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  • 详情 The Employment Consequences of Earnings Management: Evidence from Audit Firm Mergers in China
    We investigate the employment consequences of earnings management. Using audit firm consolidation as an exogenous shock impacting earnings management, we find a positive casual effect of firm-level earnings management on employment growth. The effect is concentrated in privately owned enterprises and firms with higher operational risk, consistent with earnings management affecting labor dynamics by influencing employees’ perceptions of job security and subsequent career decisions. We further document a crowding out effect in local labor market, where a firm’s earnings management negatively influences the employment growth of local peer firms.
  • 详情 Beyond Performance: The Financial Education Role of Robo-Advising
    Using unique data on Alipay users' investment accounts, we find that, in addition to generating better performance than investors’ self-directed portfolios, robo-advising has a positive spillover effect on its adopters in terms that it improves their investment behaviors. Investors have more diversified portfolios and exhibit fewer behavioral biases in portfolio management and fund choices in their self-directed accounts after adopting robo-advising. The spillover effect is more prominent for adopters who interact with the service more actively and who were less sophisticated before adopting the app. We also find that adopters learn from the robo-advisor by simply imitating its portfolios or strategies. Collectively, this study provides large-sample, non-laboratory evidence that robo-advising effectively plays a role in educating investors through repeated interactions with its adopters and setting investment models that are easy to follow.
  • 详情 Employment Effect of Mandatory CSR Disclosure: Evidence from China
    Using staggered exogenous shocks to mandatory CSR disclosure, we examine the effect of mandatory CSR disclosure on employment growth. We find that CSR reporting firms have a higher employment growth following the mandate than non-CSR reporting firms. With respect to potential channels, we document that mandatory CSR disclosure promotes employment growth by improving firms’ CSR performance on employee welfare. In cross-sectional tests, we find that the employment effect is more pronounced for state-owned enterprises, firms in hazardous industries and firms in high-tech industries. We also find that cities most impacted by the mandate exhibit higher aggregate employment growth. While mandatory CSR disclosure promotes employment growth of mandated firms, it has a crowding out effect on employment growth of non-mandated local peer firms. Our paper offers novel evidence on the impact of mandatory CSR disclosure on labor resource allocation.
  • 详情 Measuring Monetary Policy under the Evolution of Monetary Policy Framework in China
    This paper employs Autoregressive Distributed Lag (ARDL) models and monetary base growth to construct an exogenous and comprehensive monetary policy measure in China, where various monetary policy instruments co-exist, and the operational and intermediate targets are changing over time. Our methodology relies on the market equilibrium relationship instead of ad hoc policy rules and strict identiffcation assumptions, hence is robust to monetary policy frameworks in any economy. The empirical results show that the active monetary base growth (AMBG ) constructed via the ARDL models is an excellent description of the behavior of People’s Banks of China across time, and generates impacts on macro variables consistent with implications of macro theory when used in VAR analyses.
  • 详情 TURBULENT BUSINESS CYCLES
    Recessions are associated with sharp increases in turbulence that reshuffle firms’productivity rankings. To study the business cycle implications of turbulence shocks, we use Compustat data to construct a measure of turbulence based on the (inverse of) Spearman correlations of firms' productivity rankings between adjacent years. We document evidence that turbulence rises in recessions, reallocating labor and capital from high- to low-productivity firms and reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous ffrms and ffnancial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity ffrms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. This leads to a reallocation that reduces aggregate TFP. Unlike uncertainty, turbulence changes both the conditional mean and the conditional variance of the firm productivity distribution, enabling a turbulence shock to generate a recession with synchronized declines in aggregate activities.
  • 详情 Stakes and Investor Behaviors
    We examine how stakes affect investor behaviors. In our unique setting, the same investors trade stocks in real accounts using their own money and, at the same time, trade in a simulated setting. Our real-world within-investor estimation produces strong evidence that investors exhibit stronger biases and perform worse in their higher-stakes real accounts than in their lower-stakes simulated accounts. Even with no monetary stakes, investors exhibit strong biases in their simulated accounts, and biases in the two types of accounts are strongly positively correlated. Such behavioral consistency suggests that low-stakes experimental methods, although imperfect, can be informative about real-world human behaviors. Using account data from two brokerage companies, we find that investors exhibit a stronger disposition effect on positions with greater portfolio weight. Hence, the finding that stakes-strengthening-biases may not be unique to the comparison between no-monetary and high-monetary stakes.
  • 详情 Cloud Infrastructure, Industry Dynamics and Competition: Evidence from China
    We examine the rise of cloud computing in China and its impact on industry dynamics. We find that industries which depend more on cloud infrastructure experience a higher increase in firm entry and exit after cloud computing expands in China. The positive relation with firm exit is driven by the increased exit through business failure and adjustments as well as the increase in the exit of less productive incumbents. Despite the large numbers of firms that exit, the number of firms increases as entryaccelerates and the competition increases in industries with more exposure to cloud infrastructure. The average age of firms also becomes younger in industries with more exposure to cloud infrastructure. Finally, we show that equity financing increases for industries impacted by cloud computing and the positive impact is more pronounced for younger firms. These findings point to increased competition and increased industry churn through the technological effects of cloud computing.
  • 详情 HOW DOES DECLINING WORKER POWER AFFECT INVESTMENT SENSITIVITY TO MINIMUM WAGE?
    Declining worker bargaining power has been advanced as an explanation for dramatic generational changes in the U.S. macroeconomic environment such as the substantial decline in labor’s share of the national income, the loss of consumer purchasing power, and growing income and wealth inequality. In this paper, we investigate microeconomic implications by examining the effect of declining worker power on firm-level investment responses to a labor cost shock (mandated increases in the minimum wage). Over the past four decades, we find that investment-wage sensitivities go from negative to insignificant as management becomes less constrained and can pursue outside options. Consistent with drivers of weakening worker power, investment-wage sensitivity changes are more significant for firms that are more exposed to globalization, technological change, and declining unionization.
  • 详情 The Cultural Origins of Family Firms
    What determines the prevalence of family firms? In this project, we investigate the role of historical family culture in the spatial distribution of family firms. Using detailed firm-level data from China, we ffnd that there is a larger share of family firms in regions with a stronger historical family culture, as measured by genealogy density. The results are further conffrmed by an instrumental variable approach and the nearest neighbor matching method. Examining the mechanisms, we find that entrepreneurs in regions with a stronger historical family culture: i) tend to have family members engage more in firms; ii) are more likely to raise initial capital from family members; iii) are more willing to pass on the firms to their children. Historical family culture predicts better firm performance partly due to a lower leverage ratio.
  • 详情 The Propagation of ESG Practices through Multinational Companies
    We study how multinational companies may propagate Environmental, Social, and Governance (ESG) practices through subsidiaries in foreign countries with stricter ESG policies. Using staggered regulatory changes in a host country’s ESG strictness as an exogenous shock, we find that multinational firms with subsidiaries in countries that increased ESG strictness would significantly increase their R&D investments, build more green inventions in domestic operations, and have higher ESG ratings. Cities with more multinationals exposed to foreign ESG regulatory changes experience a greater reduction in air pollutant emissions. Our results are consistent with the argument that multinationals promote and propagate ESG practices across countries, likely to sustain access to finance in a foreign country with high ESG standards.