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4. “Trade with Ads” (with Joshua Madsen and Xinyuan Shao)
Market microstructure models predict that noise trading encourages informed trading and increases stock price efficiency. Based on the observations that retail trading spikes on advertisement days and that firms frequently advertise at weekly intervals, we introduce an instrument - the existence of a product market ad seven calendar days earlier - for noise trading. We use this instrument to test theory predictions. |
3. “The Bright Side of Earnings Management” (with Renhui Fu)
Imagine a model that gets into a car accident and is left with an unsightly but temporary scar on her face. It is easy to see that wearing makeup may be a better choice in such a situation because invasive treatment often runs the risk of causing more scars or irreversible side effects. Along this line of thinking, this paper demonstrates the usefulness earnings management as a noise cancelling device. We show that stock underpricing, measured using mutual fund fire sales and the 2003 trading scandal, gives rises to firms' incentives to manipulate earnings but firms cutting R&D underperform those using accruals in the long-run.
Imagine a model that gets into a car accident and is left with an unsightly but temporary scar on her face. It is easy to see that wearing makeup may be a better choice in such a situation because invasive treatment often runs the risk of causing more scars or irreversible side effects. Along this line of thinking, this paper demonstrates the usefulness earnings management as a noise cancelling device. We show that stock underpricing, measured using mutual fund fire sales and the 2003 trading scandal, gives rises to firms' incentives to manipulate earnings but firms cutting R&D underperform those using accruals in the long-run.
2. “The Long-Term Consequences of Short-Term Incentives” (with Alex Edmans and Allen Huang)
This paper shows that short-term stock price concerns induce CEOs to take value-reducing repurchases and M&A. When vesting equity (our proxy for price concerns) increases, stock returns are more positive in the short-term surrounding these events but more negative in the long-term. Co-winner of the 2017 ICPM Research Award; Co-winner of the 2017 IRRC Institute Research Award; Presented at the UNC/Duke Fall Camp, 2017; Stanford Theory and Inference in Capital Market Research Conference, 2017; FIRS Conference, 2018; PSU Accounting Conference, 2018; EFA Meeting, 2018; LBS Accounting Symposium, 2018; Toulouse Corporate Governance Conference, 2018; MIT/Asia Conference, 2018; Featured in CNBC; Harvard Law Forum; VoxEU
This paper shows that short-term stock price concerns induce CEOs to take value-reducing repurchases and M&A. When vesting equity (our proxy for price concerns) increases, stock returns are more positive in the short-term surrounding these events but more negative in the long-term. Co-winner of the 2017 ICPM Research Award; Co-winner of the 2017 IRRC Institute Research Award; Presented at the UNC/Duke Fall Camp, 2017; Stanford Theory and Inference in Capital Market Research Conference, 2017; FIRS Conference, 2018; PSU Accounting Conference, 2018; EFA Meeting, 2018; LBS Accounting Symposium, 2018; Toulouse Corporate Governance Conference, 2018; MIT/Asia Conference, 2018; Featured in CNBC; Harvard Law Forum; VoxEU
1.“Consistency As a Path to Comparability: Benefits and Costs” (with Michael Iselin and Gaoqing Zhang)
We model consistency-based financial statement comparability. In equilibrium, comparability increases the spillover informativeness across firms at the expense of their standalone informativeness. We show analytically and empirically that comparability's net information benefits decrease with firms' fundamental correlation and fundamental volatility. Presented at the Yale SOM Fall Accounting Research Conference, 2017; Inaugural Indiana Hoosier Accounting Research Conference, 2017; U Penn - Wharton Spring Accounting Conference, 2017; Minnesota Empirical Accounting Research Conference, 2017
We model consistency-based financial statement comparability. In equilibrium, comparability increases the spillover informativeness across firms at the expense of their standalone informativeness. We show analytically and empirically that comparability's net information benefits decrease with firms' fundamental correlation and fundamental volatility. Presented at the Yale SOM Fall Accounting Research Conference, 2017; Inaugural Indiana Hoosier Accounting Research Conference, 2017; U Penn - Wharton Spring Accounting Conference, 2017; Minnesota Empirical Accounting Research Conference, 2017
