Working Papers

Regulating via Social Media: Deterrence Effects of the SEC's Use of Twitter (Job Market Paper)

Abstract: This paper presents the first evidence of the effect of financial regulators' social media use on corporate and individual behavior. Using the staggered launch of U.S. Securities and Exchange Commission (SEC) regional offices' Twitter accounts, I find that financial regulators' presence on social media reduces opportunistic insider trading, customer complaints against investment advisers, and financial misreporting. Additional tests suggest that the salience and dissemination of regional offices' enforcement activities via Twitter play a role. The deterrence effect of SEC regional offices' Twitter use is concentrated among offices with more followers, firms with more retail investors, and advisers with more retail clients. I also show that investors react more strongly to enforcement actions after the enforced firm's regional office initiates Twitter use. Taken together, the results suggest that financial regulators' use of social media helps deter misconduct.

Abstract: Using a large biomedical dataset and advanced methods in genetics, we study the genetic endowment of holding managerial positions and its phenotypic and genetic correlations with a broad range of traits, including physical attributes, intelligence, mental health, and diseases. Among all traits we examined, general risk tolerance and risky behaviors have the strongest phenotypic and genetic correlations with holding managerial positions. Genome-wide association study (GWAS) reveals that holding managerial positions is associated with genetic markers in a region that has been linked to risk tolerance and adventurousness. Additionally, compared to males, females exhibit higher genetic correlations between risk-taking and being a manager. However, their phenotypic correlations between risk-taking and being a manager are similar or even lower. These findings suggest that females may face greater challenges in attaining managerial positions than males. Furthermore, we show that being a manager is positively associated with better mental health but not related to intelligence.

Do Antitrust Laws Chill Corporate Disclosure? (Solo-Authored)

  • 2022 FARS Midyear Meeting roundtable sessions

Abstract: I study how antitrust concerns arising from product markets influence corporate disclosure in capital markets. While securities regulators encourage disclosure, product-market regulators discourage disclosure of competitively sensitive information. Thus, firms may refrain from disclosing such information when antitrust regulators and private plaintiffs use corporate disclosure to infer collusion. Using peer firms' announcements of product price increases as a shock to antitrust concerns, I find that companies with more antitrust concerns reduce their disclosure of competitively sensitive information, such as information on future strategies, sales, production, and product markets. Additional analyses suggest that firms with more antitrust concerns may also raise their product prices without issuing explicit press releases. To avoid further attention from antitrust regulators and plaintiffs, these companies limit their disclosure of competitively sensitive information. Overall, my findings suggest that antitrust considerations from product markets can spill over into capital markets.

Net Income Measurement, Investor Inattention, and Firm Decisions with Natee Amornsiripanitch, Zeqiong Huang, and David Kwon

  • Featured in Duke University School of Law's The FinReg Blog

  • Utah Winter Accounting Conference 2022, Columbia University Accounting Design Project Spring 2022

Abstract: ASU 2016-01 requires that public companies' net incomes recognize changes in unrealized gains and losses from investments in equity securities. This paper studies the rule’s effects on stock prices and firms’ capital allocation decisions. We build a model with risk-averse investors who can be attentive or inattentive and managers who maximize firms' stock prices. The model makes two main predictions. First, with inattentive investors, the rule change will cause stock prices to react more to changes in net income that stem from fluctuations in financial asset prices. Second, under certain conditions, inattentive investors will assign larger price discounts to firm values because of higher perceived residual uncertainty, and managers respond by cutting financial asset holdings. We use insurance company data to test these predictions. Prices of stocks with low analyst coverage react more to changes in unrealized gains and losses, highlighting the role of investor inattention. Using a difference-in-differences approach, we find that by 2020, publicly traded insurance companies cut investments in public stocks by $23 billion.