The Effect of Mergers on Human Capital: Evidence from Sell-Side Analysts (Job Market Paper)
I find that when brokerage houses merge, acquiring house analysts temporarily produce less accurate estimates. This temporary impairment suggests that the merging process can distract high-skilled employees. Furthermore, high-quality analysts, especially when redundant, often leave target houses to avoid covering new firms. This attrition suggests that high-skilled employees exercise outside options to avoid abandoning human capital. As a consequence of these effects, the forecast error in merged houses remains elevated by 10% for two years, thus impairing information quality in financial markets. I conclude that mergers can temporarily, but significantly, impair firms’ ability to acquire, develop, and retain human capital.
- Presented at the 2016 FMA Doctoral Student Consortium
- Presented at the 2016 FMA Conference
Corporate ESG Profiles and Investor Horizons, with Laura Starks and Qifei Zhu (Ph.D. Candidate)
Over the past decade mutual funds and dedicated institutional investors have increased their holdings of firms with strong ESG profiles. One possible explanation for this shift is that long-term investors increasingly use ESG profiles to screen for firms with a long-term focus. Consistent with this hypothesis, we find that high-ESG firms attract more long-term oriented investors, i.e. investors with low turnover and low portfolio churn ratios. Moreover, following a firm’s poor stock returns or earnings shortfalls, investors are less likely to sell it stock if the firm has a high ESG profile, indicating that investors are more patient with high-ESG firms. We further confirm our findings using inclusions and exclusions from the FTSE4Good Index as shocks to firms’ ESG profile.
- Presented at the 2016 JOIM “Long-run Risks, Returns and ESG Investing” Conference
We study how property-rich and property-poor districts respond to funding changes under a wealth equalization policy, using an instrument to exogenously identify funding changes. We find that property-rich districts reduce their tax rates and issue debt for capital expenditures after the state redistributes some of their funding to poorer districts. In contrast, when property-poor districts receive additional funding, this spending correlates with investments, such as employing more and better teachers, implying that properly recaptured and redistributed funds may increase quality in property-poor districts.
- Presented at 42nd Annual Education and Finance Policy Conference
Work in Progress
This paper uses the introduction of Transportation Networking Companies (TNC), such as Uber, to show that access to flexible sources of income facilitates entrepreneurship. TNCs give prospective entrepreneurs the ability to earn a substantive wage, which provides the financial assurance to start their new businesses. Because hours are set independently, entrepreneurs also maintain the temporal flexibility to work the unpredictable hours that characterize new ventures. We employ a difference-in-differences approach that exploits variation in the timing and location of TNC introductions and find evidence that the introduction of TNCs increases young firm employment and proprietorship. We also present survey-based evidence consistent with these findings; TNCs have provided artists, musicians, engineers and other entrepreneurs the financial and temporal flexibility to pursue their passions.