Working Paper
The Tale of Silent Dogs: Do Stock Prices Fully Reflect the Implications of News Withholding?
, with Frank Zhou March, 2020, Journal of Accounting Research
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 Black-White Gap in Non-Cognitive Skills among Elementary School Children, with Todd Elder (Economics) Forthcoming, American Economic Journal: Applied Economics
Abstract: Using data from two Early Childhood Longitudinal Study cohorts, we find large black-white gaps in teacher-reported measures of non-cognitive skills. We show that these measures likely understate true racial disparities in non-cognitive skills because of systematic differences across schools in what teacher reports represent. Correcting for the resulting bias nearly doubles the size of the estimated gaps, to roughly the same magnitude as analogous gaps in achievement test scores. We then use the British Cohort Study of 1970 to provide suggestive evidence that non-cognitive skills account for large black-white disparities in adult outcomes, including arrest rates and educational attainment.
Financial Misconduct and Changes in Employee Satisfaction, with Christos Makridis
(I am the first author and corresponding author)
Coverage: NYU School of Law, PCCE; Duke The FinReg Blog; Columbia Law School's Blue Sky Blog
Conference: The First CUHK-RCFS Conference on Corporate Finance and Financial Intermediation, 2019;
30th Annual Conference on Financial Economics & Accounting, 2019
Financial Accounting and Reporting Section Midyear Meeting, 2020
Abstract: We use Glassdoor data to study the effects of the public announcement of financial misconduct on employees' perceptions of firms and managers. We find a 0.32 standard deviation decline in employees' overall company ratings and 0.14 to 0.40 standard deviation declines in ratings of career opportunity, compensation benefit, senior leadership, work-life balance, culture value, and recommendation. Additional analysis shows that long-term reputation damage is likely to be the main economic channel behind the findings. Moreover, we further assess whether employee ratings are helpful in predicting misconduct. During the years of the misconduct period, employees who are more likely to have private information lowered their ratings. Such employees' ratings help predict misconduct.
Is Public Information Valuable in the Private Loan Market? Evidence from a Natural Experiment
Abstract: In this study, I exploit an exogenous decrease in analyst coverage to investigate whether analyst coverage terminations have causal effects on the syndicated loan market. My principal results show that a decrease in the number of analysts following a firm increases the all-in-drawn spread of private loans by 14.2 basis points. I then show that the effects are larger for samples that have a larger percentage decrease in analyst estimates, a larger standard deviation of analyst estimates, more non-EPS analyst estimates, a higher leverage ratio or a credit rating lower than A. In addition, I also find that coverage terminations decrease the number of syndicated loans that treated firms can get, shorten the syndicated loan maturity period and decrease the likelihood of less-informed lenders being the lead arranger. These results indicate that public information still matters for syndicated lenders, even though they can acquire private information through other channels. Potential mechanisms might be that analyst reports provide extra information; analysts help lenders to monitor borrowers; and analyst coverage affects the private loan market through the public bond market since private loans and public bonds are partial substitutes. This paper contributes to the literature first by documenting a new factor, analyst coverage, that has an impact on the syndicated loan market; this helps us understand the price, structure and characteristics of lenders in that market. From another angle, this paper also demonstrates the importance of analyst coverage from a new perspective. Second, I examine causal effects by exploiting a natural experiment.
Publication
The Effects of Divorce Laws on Labor Supply: A Reconsideration and New Results (Economics)
Economics Bulletin, 2018, Volume 38, Issue 4, pages 1877-1888
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.