Research Interest: corporate governance, institutional investor, and investor behavior, ESG.
Published and Accepted Papers
Does Money Talk? Divestitures and Corporate Environmental and Social Policies, with Nickolay Gantchev and Mariassunta Giannetti, Review of Finance, Volume 26, Issue 6, November 2022, Pages 1469–1508, https://doi.org/10.1093/rof/rfac029.
Previously titled Does Money Talk? Market Discipline through Selloffs and Boycotts
Semifinalist for the Best Paper Award FMA 2020
Move Fast and Break Things! Innovation-Intensive Strategy, Organizational Permissiveness, and Corporate Wrongdoing, with William Grieser, Ryan Krause, Richard Priem, and Andrei Simonov, Long Range Planning, 56, no. 2 (2023): 102294, https://doi.org/10.1016/j.lrp.2023.102294
Sustainability or Performance? Ratings and Fund Managers' Incentives, with Nickolay Gantchev and Mariassunta Giannetti
Revise & Resubmit: Journal of Financial Economics
Abstract: We show that in the aftermath of the Morningstar’s sustainability ratings (the “globe” ratings) introduction mutual funds attempt to improve their globe ratings by increasing their demand for sustainable stocks. This trading behavior creates buying pressure, making stocks with high sustainability ratings overvalued. As a consequence, a tradeoff between sustainability and performance arises and the performance of funds improving their globe ratings deteriorates. Since performance appears to be more important in attracting flows than sustainability, a new equilibrium emerges in which the globe ratings stop affecting funds’ flows and funds do not trade any longer to improve their globe ratings. Our results highlight the issues arising when funds are evaluated along two different dimensions that create conflicting incentives for fund managers who compete for flows.
China International Conference in Finance Best Paper Award 2022
Presented at the 3rd Endless Summer Conference (2021), the 8th ABFER Annual Conference (2021)* FMA (2021), 13th Annual Hedge Fund Research Conference (2022)*, Global ECGI Corporate Governance Colloquium (2022)*, CICF (2022)
Featured in Principals for Responsible Investments Blog
Semifinalist for the Best Paper Award FMA 2021
Product Market Similarity, Benchmarking, and Corporate Fraud, with Audra Boone, William Grieser and Parth Venkat
Revise & Resubmit: Journal of Financial and Quantitative Analysis
Abstract: We document a strong negative relation between firms' product market similarity to their rivals and their observed fraud rate. This disciplining effect is larger than most documented fraud predictors and remains virtually unchanged after controlling for those predictors and traditional measures of competition. By exploiting variation from rivals' newly available public disclosures, as well as cross-sectional variation in firm complexity, institutional ownership, and analyst coverage, we show that the effect is most likely driven by firms' external information environment. Our analyses suggest that greater product similarity enhances the external information environment, which improves external monitoring and disciplines manager reporting behavior.
Best Paper Award for New Zealand Finance Meeting (2018)
Semifinalist for Best Paper Award FMA (2018)
Presented at Sixth Annual Conference on Financial Market Regulation (2019)*, Australasian Finance and Banking Conference (2018)*, New Zealand Finance Meeting (2018)*, Financial Management Association Annual Meeting (2018)*, Midwest Finance Association Annual Meeting (2019)*, Drexel University, FMA Asia/Pacific Conference (2018), Southern Methodist University, and Clemson University*, Universidad de los Andes*, University of Nevada Las Vegas*, and the U.S. Securities and Exchange Commission*
Personal Convictions and ESG Investing, with Charlie Costello, Sugata Ray, and Parth Venkat
Abstract: We study whether fund managers’ personal convictions regarding environmental causes relate to their investment decisions and performance, using vehicle purchases and charitable donations as proxies for managers’ convictions. We find that environmentally committed managers hold more of their portfolios in green stocks and perform significantly better among those holdings. This outperformance can be explained by superior characteristic selectivity, higher active share, and avoidance of large negative returns in green stocks. As such, environmentally committed mutual fund investors could consider managers’ personal convictions in addition to conventional fund-level environmental measures (e.g. disclosures, prior holdings, etc.) in selecting funds.
Presented at Financial Management Association Annual Meeting (2022)*
Abstract: Does investor heterogeneity affect the power of market discipline in mutual fund adviser misconduct? We show a significant difference in flow sensitivity to misconduct disclosures between institutional and retail investors. Market discipline is particularly weak among retail investors with limited attention. The effectiveness of discipline by investors in fact predicts misconduct likelihood. Investors' differential ability to impose market discipline also affects fund management profitability and turnover along with subsequent fund performance. Overall, our study highlights the real effects of investor heterogeneity on market discipline and casts doubt on the safety of retail investments under the current regulatory and market environment.
Presented at FIRS Conference (2019), Midwest Finance Association Annual Meeting (2019), Financial Management Association Annual Meeting (2018), Michigan State University, Southern Methodist University, University of Texas Arlington, Villanova University and University of Alabama
Shareholder Satisfaction with Overlapping Directors, with Miriam Schwartz-Ziv
Abstract: We find that mutual fund shareholders are particularly supportive of directors who serve simultaneously on a corporate board and a mutual fund board (overlapping directors). Such support is observed both for connected funds, which share a director with a company, and for non-connected funds, which do not share a director with the company. Our results imply that the benefits overlapping directors offer to all fund shareholders exceed the costs. Mutual funds are particularly supportive of overlapping directors when monitoring is needed. Our results suggest overlapping directors are more valuable to fund shareholders than to other types of shareholders.
Presented at Financial Management Association Annual Meeting (2017), Law and Economics (2018)*, University of Windsor, University of Melbourne*, IDC*, and Midwest Finance Association Annual Meeting (2019)*
Featured in The CLS Blue Sky Blog
* Presented by coauthor or invited
Work in Progress
Socially Responsible Lending (with Josh Pierce and Paul Obermann)