Research

Recent Publications:

1. Illuminating the Murk: The Effect of Business Complexity on Voluntary Disclosure (with Arshia Farzamfar, Hosein Hamisheh Bahar and Lilian Ng), 2024, Journal of Corporate Finance, 102612.

2. Mutual Fund Pollution Experience and Environmental Voting (with Alan Marcus and Vinh Nguyen), 2024, Journal of Banking and Finance, 162, 107149.

3. Peer Effects in Corporate Governance Practices: Evidence from Universal Demand Laws (with Alan Marcus, Vinh Nguyen, and Hassan Tehranian), 2021, Review of Financial Studies, 35(1), 132-167.

-Midwest Finance Association Outstanding Paper Award, MFA annual meeting, 2019

-Semifinalist for Best Paper Award in Corporate Finance, FMA annual meeting, 2016

-Media Coverage: Harvard Law School Forum on Corporate Governance - May 3, 2021  

4. Investor Protection and the Long-Run Performance of Activism (with Namho Kang, Gideon Ozik, and Ronnie Sadka), 2019, Journal of Financial and Quantitative Analysis, 54(1), 61-100.

Working Papers:

1. Environmental Violations in the Power Sector:  Accountability and Community Welfare  (with Hosein Hamisheh Bahar and Lilian Ng)

-R & R

-Semi-finalist for the Best Paper Award in Corporate Finance, FMA Annual Meeting, 2024

Abstract:  This study examines how U.S. power sector firms respond to environmental regulation violations, focusing on facilities flagged by the EPA for non-compliance. In response, these plants implement various strategies to reduce air pollution and prevent future violations, including cutting electricity generation, improving fuel quality, reducing coal use, installing scrubbers, enhancing pollution controls, and investing in energy-efficient generators. Organizational efficiencies and government subsidies further strengthen these efforts. While these actions aid environmental recovery, the costs of compliance are often passed on to local communities through higher electricity prices, raising concerns about social equity. Following a violation, firms generally experience increases in assets, capital expenditures, debt, revenues, and electricity prices, yet operating income remains unaffected. Our findings highlight that while market competition and government subsidies can help alleviate some of the financial burden on consumers, these subsidies often fall short in promoting the long-term investments in advanced technologies necessary for sustained environmental progress.

2. Hedge Funds are on the Ball When Insiders Trade (with Jerry Parwada, Yixuan Rui and Jianfeng Shen)

-R & R

Abstract: This study examines the use of insider trading information by hedge funds. We find that hedge funds tend to trade in the same direction as insiders when insider trading is likely driven by information, but do not respond to likely liquidity-driven insider trades. This finding is consistent with hedge funds being able to decipher insider trading information and trade accordingly. In contrast, mutual funds, pension funds and other institutional investors (mostly banks and insurance companies) are more likely to trade in the opposite direction as insiders, acting as liquidity providers regardless of the trading motives of insiders. Further, there is evidence that a hedge fund’s ability to exploit insider trading information helps improve its performance. Our study contributes to the literature on hedge fund skills by showing their ability to exploit insider information and linking such ability to performance.

3. Hedge Fund Activists' Network and Information Flow

-WFA Cubist Systematic Strategies Ph.D. Candidate Award for Outstanding Research, WFA annual meeting, 2017

-Best Paper Award in Honor of Stuart I. Greenbaum, Olin School of Business at Washington University in St. Louis, 2016

Abstract: This paper studies connections and information flows between activist hedge funds and other institutional investors and shows them as prominent factors in the success of activist campaigns. Using manager turnovers in connected mutual funds as exogenous shocks to activists’ connectivity, I identify a positive causal effect of connections with other investors on the short-run and long-run performance of activists’ campaigns. I also show that the two likely mechanisms through which activists benefit from their relationships with other institutions are information flows between institutional shareholders and well-connected activists before campaign announcements and higher support from other shareholders during the campaign.

