Welcome to my site! I will be joining Singapore Management University as an assistant professor of accounting starting from July 2021.
Riding the Blockchain Mania: Public Firms’ Speculative 8-K Disclosures (with Stephanie Cheng, Gus De Franco, and Haibo Jiang), 2019, Management Science.
This paper provides evidence on public firms’ initial 8-K disclosures that mention Blockchain and investors’ response to these disclosures. We categorize the description of Blockchain activities in firms’ 8-Ks as Speculative (e.g., a vague future plan that involves Blockchain) or Existing (e.g., a description of Blockchain product). We document a sharp increase in the number of initial 8-K disclosures of Blockchain, particularly by Speculative firms, coinciding with the rise of Bitcoin prices and excitement in Blockchain technology in the last quarter of 2017. Investors react positively to the Blockchain 8-Ks issued by Speculative firms in the initial seven-day event window although the reaction is mostly reversed over the 30 days following the disclosure. The reaction is stronger when Bitcoin returns are more positive. Overall, our results are consistent with a situation that troubles the SEC and the financial press: investors overreact to a firm’s first 8-K disclosure of a potential foray into Blockchain technology and that overreaction is a function of the Bitcoin price bubble.
Do Emotions Affect Audit Practice? Terrorist Attacks and Accounting Misstatements (Dissertation), 2020
Psychology and neuroscience research shows that individuals with negative emotions (e.g., fear) are more sensitive to negative signals and exhibit a higher degree of risk aversion. Using local terrorist attacks as exogenous shocks that cause auditors to experience more negative emotions in the audit period, I empirically study the impact of negative emotions on audit practice. I find that accounting misstatements are less likely to occur for firms when there is a local terrorist attack in the audit period. The reduction in misstatements is stronger for auditors who are located closer to the terrorist attacks. Further evidence suggests that affected auditors are more likely to issue going concern opinions, spend more time on the audit, and charge higher audit fees. I obtain a similar set of results using airplane crashes as an alternative source of emotional shocks. Overall, the evidence is consistent with the idea that auditors with more negative emotions exert greater effort to lower misstatement risks. My findings provide large-scale archival causal evidence that emotions can affect audit outcomes.
Marijuana Liberalization and Public Finance: A Capital Market Perspective on a Public Health Policy (with Stephanie Cheng and Gus De Franco), 2020.
The staggered passage of state medical marijuana laws increases state bonds’ offering and trading spreads by 7 to 11 basis points. Consistent with medical marijuana laws causing an increase in states’ credit risk, states incur higher safety and public welfare expenditures and experience greater deficits following the law’s passage. Additional analyses show that the increase in spreads is stronger for states with greater corruption, more vulnerable demographics, and better cultivation environments. Overall, these results support economic theory on substance use, which suggests that making marijuana legal for medical purposes expands the availability, reduces the perceived risks, and increases the local consumption of marijuana.
Media coverage: Brookings Up Front
Watchdogs in the Newsroom: Newswire Negativity around Earnings Announcements (with Jeremiah Green and Nina Xu), 2021.
We study newswires’ watchdog role for professional investors when covering earnings announcements. We argue that in contrast to the popular press, newswires fulfill this role by primarily focusing on what to cover within earnings news stories rather than selecting which news stories to cover. We study this within-story watchdog role by asking whether newswires emphasize negative more than positive aspects of earnings announcements and whether this emphasis is useful for professional investors. We document a significantly stronger sensitivity of newswire story text sentiment to negative earnings surprises than to positive surprises. Consistent with negativity reflecting journalists’ watchdog efforts, we find that the negativity is more pronounced when investors face greater information acquisition and processing costs. Further analyses reveal that the negative media coverage is useful for investors, leading to larger earnings announcement reactions and more information search activity.
Music (rock and classical), Chinese calligraphy, and biking