Working Papers
The Value of Familiarity: Evidence from Lawyer-Judge Interactions in Corporate Bankruptcy
(with Josh Madsen and Wei Wang)
Revise and Resubmit: Review of Financial Studies
We show that familiarity between lawyers and judges accelerates case resolution in corporate bankruptcies by 15%. Familiarity developed through repeated in-court interactions, where lawyers gain first-hand knowledge of judges' preferences, is more valuable than connections through educational or professional networks. Familiar lawyers manage cases more efficiently by filing fewer motions, maintaining a consistent filing pattern, and securing faster judicial approvals. Firms represented by familiar lawyers incur lower professional fees, primarily due to retaining fewer legal professionals, and creditors in these firms recover more. Our findings highlight the value of familiarity in repeated transactions where channels for private communication are limited.
Intermediary Demand for Duration and Corporate Financing: Evidence from Longevity Shocks
(with Zhanhui Chen, Pingyi Luo, and Wenjun Zhu)
We study whether changes in financial intermediaries' demand for duration affect corporate financing. Life insurers provide a natural setting because revisions in life expectancy alter the duration of their liabilities. Improvements in longevity increase insurers' purchases of long-maturity corporate bonds and the duration of their corporate bond portfolios, generating plausibly exogenous variation in intermediary demand. Positive longevity shocks are associated with lower corporate term spreads. Consistent with these market-level responses, firms with greater exposure to insurer demand issue longer-maturity debt. The findings identify a financial-market transmission mechanism linking longevity revisions to corporate financing.
Doing Good by Doing Nothing?Passive Ownership and Environmental Performance
(with Daniel Urban and Theresa Spickers)
Exploiting the creation of 55 equity indexes in 30 countries, we find that passive ownership raises environmental scores and reduces greenhouse gas emissions, particularly in carbon-intensive firms. We document a demand-elasticity channel: higher passive ownership makes stock demand more inelastic, dampens stock price reactions to earnings news, and allows firms to pursue green investments. Effects are strongest in countries with higher costs for green projects and greater climate risks. Visibility or investor engagement are unlikely to explain the results. Ultimately, passive ownership curbs emissions by giving firms freedom to invest in costly environmental upgrades.
When AI Acquires Data: Strategic Complementarities in M&A
(with Yue Fang, Yingxuan He, and Zilong Zhang)
We examine how firms’ artificial intelligence (AI) capabilities influence their mergers and acquisitions (M&A) decisions, using employees’ job skills to measure AI strength. Firms with stronger AI capabilities are more likely to acquire data-rich targets and hire data analytics specialists, reflecting a strategic complementarity between AI expertise and data assets. Without paying higher acquisition premiums, these AI-intensive acquirers achieve superior M&A performance, especially when acquiring data-intensive targets. Such mergers lead to an increase in patents and AI-related patents, indicating greater innovation. Our findings highlight the combined power of AI and data as a key driver of M&A value and a force reshaping firm boundaries.
Access to Credit and Labor Mobility
(with Janghoon Shon)
Exploiting a government credit program in Korea that sharply expanded credit access to some individuals but not others, we analyze the effect of credit market frictions on labor mobility and wages. Individuals eligible for credit were 43% more likely to switch jobs relative to those who were not eligible. The higher switching rates and subsequent wage improvements in response to improved access to credit suggest that credit frictions impede labor mobility. Furthermore, individuals take greater risks when they have more credit; they exhibit a higher propensity to switch to employers in a different industry and move to different occupations at a higher rate. The fact that wages increased on average for these workers implies that removing credit frictions is important for labor mobility and quality of job matches.
Passive Ownership and Corporate Investment: A Matching Perspective
(with Murray Frank)