Research

Published and Accepted Papers

THE VALUE OF OFFSHORE SECRETS – EVIDENCE FROM THE PANAMA PAPERS

with Hannes Wagner and Stefan Zeume
at The Review of Financial Studies (2019, 32(11): 4117-4155)
  •  Lead article and runner up for Michael J. Brennan Best Paper Award

We exploit one of the largest data leaks to date to study whether and how firms use secret offshore vehicles. From the leaked data, we identify 338 listed firms as users of secret offshore vehicles and document that these vehicles are used to finance corruption,  avoid taxes, and expropriate shareholders. Overall, the leak erased $174 billion in market capitalization among implicated firms. Following the increased transparency brought about by the leak, implicated firms experience lower sales from perceptively corrupt countries and avoid less tax. We estimate conservatively that
one in seven firms have offshore secrets.

INTERNATIONAL ASSET PRICING WITH STRATEGIC BUSINESS GROUPS

with Massimo Massa and Hong Zhang
Accepted at The Journal of financial economics

Firms in global markets often belong to business groups. We argue that this feature can have a profound influence on international asset pricing. In bad times, business groups may strategically reallocate risk across affiliated firms to protect core “central firms.” This strategic behavior induces co-movement among central firms, creating a new intertemporal risk factor. Based on a novel dataset of worldwide ownership for 2002-2012, we find that central firms are better protected in bad times and that they earn relatively lower expected returns. Moreover, a centrality factor augments traditional models in explaining the cross-section of international stock returns.

Working Papers

UNDERSTANDING THE ASSET GROWTH ANOMALY

Components of balance sheet asset growth which are related to earnings management contributed to the asset growth anomaly in the past. These components of balance sheet asset growth are no longer related to returns since 2002 and this has contributed to the disappearance of the asset growth anomaly. I provide evidence that the Sarbanes-Oxley Act reduced earnings management and improved the integrity of accounting information: earnings manipulation has decreased, earnings predictability has increased, and analyst forecast errors have decreased. Further, the cross-sectional relationship between the accrual accounts used to manage earnings and analyst optimism has reduced. The evidence suggests that the asset growth anomaly was driven by mispricing in the past and that this mispricing has decreased. More broadly, these findings point towards changes in the regulatory environment as a novel driver of equity market anomalies.

Work in Progress

Equilibrium Computation with Heterogeneous Firms: An Alternative Approach

Asset Pricing with Heterogeneous Firms and Entry: An Investigation

Merger Financing and the Information Content of Option-Implied Moments

(with Cal Muckley and Conall O’ Sullivan)