Working Papers

"Diversity Breeds Diversity: Evidence from CEOs' Early-Life Experiences" 

(Job Market Paper)

Abstract: Diversity and inclusion (D&I) is becoming an essential factor for many workers. Yet, little is known about what drives the significant variation in firm D&I. This paper identifies CEOs' early-life exposure to community diversity as an important factor associated with more D&I policies, more women among the top-paid executives, more minority and female employees, and a lower probability of facing employee discrimination. Supporting a more causal interpretation, the diversity exposure effects depend on the level of integration in the CEO's community while growing up, and the CEO's control over firm policies. Moreover, using a difference-in-differences specification around plausibly exogenous CEO turnovers, to address the endogenous matching of CEOs to firms, provides consistent results.

"For Better or Worse? The Economic Implications of Paid Sick Leave Mandates" (with Paige Ouimet)

(Revise and Resubmit at the Journal of Financial Economics)

Abstract: Public calls for a national paid sick leave policy continue to mount in the United States. Using the staggered adoption of local and state mandates, we document an average increase of 1.5% in employment following the enactment of a paid sick leave policy. As predicted, workers with ex ante lower access to paid sick leave drive the employment effect. Several mechanisms can explain our findings. Paid sick leave mandates are associated with a decline in labor turnover, an increase in the labor supply, and an increase in household income, which creates positive spillover effects on local markets. Moreover, firms exposed to the mandate experience a significant increase in operating profit – benefits firms may not be able to achieve through voluntary actions, in the absence of a mandate, due to adverse selection.

Presentations: American Finance Association (2023), Midwest Finance Association (2023), Labor and Finance Group* (2022).

*: presented by co-author

Coverage: Kenan InstituteFinReg Blog, WRAL, National Affairs

"CEO Power and Luck: Impact of Stock Markets on Building Powerful CEOs" 

Abstract: The optimal view of managerial power theory suggests that corporate boards reward CEOs with power for good firm performance as the boards' assessment of their ability is higher. In evaluating the CEO's quality, economic theory predicts that boards filter out luck from performance. Luck represents exogenous shocks to performance, such as market-wide conditions, that are outside the CEO's control. Contrary to the prediction, I find that CEOs are rewarded with power for luck. In the baseline specification, a one standard deviation increase in firm performance due to luck leads to a 3% increase in CEO power relative to the median. This finding is mainly driven by firms with weaker governance in terms of board structure and institutional ownership. I also find some evidence suggesting that CEOs who manage weakly governed firms are rewarded with power for good luck, but are not punished equally for bad luck. These results may suggest, given the opportunity, CEOs strategically time their entrenchment following good firm and market performance.

Coverage: Institutional Investor, FinReg Blog

Work In Progress

"Distributional Effects of Adverse Economic Shocks Through Firm Production Networks" (with Franklin Qian)