Do firms value ethnic diversity? We show that firms prefer locating #interstate investments in ethnically diverse regions. Such investments are mentioned more in conference calls, and help boost innovation, sales & overall operating performance. #Diversity

Passive funds must balance tracking error versus transaction costs. Many funds don't fully replicate their index—they omit small illiquid stocks. Sampling means ETFs harm liquidity and price efficiency in liquid stocks, but leave illiquid stocks untouched

Our study shows that institutional cross-ownership strengthens revelatory price efficiency, heightening investment-q sensitivity & facilitating managerial learning from prices. Results are validated using financial institution mergers. #Finance#Accounting

Banks leverage industry expertise from corporate lending to enhance mortgage decisions. Chu, Xiao, and Zheng find that this "industry expertise channel" reduces information asymmetry and lending risks, improving mortgage performance.

Agency conflicts create opposing incentives that shape optimal investment timing. Our model shows how these frictions, along with tax benefits and bankruptcy costs, jointly determine a firm’s optimal ownership and capital structure. #AgencyConflicts.

Inattentive investors in equity markets lead to post-announcement drift. We develop a new measure of patents’ economic value combining the announcement effect (AE) and drift with greater predictive power for firm performance than measures using AE alone.

When executive mobility is constrained by stricter #noncompetes, firms widen executive pay gaps to boost tournament incentives for executive officers. But they don’t cut pay gaps as much when mobility restrictions are eased. #CorporateGovernance #FTC

We create a firm-specific measure of #labor_market_agglomeration, based on the similarity between the employee skill profile of a firm and that of the locality. Our measure is positively related to #innovation, mainly through enhanced #labor_mobility.

Information distortion is common in China. While it is often attributed to top-down political institutions, we show alcohol-related social norms intensify earnings management, revealing a social basis and bottom-up externality for distorted information.

Information distortion is common in China. While it is often attributed to top-down political institutions, we show alcohol-related social norms intensify earnings management, revealing a social basis and bottom-up externality for distorted information.

New lens on governance: Learning model shows directors matter and drive 10% of volatility when appointed. Study reveals when investors expect directors to have greater impact. #BayesianLearning #Boards #GenerationalDiversity #KnowledgeCapital

Firms connect through labor markets beyond industries, but Investors don’t fully incorporate this, leading to lead-lag returns. Industry shocks can impact firms outside the industry via labor networks, causing substitution effects between labor peers.

Are share repurchases really flexible? Almeida, Huang, and Xuan document a trend of declining flexibility in share repurchase policies over the last four decades and show that repurchase stickiness can have real effects for firms.

Culture matters! We show how much deep-rooted cross-country values affect the executive gender pay gap. Our identification methods and Oaxaca-Blinder decomposition highlight how ignoring culture means missing the bigger picture in executive compensation.

The newly proposed 9-factor model for hedge funds—which includes 1 equity market factor, 5 anomaly factors, and 3 macro factors—significantly enhances hedge fund performance evaluation, outperforms existing models, and reveals strategic insights.

Stablecoins are fragile but trade at par. Why? We show that stablecoin holders are compensated for run risk by lending to crypto speculators. This helps maintain the $1 peg but also links crypto speculation to traditional financial markets.

Stablecoins are fragile but trade at par. Why? We show that stablecoin holders are compensated for run risk by lending to crypto speculators. This helps maintain the $1 peg but also links crypto speculation to traditional financial markets.

Firms outsource the burden of filing with the SEC to third-party filing agents in 80% of 8-Ks. Leakage of private information is greater when firms outsource versus self-file. Leakage differentials are higher when private information is more valuable.

This paper shows that investors price short-term risk very different from long-term risk, using stock index option data. At short horizons, investors overpay for OTM calls, while at longer horizons prices are surprisingly well in line with rational models.

International equity funds outperform by actively rotating country asset allocations. Country-rotation-linked outperformance is most evident during market downturns, as funds reduce exposure to country holdings ahead of poor subsequent market returns.