Research Interests
- Corporate Finance
- Corporate Governance
- Institutional Investors
- Industrial Organization
Working Papers
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CEO-Firm Matches: Evidence from Competition Shocks
Competition shocks fundamentally alter the nature of a firm’s strategy; an increase (decrease) in competition shifts firms’ focus from long-term growth (short-term performance) to short-term performance (long-term growth). Using major decreases and increases of import tariffs as quasi-natural experiments, this paper documents a non-monotonic relationship between competition and the probability of CEO turnover. Based on CEOs’ prior experience, I construct two indices of skills: 1) skills that are suitable for short-term performance, and 2) skills that are desirable for long-term growth. I find that firms are more likely to retain a CEO or appoint a candidate with short-term (long-term) skills following a tariff cut (increase). Firms run by CEOs with relevant skills outperform those run by CEOs who lack those skills. Because turnovers are costly, firms change their CEOs if the benefits of a CEO with relevant skills outweigh the costs. Firms that retain their CEOs change their compensation plan to motivate CEOs to deliver appropriate strategies.
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Institutional Ownership Concentration and Stock Price Informativeness
Using a board panel of NYSE-, AMEX- or NASDAQ-listed stocks, this paper studies the relation between institutional ownership concentration and stock price informativeness. One channel through which ownership concentration affects price informativeness is competition among institutional investors that trade on their private information. We find that stocks with less concentrated ownership are priced more efficiently, even after controlling for variation in institutional holdings, liquidity, and analyst coverage. The price adjustment is also faster for firms with lower ownership concentration. The higher informativeness cannot be explained by insider ownership that tend to be more concentrated.
- Corporate Governance of Index Funds (with Yanran Liu)
We provide the first evidence on passive investor engagements using data from one of the largest passive investors, State Street Global Advisors. We find that State Street’s targets cluster in industries. Passive investors lower the costs of engagement by targeting an industry rather than a firm. Within an industry, State Street, unlike activist hedge funds, tend to target firms that are larger and have higher Tobin’s Q. Engagements by State Street improve firm performance and value. Following the engagements, firms lower CEO total compensation and increase board independence. Moreover, firms tend to lower dividends and repurchases but increase R\&D investments. Our results suggest that index funds, as near-perpetual shareholders, use their voice and influence to improve firms’ long-term values.
Works in Progress
- Internal Capital Market Efficiency: Evidence from Production Disruptions (with Jesse Ellis, Manoj Kulchania and Shawn Thomas)
We examine how significant production disruptions at one division influence operations/investment at other unaffected divisions within conglomerate firms and how firms respond to these shocks.
- Kick Them When They Are Down? Competitive Responses to Production Disruptions (with Jesse Ellis, Manoj Kulchania and Shawn Thomas)
We examine whether and how competitors attempt to capitalize when a rival firm experiences a negative idiosyncratic shock.
- Dual Ownership and Bondholder-Stockholder Conflict (with Andrew Koch)
We study the role of dual ownership (holding both bond and stock) in mitigating the bondholder- stockholder conflict.
- Product Market Competition and CEO Compensation