CEO educational background and acquisition targets selection (With David Yin) Journal of Corporate Finance 52, 238-259, 2018.

Using hand-collected CEO education data of 3,574 CEOs over the period of 2000 to 2015, we document that CEOs are significantly more likely to acquire targets that are headquartered in those states where the CEOs received their undergraduate and graduate degrees. Education-state deals are larger, have higher completion rates, and exist with both public and private targets. Acquirers pay a lower target premium for education-state deals and the cumulative abnormal announcement returns are positive. The combined evidence suggests that education-state acquisitions are more likely to be driven by bidder CEO’s information advantage toward firms headquartered in the education state.

Hiring retiring-age CEOs​ (With David Yin) European Financial Management, forthcoming 

We document a stylized fact that more than 10% of S&P 1500 companies have hired a CEO who starts the job near or above the retirement age of 65 years old (Retiring CEOs). We find that, although hiring retiring CEOs on average has a negative impact due to the management deficiencies, they can bring valuable advisory benefits to firms when they are hired to resolve firm distress. Retiring CEOs receive lower compensation and they have a shorter tenure. Overall, evidence from this paper suggests that retiring CEOs can be beneficial to shareholders when they are hired for the right purpose. 

Working Papers

1. Firm reputation and the cost of bank debt (Job Market Paper) 

This paper examines whether firm reputation impacts borrowing costs and thus investment. Using unique data from Fortune’s Most Admired Companies surveys, I find that reputable borrowers enjoy lower borrowing costs and better loan contract terms. My identification strategy is based on propensity score matching, a regression discontinuity design, and clean reputation measures removing the impact of prior financial performance. Further evidence suggests that banks reward reputable firms with better contract terms because this reputation proxy contains incremental information on borrower future performance and credit risk. Last, firms increase capital expenditures and R&D after receiving the Most Admired designation, consistent with reputable firms exploiting their lower cost of capital and with reputation having real effects on firms’ investment policies.

  • American Finance Association Ph.D. Students Poster Session /Financial Management Association Annual Meeting /Southwestern Finance Association Annual Meeting (2019)/Eastern Finance Association Annual Meeting (2019)

2. Mergers, Product Prices, and Innovation: Evidence from the Pharmaceutical Industry​ (With Alice Bonaimé)

Using novel data from the pharmaceutical industry, we study the impact of mergers on product prices and innovation. Exploiting within-deal variation in product market consolidation, we show prices increase more within drugs in consolidating markets than within matched control drugs. Conservative estimates indicate a 2.3-3.4% price effect that persists for two years. Price increases are more pronounced within concentrated markets, for drugs without generic competition, and for acquisitions of drugs still in the pipeline. Examination of trade-offs reveals these deals generate significant shareholder value and spur labeling-related innovation but not new drug approvals.

  • Midwest Finance Association (2020)/American Finance Association (2020)

  • Center for Management Innovations in Healthcare (CMIH) 2019 Fall Research Grant 

  • The University of Arizona (2019)/The University of Exeter (2019)/The University of Bristol (2019)/Virginia Tech University (2020)

3. Does Modern Information Technology Attenuate Managerial Information Hoarding? Evidence from EDGAR Implementation​ (With Xiaoran Ni and David Yin)

Exploiting the staggered implementation of the EDGAR system from 1993 to 1996 as quasi-exogenous shocks, we find that the internet dissemination of corporate disclosures encourages managers’ bad news hoarding and thus increases firms’ future stock price crash risk. Supplemental evidence suggests that short-term pressures due to increased stock liquidity and investors’ increased reliance on accounting numbers appear to play a role, and both accrual and real earnings management increase. Taken together, our findings indicate that while modern information technologies increase market efficiency by lowering information acquisition costs, they may have an unintended effect on managers’ incentives to hoard bad news.

4. Takeover Threats and Stock Price Crash Risk, Revisited (With Xiaoran Ni and David Yin)

This paper revisits the impact of takeover threats on firms’ future stock price crash risk. Using the takeover index developed by Cain, McKeon, and Solomon (2017), which considers state takeover laws, federal statute, state court standards of review along with a list of firm-specific and economic variables, we find that a more hostile takeover environment reduces firms’ future stock crash risk. Further, we identify improvement in accounting conservatism in response to the threat of takeover as the channel underlying our main findings. The results are robust to alternative measures of stock price crash risk and addressing multiple critiques of prior studies on takeover susceptibility. Overall, our findings are consistent with the market for corporate control serving as an effective governance mechanism and reducing agency problems.