"Labor-saving Innovations and Capital Structure", 2023, Journal of Corporate Finance, forthcoming. (with J. Qiu, McMaster University, and C. Wan, University of Massachusetts at Boston)
"Can Short Sellers Detect Internal Control Material Weaknesses? Evidence from Section 404 of the Sarbanes-Oxley Act", 2022, Journal of Accounting, Auditing, and Finance: 37(1), pp.3-38. (with Z. Singer, HEC Montreal, and J. Zhang, University of Alabama Huntsville)
“How Are Institutions Informed? Proactive Trading, Information Flows, and Stock Selection Strategies”, 2021, Contemporary Accounting Research: 38, pages 1849-1887.
“Who is Afraid of BlackRock?”, 2021, Review of Financial Studies: 34(4), pages 1987–2044. (with M. Massa, INSEAD, and D. Schumacher, McGill University).
“Cross-Country Competitive Effects of Cross-Listings”, 2020, Review of Corporate Finance Studies: 9 (1), pages 116–164. (with S. Sarkissian, McGill University)
“The Product Market Impact of Minority Stake Acquisitions”, 2018, Management Science: 64(2), pages 825-844. (with A. Nain, University of Iowa)
Price fragility and its implications
"Repurchases for Price Impact: Evidence from Fragile Stocks", (with M. Massa, INSEAD, and D. Schumacher, McGill University) SSRN
Presented at AFA 2022
R&R at Journal of Financial & Quantitative Analysis
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.
“Does Ownership Concentration Affect Corporate Bond Volatility? The Impact of Illiquidity”, (with Jing-Zhi Huang, Pennsylvania State University, and Y. Wang, University at Albany) SSRN
Presented at FMA 2021, NFA 2020, and SFA 2020
R&R at Journal of Banking & Finance
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
“The Effect of Labor Cost on Innovation”, (with A. Nain, University of Iowa) SSRN
Presented at FMA 2020, University of Iowa
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.
“Local Labor Market Competition and Capital Structure Decisions”, (with John Bai, Northeastern University, M. Massa, INSEAD, and C. Wan, University of Massachusetts at Boston) SSRN
Presented at PFMC 2022, WBFS 2022
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.
Product markets and corporate finance
“Two Faces of Product Market Competition and Tax Avoidance”, (with R. Li, University of Massachusetts at Boston, J. Qiu, McMaster University, C. Wan, University of Massachusetts at Boston, and M. Wang, University of Massachusetts at Boston) PDF
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.
SSHRC Insight Grant, Social Sciences and Humanities Research Council, Principal Investigator, 2019 – 2025 (Amount: $88,219)
SSHRC Insight Development Grant, Social Sciences and Humanities Research Council, Principal Investigator, 2019 – 2023 (Amount: $48,268)
SSHRC Explore – Standard Research/Creative & Performing Arts Grant, McMaster University, 2017 (Amount: $7,000)