Research Interests

Empirical corporate finance and accounting, with a focus on supply chain and corporate externalities. I have been working on topics related to supply chains, product market competition, innovations, M&As, risk management, stock liquidity, corporate disclosures, financial reporting incentives, cost management and environmental issues.

Working Papers

  1. “Is There a Positive Externality of Data Breaches? Evidence from IT investment” Job Market Paper


Presented at World Finance & Banking Symposium (2019, accepted), University of Hong Kong, Xi'an Jiaotong University, Tianjing University.


Abstract: I study whether peer firms respond to data breach events occurred to other firms in their industry. Exploiting malicious hackings targeting U.S. public firms from 2008 to 2018, I find that peer firms defined as the same four-digit SIC industry level significantly increase IT investment following a hacking in their industry. The effect is stronger when more data records are lost and for firms that are more exposed to cyberattack, have higher risk management awareness (denoted by having a designated risk officer or a risk committee, or having previously discussed cyber risk in annual reports), and for the period after the 2011 SEC guidance on more cyber risk disclosure. I find that board interlocking with breach firms is a channel for the relevant information (e.g., on the effects of hacking and the resulting corporate responses) to be transmitted from hacked firms to peer firms. Overall, peer firms respond to hackings in the same industry by taking precautionary actions to manage the potential cyberattack risk and/or the potential litigation and reputation risk. In this way, a negative event (i.e., a data breach) results in positive externalities to the industry and its stakeholders.

  2. “Do Major Customers Help or Hurt Innovation? The Effects of Customer-Base Concentration on Radical and  Incremental Innovation”

with Clara Xiaoling Chen (UIUC), Wei Jiang (Renmin U).  


Presented at Harvard University (2020), Columbia University (2020), Seoul National University (2020), AAA-Managerial Accounting Section Midyear Meeting (2020), University of Toronto(2019), UIUC (2019).

Abstract: We examine the effect of a firm’s customer-base concentration on two types of firm innovation: radical innovation (i.e., a revolutionizing breakthrough from existing technology) versus incremental innovation (i.e., minor improvements to existing practices). Drawing on theories of resource dependence and resource allocation, we predict that dependence on major customers will lead a firm to make less investment in radical innovation and more investment in incremental innovation. We test our hypotheses with a sample of 11,940 firm-year observations between 1984 and 2010. Consistent with our predictions, we find that customer concentration is positively associated with incremental innovation, and such association is more pronounced for firms with high investment irreversibility. Although we do not find a main effect of customer concentration on radical innovation, we find an interaction effect between customer concentration and investment irreversibility such that radical innovation is significantly lower in firms with high customer concentration and high investment irreversibility than in other firms. Our results suggest that innovation resource allocation decisions of firms with high customer concentration may be shaped by major customers.


    3.  “Corruption Costs and Customer Identity Disclosure: Evidence from A Quasi-Natural Experiment” 

with Wei Jiang (Renmin U) and Hong Zou (HKU) 

Abstract: Using a panel data set for Chinese listed firms over the period 2009-2017 and difference-in-differences estimations, we find that firms with more potential sales related corruptions respond to the 2012 Chinese anticorruption campaign by reducing the disclosure about their customers’ identities. These results are stronger in firms that are prone to sale-related corruptions: those selling more to industries dominated by SOEs, being inactive in innovation before the campaign, or operating in regions with poor business environment. The reduction in the disclosure of customer identity is also larger for firms facing higher media coverage. Overall, hiding potential sale-related corruptions when the detection risk is heightened appears an important consideration for firms to reshuffle their customer disclosure policy.

    4.  “Meet, Beat, and Pollute”

with Jacob Thomas (Yale), Frank Zhang (Yale),  and Wei Zhu (UIUC)

Presented at Yale University(2021), Penn State University(2021).

