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4. “Fractional Trading” (with Zhi Da and Wenwei Lin)
We observe a sharp increase in retail ownership and trading among high-priced stocks since the introduction of Fractional Trading (FT) in late 2019. The effects of FT were amplified by other factors like zero commission trading, stay-at-home orders, and distribution of stimulus checks. With FT, small market participants can exercise collective power on high-priced stocks if coordinated through attention-inducing events (such as being featured in a broker's Top Mover list or stock split announcements). FIRS Conference, 2022; Financial Markets and Corporate Governance Conference, 2022;Conference on Emerging Technologies in Accounting and Financial Economics (CETAFE), 2022 |
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3. “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 the CICF meeting, 2022; 9th Conference on Financial Market Regulation (CFMR), 2022; MFA meeting, 2022; FARS Midyear Conference 2022; HKUST Accounting Symposium 2021; 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 the CICF meeting, 2022; 9th Conference on Financial Market Regulation (CFMR), 2022; MFA meeting, 2022; FARS Midyear Conference 2022; HKUST Accounting Symposium 2021; Columbia Burton Accounting Conference, 2021
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2. “Corporate Advertising, Trading, and Volatility” (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 |
1. “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.
