Working papers
* Presenter, c Co-author presentation
E of ESG
[1] When Smoke and Mirrors Fail: Strategic Climate Disclosures and Investor Skepticism (2024, Job market paper)
▪ Dissertation committee: Oded Rozenbaum (chair), Sok-Hyon Kang, Edward Sul, Allison Koester
▪ Presented at George Washington University (2024)
This study investigates whether managers consider investors’ limited attention when making climate disclosure decisions and how investors react to such information. Using FinBERT, a machine-learning model based on BERT, I identify climate-related sentences in earnings conference call presentations and decompose firm-level climate disclosures into two components: predicted climate talk (driven by investor demand) and abnormal climate talk (driven by managerial incentives). I find that managers engage in abnormal climate talk when firms experience poor earnings performance, poor environmental performance, or peer pressure on climate disclosures. Additionally, I find that managers adopt an overly positive tone in positive abnormal climate talk. These findings suggest that managers strategically provide excessive climate disclosures to redirect investors’ attention from adverse incidents. However, investors are skeptical about abnormal climate talk, with this skepticism persisting over time. In contrast, investors view predicted climate talk as informative, though their heterogenous preferences lead to muted market reactions. Various cross-sectional tests based on industry type, investor sophistication, investors’ climate preferences, and investor horizon provide evidence of industry and investor clientele effects on both the determinants and consequences of abnormal climate talk. Overall, this study suggests that investors can see through managers’ attempts to influence their perceptions through climate disclosures, especially when investor skepticism is present.
S of ESG
[2] Healing the Wounds of Survivors: The Role of Disclosure Tone after Mass Layoffs (2024, with Keehea Moon)
▪ Preparing for submission
▪ Presented at 2024 Washington Area Research Symposium c
Using mass-layoff events, we investigate whether managers tailor the tone of earnings press releases to influence the perceptions of the remaining employees, the layoff survivors. Consistent with managers using tone management directed towards the layoff survivors, we find that managers who announce layoffs engage in downward tone management, especially in firms that rely more heavily on human capital and have a greater number of employees. Additionally, our findings indicate that managers’ use of tone varies with employee characteristics; specifically, managers employ upward tone management in firms with high employee option grants. We further examine the impact of managers’ tone management on employees’ behaviors and find that employee turnover and productivity, as well as firm performance, are related with managers’ use of tone management. Overall, our paper suggests that managers use the tone of financial disclosures to influence layoff survivors’ perceptions and that employees react to these qualitative aspects of firm disclosures.
G of ESG
[3] Institutional Blockholder Exit Threats and Corporate Social (Ir)responsibility (2024, with Ed Sul)
▪ Preparing for submission
▪ Developed from a first-year summer paper
▪ Presented at George Washington University (2021) *, GW Research Showcase 2022 *, 2022 AAA Annual Meeting *, 2023 Hawaii Accounting Research Conference *, 2023 European Accounting Association c, 2023 Korea Accounting Conference c
Institutional blockholders, who have incentives to gather private information and sell their shares when managers underperform, exert governance through exit threats. Hence, managers align their actions with shareholders’ interests to dissuade blockholders from selling. We find that as exit threats increase, firms reduce not only social irresponsibility (CSI), but also social responsibility (CSR), implying that CSI and CSR are independent actions that both reflect agency problems rather than firm value enhancement. Furthermore, consistent with exit theory, the negative impact of exit threats on CSI and CSR increase as managerial wealth is sensitive to stock price, the firm is cash-rich (more susceptible to “bad” agency problems) and following Schedule 13G filings that indicate blockholders’ intent to remain passive (exert governance through exit threats only). We contribute to research on corporate social (ir)responsibility and the role of blockholders in disciplining both CSR and CSI that may not be in the shareholders’ interests.
[4] Director Independence and Corporate Investment Efficiency: Evidence from Board Reforms Worldwide (2021, with Ed Sul)
▪ Presented at George Washington University (2020) *, 2021 FARS Mid-year Meetings c, 2021 AAA Annual Meeting *
This paper investigates the effect of major board independence reforms on corporate investment efficiency using a large sample of firms from 30 countries. We find evidence of a significant reduction in overinvestment subsequent to the initiation of board reforms. This reduction is most effective (1) in countries with rule-based reforms and higher liability standards and (2) in firms with lower insider ownership and higher analyst coverage. We also find stronger reductions in overinvestment among firms most affected by board reforms – firms that did not have majority board independence at the time of reform. Furthermore, we provide evidence that firms have lower deviations from the level of expected investments following board reforms. Our evidence is consistent with major country-level board reforms that increase the percentage of independent directors enhancing investment efficiency through the mitigation of the moral hazard problem for overinvesting firms.
Corporate Disclosures
[5] Mistaking Bad News for Good News: Mispricing of Strategic Alternatives Announcements (2024, with Jenny Zha Giedt)
▪ Under Review at Review of Accounting Studies
▪ Presented at George Washington University *, 2022 Joint meeting of the Mid-Atlantic and Northeast regions DSFI *, 2023 Eastern Finance Association Meeting c, 2023 FMA Applied Finance conference *, 2023 Washington Area Research Symposium c, 2023 Haskayne and Fox conference c, 2023 Japan Accounting Association International Exchange c, 2024 AAA FARS Mid-year Meeting c, 2024 Wolfe Research Global Macro and Quant Conference c, 2025 Swiss Accounting Research Camp* (Scheduled)
▪ Featured at the Columbia SKY Law blog (2023)
Companies’ strategic alternatives announcements lead to negative future stock returns. We first investigate whether an anomaly exists and demonstrate that the anomaly is significant, pervasive across years, industries, firm size, and information environments, and not driven by confounding variables nor risk. We then investigate why investors misprice the announcements and find that investors appear overly optimistic about a potential merger or acquisition and do not fully incorporate the negative fundamental news conveyed by the announcement. Meanwhile, short sellers exploit the mispricing. We also evaluate market frictions as limits to arbitrage. This study’s contributions are: (i) evaluating mispricing and risk explanations for an event that causes extreme stock returns, (ii) challenging investors’ widely held belief that such announcements reflect good news, and (iii) warning investors and analysts about a behavioral bias they might unknowingly adopt. these qualitative aspects of firm disclosures.