Abstract: We examine the relation between managers’ attempt to meet or beat earnings expectations and firms’ emissions of toxic chemicals. Using plant-chemical-level data on toxic releases from the United States Environmental Protection Agency’s Toxic Release Inventory, we document significantly more toxic releases from firms that meet or just beat analyst forecasts relative to other firms. Evidence suggests that firms cut pollution abatement operating costs to beat benchmarks. Cost of goods sold per unit of sales are significantly lower among benchmark-beating firms and the relation between benchmark beating and toxic releases is weaker among plants that have newly implemented pollution-prevention activities. Our findings highlight a negative externality of financial reporting incentive and real earnings management on environment and public health. 

    5.  “Do Stock Liquidity Affect M&As? Evidence from SEC’s Tick Size Pilot Program”

with Chen Lin (HKU) and Hong Zou (HKU)

Abstract: Exploiting the SEC’s 2016 randomized tick-size pilot as a negative shock to firms’ stock liquidity, we study whether and how a firm’s M&As respond to stock liquidity shocks, which hitherto has not been examined in the literature. Our difference-in-differences analyses show that pilot firms experience a decrease in M&A intensity. Conditional on conducting an M&A, pilot firms also reduce the proportion of stock payment for M&A deals, are less likely to choose a large deal or a deal involving a public target, and they tend to reduce horizontal deals but increase vertical deals, and eventually, they are more likely to complete the deal, and garner more value gains (especially for firms that have better M&A performance before the pilot). Taken together, the evidence is consistent with the view that stock liquidity shocks lead firms to reduce the total intensity of M&A investment by cutting low-quality deals and lead firms to structure deals more carefully to limit the risk of acquisitions in time with lower stock liquidity.

    6.  “Product Market Competition and Corporate Hedging Decisions: Evidence from Large Tariff Rate Cut” 

with Andrew Ellul (Indiana U), Margret Zhu (CUHK), and Hong Zou (HKU). 

Abstract: Using the large reductions of U.S. import tariffs as a quasi-exogenous increase in firms’ product market competition risk, we examine how firms’ derivatives hedging activities respond to the increase in competition risk. We find that after a substantial increase in the competition risk, more firms begin to hedge, and the notional value of derivatives increases significantly. The results are robust to propensity score matching and other robustness checks. Further, we find the effects are more pronounced in firms subject to a more convex tax schedule, with higher distress risk, and a risk-averse CEO. The results indicate that the rise in hedging activities following the increase in competition risk appears to be due to both value-increasing incentives and managerial risk aversion.


  1. “Stock Liquidity and Corporate Diversification: Evidence from China's Split Share Structure Reform”, with Lifeng Gu, Yilin Zhang, and Yixin Wang.     Journal of Empirical Finance, 2018, 49: 57-80.  [paper]

  2.  “The Enforcement of the Minimum Wage Policy and Firm Cost Stickiness”, with Wei Jiang, Yuming Hu. China Journal of Accounting Studies, 2016, 3: 339-355. [paper]

Publications in Chinese

  1.  “Customer Concentration and Firm Cost Stickiness: Empirical Evidence from Chinese Listed Companies in Manufacturing Industry”, with LuLu Di and Wei Jiang. Journal of Financial Research (金融研究), 2017, 9:192-206.  [paper]

  2.  “The Enforcement of the Minimum Wage Policy and Firm Cost Stickiness”, with Wei Jiang, Yuming Hu. China Journal of Accounting Studies (会计研究), 2016,10: 56-62. [paper]

  3. “The Enforcement of the Property Law and Supply Chain Finance—Empirical Evidence from Bank Loans Pledged by Accounts Receivable”, with Wei Jiang. Economic Research Journal (经济研究), 2016, 01: 141-154.  [paper]

  4. “Firm Innovation and Executive Pay-performance Sensitivity ---Empirical Evidence from SOEs in China”, with Wei Jiang. Economic Management Journal (经济管理), 2015, 05: 63-73.  [paper]

  5.  “Ownership, Managerial Turnover and Cost Stickiness”, with Wei Jiang. Journal of Shanxi University of Finance and Economics (山西财经大学学报), 2015, 04: 44-56.  [paper]