The Tale of Silent Dogs: Do Stock Prices Fully Reflect the Implication of News Withholding?, with Frank Zhou (Accounting)
Abstract: We investigate whether investors correctly interpret the implication of lack of management forecasts. We find that, for firm quarters without management forecasts, investors underestimate the magnitude of bad news implied by nonguidance, which generates 40 basis points predictable negative abnormal stock returns around the earnings announcement and up to 100 basis points for some subsamples. The results are consistent with limited strategic thinking: investors underestimate the relation between management's information withholding and management's private information. This leads to an initial overpricing of the implication of nonguidance and a subsequent correction around the earnings announcement. We contribute to the literature by showing that investors are constrained in understanding managers' strategic nondisclosure decisions. As a result, management can withhold bad news without suffering much negative capital market consequence, at least prior to the earnings announcement.
The Racial and Ethnic Disparities in Non-Cognitive Skills, with Todd Elder (Economics)
Abstract: While the disparity in cognitive skills between white and black children has been studied extensively, the racial gap in non-cognitive skills has attracted much less attention. In this paper, we use two cohorts of the ECLS-K to show that there are significant differences in non-cognitive skills between white and black students, even after controlling for a large set of background variables. We present evidence that teacher-reported measures of non-cognitive skills likely understate the actual racial gaps due to subjective bias in favor of black students. The bias is primarily driven by systematic differences across schools in what the teacher reports measure. Using a counterfactual distribution approach in the spirit of Dinardo, Fortin, and Lemieux (1996) to address this between-school bias, we find that the corrected racial gaps are substantially larger than the corresponding uncorrected gaps.
Abstract: In this paper, I revisit the effects of unilateral divorce laws on female labor supply. I use a variety of models to check the robustness of the results and find that the estimated effects on female labor supply are remarkably robust. The estimates I mainly use in this paper suggest that unilateral divorce laws increase female labor force participation rates by roughly 4-5 percentage points, and that these effects strengthen over time. There are also strong long-term effects on the weeks and hours of work and on participation in full-time work. In addition, this paper compares the dynamic participation responses of married mothers versus married nonmothers, high education versus low education women, young versus old women and white versus black women.