4. The Hidden Cost of Going Green: Evidence from Firm-Level Violations  (with Arshia Farzamfar and Lilian Ng)

-Best Paper Award at Asia-Pacific Financial Markets (CAFM) annual meeting, 2022

-Media Coverage: Forbes - Sep 06, 2022

- SSRN Top Ten Download List

Abstract: This paper explores whether corporations resort to cutting social investments when responding to pressures from environmental authorities and various stakeholders to adopt pro-environmental policies. Our study documents the first evidence of a robust negative relationship between firm environmental and social responsibilities, as measured by the penalties imposed on the firm’s social violations and Glassdoor employee reviews. We use the engagement by large institutional investors on the environmental performance of their portfolio firms to reinforce our findings that when a firm goes green, it reduces emissions but at the expense of its social responsibility. This phenomenon, which results in more efficient asset utilization, higher profitability, and firm value, becomes more severe when management is under pressure from external and internal forces.

5. Corporate Pensions and Financial Distress (with Ying Duan, Edith S. Hotchkiss, and Yawen Jiao)

Abstract: We examine the role of corporate pension plans in determining how firms restructure in financial distress. Both defined benefit (DB) and defined contribution (DC) plans can have significant exposures to the company’s own stock, imposing significant losses on employees if the firm defaults and/or files for bankruptcy. We find that firms with DB plans typically have little exposure to the stock prior to default; the degree of underfunding increases significantly as firms near default, but is not related to restructuring types (bankruptcies versus out of court restructurings). In contrast, large exposures to company stock in DC plans often are not reduced prior to default. High levels of own-company stock ownership are positively related to default and bankruptcy probabilities. Our evidence suggests a link between employee-ownership related managerial entrenchment and default risk. 

6. Cashing Out: The Rise of M&A in Bankruptcy (with Stuart C. Gilson, Edith S. Hotchkiss, and Katherine Waldock)

Abstract:  The use of M&A in bankruptcy has increased dramatically, leading to concerns that Chapter 11 leads to excessive liquidation of viable firms. We examine the drivers of M\&A activity, based on factors specific to Chapter 11 as well as more general factors that drive M&A waves for non-distressed firms. M&A in bankruptcy is counter-cyclical, and is more likely when the costs of financing a reorganization are greater than financing costs to a potential acquirer. Consistent with a senior creditor liquidation bias, the greater use of secured debt leads to more sales in bankruptcy, but this result holds only for sales that preserve going concern value. We also show that overall creditor recovery rates are higher for firms with more secured debt, and that recoveries and post-bankruptcy survival rates are not different when bankrupt firms sell businesses as going concerns versus reorganizing independently. Our results are consistent with the efficient redeployment of assets via sales in bankruptcy.

7. Unveiling the Nexus: Lobbying Firms' Influence on Mutual Fund Voting (with Hosein Hamisheh Bahar)

Abstract: While extensive research has explored how lobbying firms shape corporate law, their roles extend beyond advocating for favorable regulations. This study uncovers a noteworthy correlation: institutional shareholders, when aligned with their portfolio companies through a shared lobbying firm, exhibit a higher propensity to vote in concurrence with company management especially when such votes carry significant managerial value. Subsequent to these voting instances, we observe negative abnormal returns and a more pronounced impact in firms with entrenched leadership. Overall, our insights suggest the possibility that management may strategically utilize shared lobbying relationships to influence shareholder voting patterns. 

8.  Inside Access: The Role of In-Person Communication in Insider Trading (with Yixuan Rui) 

Abstract: This paper investigates how corporate insiders acquire material information, focusing on the role of in-person interactions. We find that non-executive officers engage in significantly less informative trading-measured by trade profitability-compared to top executives and directors. The disparity suggests that low-tier insiders may rely on face-to-face interactions with senior insiders as a key channel for accessing operational insights. To identify this mechanism, we exploit the exogenous shock to in-person communication caused by U.S. stayat-home orders during the COVID-19 pandemic. The decline in trading informativeness among non-executive officers is most pronounced for stocks with improved liquidity, reducing concerns about confounding changes in information asymmetry. These findings underscore the importance of informal interpersonal communication in insider information flow.