Publications
(2023): Board cultural diversity and firm performance under competitive pressures, Financial Review, 59 (1): 89-111.
Abstract: We examine the impact of board cultural diversity, based on directors' ancestry, on firm performance conditional on product market competition. We argue that culturally diverse boards foster critical thinking and offer creative solutions that help firms thrive in competitive environments. We document that culturally diverse boards are associated with superior performance for firms operating in highly competitive industries. To address potential endogeneity issues, we use a quasi-natural experiment of the U.S. import tariff cuts. The positive impact of board cultural diversity on firm performance in competitive markets manifests itself in firms that innovate more, require creative inputs, and face heightened predation risk due to their high interdependence with industry rivals, in line with culturally diverse boards effectively performing their advisory role. Lastly, we find no evidence that board cultural diversity is associated with enhanced monitoring as its benefits fade in the presence of powerful CEOs.
(2022): CEO Marital Status and Insider Trading, British Journal of Management, 34 (4): 1974-1991.
Abstract: We investigate the association between the chief executive officers’ (CEOs’) marital status and their tendency to profit from insider trading. We argue that marriage can constrain CEOs’ opportunistic behaviour, which could increase litigation risk and show that married CEOs earn lower future abnormal profits compared to unmarried CEOs. We also find that married CEOs are less likely to engage in opportunistic trades and earn lower insider trading profits among firms with weaker corporate governance and those with higher information asymmetry. Our empirical results remain robust after accounting for several endogeneity tests.
(2021): Married CEOs and Stock Price Crash Risk, European Financial Management, 28 (5): 1376-1412.
Abstract: This study examines whether marriage, as a social construct and cultural norm, can affect firm-level stock price crash risk. We find that firms managed by married CEOs are associated with lower future stock price crash risk, after controlling for a set of firm characteristics and CEO traits. We document that CEO marriage reduces crash risk by curbing bad news hoarding and formation activities. Moreover, the attenuating impact of CEO marriage on crash risk is more pronounced among firms with weaker corporate governance and those run by less prominent, higher-delta and lower-paid CEOs.
(2021): The effect of credit shocks in the context of labor market frictions, Journal of Banking & Finance, 125: .
Abstract: The recent financial crisis was associated with a large and prolonged deterioration of the credit supply. I build and calibrate a structural model to explore the impact of credit-supply shocks on firm behavior in the context of labor market frictions. I discover that (i) a negative shock to the credit supply can lead to a protracted depression in business activities when firms have a steady level of productivity (demand) and that (ii) a reduction of labor adjustment costs can improve investment and mitigate the negative impact of credit-supply shocks, especially for firms with a high level of productivity. I also empirically corroborate that a lower labor unionization rate can mitigate the negative impact of supply shocks on high-demand firms during a crisis.
(2023): The Russia-Ukraine Outbreak and the Value of Renewable Energy, Economics Letters, 225: .
Abstract: The paper studies the role of renewable energy in the stock market reaction to the Russia-Ukraine crisis. The examination of equity prices reveals that European firms with a larger share of ex-ante purchased or produced renewables experience less stock return decline in the Russia-Ukraine outbreak period.
(2022): Corporate investment and stock market valuation, Journal of Business Finance & Accounting: .
Abstract: We study the driving forces behind the positive association observed between corporate investment and stock market valuation, and how they interact with managerial equity incentives and informativeness of investment. We build a dynamic model where managers use investment choices to influence investors' opinions about firms' future prospects and increase the market valuation. The incentives to manipulate the valuation processes increase with managerial equity incentives and informativeness of investment. Our empirical findings support the model's predictions that the tendency of using investment to boost market valuation is stronger when managerial stock ownership is high or when earnings quality is low (i.e., there is strong reliance on investment for information).
(2023): Can Capital Adjustment Costs Explain the Decline in Investment-Cash Flow Sensitivity?, Journal of Financial and Quanitative Analysis: 1-26.
Abstract: It is well documented that since at least the 1970s investment-cash flow (I-CF) sensitivity has been decreasing over time to disappear almost completely by the late 2000s. Based on a neoclassical investment model with costly external financing, we show that this pattern can be explained by the gradual increase of capital adjustment costs, attributable to the accumulation of knowledge capital. The result is robust to a variety of approaches, including Euler equation estimation and the simulated method of moments. More generally, our findings demonstrate that I-CF sensitivity should only be interpreted as a joint measure of financial and real frictions.
(In Press): Does CEO extraversion pay off when in need? Evidence from the global financial crisis, The British Accounting Review: .
Abstract: We examine the effect of CEO extraversion on corporate performance during the Global Financial Crisis (GFC). Contrary to the expectation that extraverted CEOs should shield firms better from GFC adversities, we document that the extraversion characteristic of CEOs places a significant, though negative, effect on corporate performance during the financial crisis. Our findings are robust to controlling for other CEO personality traits. We also perform a battery of robustness tests and validate the underperformance of firms with extraverted CEOs during the GFC using stock returns and measures of operating performance. We argue that because extraverted CEOs are associated with heightened firm risk profile, this can hurt firms when the market disciplines excessive risk-taking during the crisis.