(with Wensi Xie)

Journal of Financial and Quantitative Analysis, 2022, 57(4), 1591-1620

Exploiting exogenous variations in corporate ratings due to sovereign credit downgrades and sovereign ceiling policies, we assess how firms respond to a reduction in credit ratings. We find that firms bounded by the sovereign ceiling significantly increase information production in response to a sovereign downgrade. The effects are stronger for firms relying more heavily on external finance and operating in a more opaque environment. Enhanced information production, in turn, affects firms’ subsequent access to bond markets. These findings suggest that firms actively manage information environments to maintain access to public debt markets. 

Working Papers

(with Jan Bena, Isil Erel and Michael S. Weisbach)

R&R, Journal of Finance

The hold-up problem can impair firms’ abilities to make relationship-specific investments through contracts. Ownership changes can mitigate this problem. To evaluate changes in the specificity of human capital investments, we perform textual analyses of patents filed by lead inventors from both acquirer and target firms before and after acquisitions. Inventors whose human capital is highly complementary with the patent portfolios of their acquisition partners are more likely to stay with the combined firm post-deal and subsequently make their investments more specific to the partner’s assets. As ownership of another firm results in increasingly specific investments to that firm’s assets, contracting issues related to relationship-specific investments is likely a motive for acquisitions. 

(with Sudipto Dasgupta, Jarrad Harford, Fangyuan Ma and Haojun Xie)

M&A conference calls held shortly after deal announcement are associated with positive market reactions, higher deal completion rates, and reduced information asymmetry, consistent with selective disclosure. However, the impact disappears when the call decision is instrumented, i.e., when the decision is presumably uncorrelated with the underlying deal value. Analysis of call content shows that managers can control the informativeness of conference calls by emphasizing different types of topics, such as soft versus hard information topics. Our findings highlight the selective transparency of M&A call disclosures, shedding light on the information environment that investors navigate when assessing merger values. 

This paper studies how firms choose to obtain skilled workers between hiring them directly (“direct hiring”) and acquiring their employers (“acqui-hiring”). Using textual analysis of US patents and selected technological breakthroughs, I measure the skills and turnovers of individual inventors. I find that inventors with relevant skills in the breakthrough-related field are in high demand and the external labor market of such inventors becomes highly active years before the breakthrough, coinciding with the public’s increasing attention to the emerging technology. In the years leading up to a breakthrough, inventors with relevant skills are 13.4% more likely to be directly hired and 44.1% more likely to be acqui-hired than comparable inventors without relevant skills. However, in the years immediately following a breakthrough, they are predominately more likely to be acqui-hired, with a 43.1% higher likelihood. I show that labor market legal frictions and employers’ organizational capital (in particular, tacit knowledge and team synergy) are two underlying factors that induce firms to prefer acqui-hiring over direct hiring. Overall, this paper provides insights into how firms acquire skilled workers and sheds light on the factors that influence their decision-making process.

Work in Progress

Dancing with the Giants: CVC Investments and Startup Outcomes

(solo-authored, draft coming soon)