technologies using the robotics adoption in European countries. Our analysis suggests that the exposure to automation technologies creates a replacement threat that weakens workers’ bargaining power, compressing their wage premiums for bearing financial distress risk and reducing wage rigidity, both of which allow firms to increase financial leverage. 

Product markets and corporate finance

Abstract: This paper investigates the effect of product market competition on a firm’s tax avoidance behavior. We develop a theoretical model showing that a greater product market competition could increase the managerial incentive of tax avoidance due to a “threat-of-demotion” effect but decrease shareholders’ incentive of tax avoidance due to a “value-of-tax-saving” effect, resulting in a nonlinear impact of product market competition on tax avoidance. Empirically, we find consistent evidence that the effect of product market competition on a firm’s tax avoidance has an inverted U-Shape. Our analysis highlights that the product market competition could have a two-faced impact on a firm’s tax avoidance activities.

Research Grants