Working papers

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[1] Do Peer Firms Affect Corporate Cash Saving Decisions? (Job Market Paper)

Abstract: I show that peer firms play an important role in determining U.S. corporate cash saving decisions by using the instrument variable identification strategy. Specifically, one standard deviation change in peer firms average cash savings leads to 2.63% same-direction change in firms own cash savings, which exceeds the marginal effects of many previously identified determinants. The economic implications of cash-saving peer effects are large, which can significantly alter cash savings in an industry by 7.2%. In cross-sectional tests, I find that peer effects are stronger when the product market is highly
competitive and when the economy is in recessions. In addition, less powerful, smaller and financially constrained firms respond more actively to their peers cash saving decisions. Finally, I provide evidence that such peer effect is asymmetric, that cash-rich firms, who had already held enough cash, are less likely to mimic peers cash policies compared to cash-insufficient firms.

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• FMA Annual Meeting Best Paper Award (Semifinalist) in Corporate Finance, 2017

• Presented at AFA Ph.D. Poster Session 2018 (scheduled); FMA Annual Meeting 2017 (Top 10 Session); AFBC 2017; AsianFA 2017; SMU 2016

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[2] Getting Feedback on Your Research: Evidence from Analysts (with Roger Loh)
Abstract: This paper investigates how analysts learn about the quality of their research from the stock-price reaction to their reports. We find strong evidence of analyst learning when there is a strong stock-market reaction to their recommendation changes. Recently influential analysts are more likely to issue recommendation changes and increase their total recommendation activity. They are also more likely in the following period to deviate from consensus and provide narrower confidence intervals to their target price forecasts. These feedback effects are short-term and also exist at the broker level. Our results are most likely driven by analysts applying the short-term information in their recently successful reports to the rest of their coverage portfolio.

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• Presented at SMU* 2017; PBC Tsinghua* 2017; KAIST* 2017 (* indicates presentation by co-author)

 

[3] Is the CEO Alone Responsible for the Corporate Decisions? (with Rong Wang)
Abstract: Companies are run by a team of top managers. However, the literature normally focuses on CEO when studying managerial influence on firm decision-makings. This paper aims to examine the role of other senior managers. Specifically, we study the effect of non-CEO managers over-optimism, and find that other top managers are at least as important as CEOs in corporate decisions. We show that only the firms with both overoptimistic CEOs and overoptimistic non-CEO manager teams would make more investment, use more debt financing, and are less likely to pay dividends. Furthermore, overoptimistic CEOs need help of other overoptimistic senior managers in translating the growth opportunities into firm value, only overoptimistic CEOs alone cannot achieve such success. This result is consistent with the recent literature which documents the bright side of managerial over-optimism.

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