Research
Working Papers
Overvalued Equity and Investment: A Regression Discontinuity Approach Revise & resubmit, Journal of Finance
New draft expected in June 2026
How does overvalued equity impact corporate investment? This paper examines a margin trading deregulation in China to identify substantial exogenous overpricing. Using a regression discontinuity design that exploits the proprietary ranking procedure, I find that firms with overpriced stocks due to quasi-random experiment eligibility double their investment. Moreover, overvalued firms increase both equity and debt issues, ruling out the financing channel as the sole mechanism. Consistent with the informational channel, investment reacts to overvaluation more when firms struggle to detect mispricing or when they have a stronger incentive to learn from the market.
Conferences: Wellington Finance Summit 2024
Structured Bias in Implied Cost of Capital: Theory, Evidence, and Research Implications with John S. Hughes and Jun Liu
Revise & resubmit, Review of Accounting Studies
We show that the implied cost of capital (ICC) can be a biased proxy for expected return, with the bias increasing in idiosyncratic volatility (IVOL) and expected growth. If not accounted for, this structured bias can lead to incorrect inferences about whether a firm characteristic represents a priced risk factor. Consistent with this concern, we find that commonly used disclosure measures, due to their inherent correlation with IVOL (but not with growth), exhibit a robust positive relation with ICC. We then propose and implement two simple bias-mitigation methods---controlling for model-implied bias drivers and subtracting an empirically estimated bias component from ICC---and find that the positive disclosure--ICC relation largely disappears once these adjustments are applied. Overall, the evidence underscores the importance of accounting for structured ICC bias when drawing ICC-based inferences about priced risk.
Conferences: CICF 2026 (scheduled), FARS 2025, CFEA 2024, HARC 2023, AES Weekly Webinars 2023
The Price of Voice: Retail Investor Engagement and Corporate Investment with Yongxin Xu and Zili Zhuang
Exploiting a Chinese mandate requiring listed firms to engage retail investors on an online platform, we find that treated firms exhibit lower investment-q sensitivity and weaker long-run performance, consistent with reduced managerial learning from stock prices. We also find evidence of managerial catering: firms receiving more investment-related posts subsequently increase investment, while an exogenous platform redesign that reduced such posts lowers investment. This voice-induced investment is associated with only short-lived valuation gains and worse long-run outcomes, further supporting a catering interpretation. Our results suggest that amplifying retail engagement can simultaneously erode price-based learning and induce value-destroying catering in corporate investment.
Conferences: CICF 2026 (scheduled)
We study how corporate disclosures affect strategic imitation in product markets. Using NielsenIQ product data, MD&A disclosures, and EDGAR server logs, we find that product-related disclosures increase similarity between disclosing firms’ and competitors’ product offerings, especially when competitors access the filings. Imitation is stronger when disclosers are financially successful, market leaders, or provide more valuable product information. Exploiting the 2016 Defend Trade Secrets Act, we show that reduced product disclosure is followed by less competitor imitation. Disclosures also prompt competitors to innovate within shared product categories and hire product-related employees from disclosing firms. These disclosure-induced spillovers are associated with lower future valuation and operating performance for disclosing firms, suggesting that product disclosures provide competitors with actionable strategic intelligence.
Reputation Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment with Grace Wang and the BOCOM Research Center
We study the role of sentiment in debt repayment, using an experiment with the credit card users of a major commercial bank in China. Customers are categorized into three types of social networks: colleagues, friends, and relatives. The core of our experiment involves selectively disclosing the debt status of delinquent clients within these networks.
Presentations: Huatai Securities, CITIC Securities, HSBC Bank
Work in Progress
Testing the agency theory of overvalued equity with Lin Liu
The real effects of echo chambers in finanical markets