4. “Everlasting Fraud” (with Nan Li, Wenyu Wang, and Gaoqing Zhang)
We model the interdependent mechanisms of corporate fraud and regulation. Our analyses yield two key insights. First, fraud is a never-ending game of cat and mouse. Second, although anti-fraud regulations can temporarily tamp down fraud, they do not eradicate fraud and may induce corporate fraud waves over time.
Accepted by Columbia Burton Accounting Conference, 2021
We model the interdependent mechanisms of corporate fraud and regulation. Our analyses yield two key insights. First, fraud is a never-ending game of cat and mouse. Second, although anti-fraud regulations can temporarily tamp down fraud, they do not eradicate fraud and may induce corporate fraud waves over time.
Accepted by Columbia Burton Accounting Conference, 2021
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3. “Noise Trading: An Ad-based Measure” (with Josh Madsen and Xinyuan Shao) [Presentation]
Motivated by evidence that retail trading spikes on ad days, that firms regularly place ads at weekly intervals, and that weekly ads frequently contain duplicate images, we introduce a measure of noise trading: an indicator of whether the firm placed an ad in the WSJ seven calendar days earlier. We use the measure to test the theoretical predictions of Collin-Dufresne and Fos (2016, Econometrica) and find broad support. Accepted by GSU-RFS FinTech Conference, 2020; FARS Midyear Conference (Roundtable Session), 2020; CICF Conference, 2019; FIRS Conference, 2019; USC Conference on Emerging Technologies in Accounting and Financial Economics (CETAFE), 2019; BYU Accounting Symposium, 2018 |
2. “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.
1. “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 FIRS Conference, 2018; PSU Accounting Conference, 2018; EFA Meeting, 2018; LBS Accounting Symposium, 2018; Toulouse Corporate Governance Conference, 2018; MIT/Asia Conference, 2018; the UNC/Duke Fall Camp, 2017; Stanford Theory and Inference in Capital Market Research Conference, 2017; 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 FIRS Conference, 2018; PSU Accounting Conference, 2018; EFA Meeting, 2018; LBS Accounting Symposium, 2018; Toulouse Corporate Governance Conference, 2018; MIT/Asia Conference, 2018; the UNC/Duke Fall Camp, 2017; Stanford Theory and Inference in Capital Market Research Conference, 2017; Featured in CNBC; Harvard Law Forum; VoxEU
