Working papers

Local IPOs and Household Stock Market Participation (with Feng Jiang and Yiming Qian)

We posit that IPOs of local companies will lead to increased stock market participation. First, local IPOs attract attention to the market, through both increased information production and publicity. Second, local IPOs generate wealth, not just for people associated with the heretofore private company but also for the wider community through local agglomeration effects. Consistent with predictions, we find that local IPOs increase both households’ propensity to own stock and equity holdings as a percent of wealth. Tests of the mechanisms underlying this relation support the attention channel. We find little evidence in support of the wealth channel. Given prior evidence that stock market participation represents a key factor toward building wealth, our findings highlight that the benefits of IPOs extend beyond those people directly involved with the offering.

The Government Agenda and the Effects of Regulatory Fragmentation (with Joseph Kalmenovitz and Ekatarina Volkova)

The agenda of the U.S. government extends across a myriad of agencies and topics. This has resulted in regulatory fragmentation, where a single regulatory topic is handled by multiple government agencies. Using the full text of the Federal Register, the government’s official daily publication, we develop a machine-learning algorithm to quantify the entire government agenda, classify it by topics, and compute its fragmentation across agencies. We present new stylized facts on the scope and composition of the government agenda since 1994. We measure firm-specific regulatory fragmentation as the number of agencies that regulate each topic, weighted by the relevance of each topic to the firm. We find that higher regulatory fragmentation increases administrative costs while lowering the firm’s productivity, profitability, and growth. Our results uncover a new source of regulatory burden, the “industrial organization” of the federal government, highlighting the economic price companies pay when regulatory oversight is fragmented across multiple government agencies.

ES Risks and Shareholder Voice (with Yazhou HE and Bige Kahraman)

We examine whether shareholder votes in environmental and social (ES) proposals are informative about firms' ES risks. While ES proposals nearly always fail, we find that mutual funds’ support for these proposals contains information regarding the ES risks that firms face. Higher support in failed ES proposals predicts subsequent ES incidents, the effects of these incidents on shareholder value, and firms’ overall stock performance. These relations raise the question of why more mutual funds do not support these proposals. An examination of underlying economic channels reveals that agency frictions amongst a group of shareholders contribute to proposal failure.

Are All ESG Funds Created Equal? Only Some Funds are Committed (with Pingle Wang and Kelsey Wei)

Although flows into ESG funds have risen dramatically, it remains unclear whether these funds are truly committed to sustainable investments and how much their investments matter. We shed light on this debate by examining the incentives of fund managers. We find that conditional on similarly large ESG investments, ESG funds vary in their incentives to engage with portfolio firms. ESG funds with higher incentives to engage – committed ESG funds – hold their ESG investments longer, pay more attention to firms’ ESG risk exposure and implement less negative screening. Strikingly, only investments by committed ESG funds contribute to real ESG-improvements, and these funds have outperformed other ESG funds on their ESG holdings. Our paper highlights the importance of incentives when assessing the real impacts of sustainable investments and calls for greater investor awareness of a hidden form of greenwashing.

The Gender Pay Gap: Pay for Performance and Sorting across Employers (with Daniel Bradley, April Knill, and Jared Williams)

We document a gender pay gap among business professors at Florida public universities. Part of this gap is driven by the fact that females are disproportionately likely to work at schools with low pay, controlling for faculty productivity. However, this sorting effect does not completely explain our findings: Using strict fixed effects to control for discipline, employer, rank, productivity, and experience, we find that women are paid approximately 3.5% less than men. Women’s pay is less sensitive to their publication performance, and the pay gap is economically largest among full professors.