Journal of Financial Economics, 2025, 164, 103986

Have you ever wondered what drives investors to buy or sell stocks? Is it cold, hard logic—or something more emotional, like chasing past performance?

Instead of relying on surveys or guesswork, the researchers developed a smart model that reads between the lines of market prices—specifically, the price-to-dividend ratio—to uncover what investors believe about the future.

Key findings:

• Beliefs are in the prices: The model successfully extracts investor beliefs from market prices, closely matching what surveys reveal—without needing to ask anyone.
• Return extrapolation: Investors expect recent high returns to persist.
• Cash-flow extrapolation: Investors believe recent dividend growth will continue.
• Better predictions: The model’s belief estimates predict future stock returns.
• Behavioural biases are quantifiable: This approach shows that investor psychology is not just a theory—it is embedded in the numbers we see on financial dashboards every day.

The study reveals that investor beliefs—especially about future dividends—are deeply embedded in market prices and can be extracted without relying on surveys. By showing that these beliefs help predict returns and influence valuations, this research offers a powerful new way to understand how psychology shapes financial markets.

Management Science, Forthcoming

This study explores how managers of companies facing a potential takeover might legally hide information from potential acquirers. While companies are required to disclose material contracts, little is known about whether managers use the ability to redact sensitive information as a defensive tactic against the threat of takeover.

The study analyses redactions in material contracts that companies are required to file publicly. It compares the behaviour of managers facing takeover threats with those who are not, and classifies the redacted contracts by type to better understand the strategic motives behind the redactions.

Key findings:

• Managers are more likely to redact information in their material contracts when their company is threatened with a takeover.
• The motivation for these redactions differs by contract type. Managers redact research and development contracts more heavily when their firm possesses valuable trade secrets, suggesting a strategy to protect their technology from being acquired.
• In contrast, managers redact details from purchase and sales, and licensing and royalty contracts more heavily when their own private benefits from controlling the firm are greater.

Overall, the findings reveal tactics that managers use to defend against takeover threats, especially to protect genuine trade secrets from the threat of technological acquisition and, at times, to shield their own private interests.

Management Science, 2024, 71(4), 3253-3282

The drive in Washington for “home-grown” production has shifted from campaign slogan to concrete trade policy. Billions are now flowing into domestic high-tech production plants thanks to the US’s CHIPS & Science Act, and new tariff negotiations are looming. This new reality means that every corporate press release hinting at moving factories back to US soil now triggers an immediate reaction on trading floors, along with anxious recalculations by suppliers across China’s Pearl River Delta. But do US firm’s decisions to reshore always lead to positive outcomes for such firms? The short answer is NO.

Key findings:

• No automatic reward: On average, the announcement of a move to reshore production has no statistically significant effect on a company’s share price.
• Risk reduction is key: Investors react positively only when reshoring is presented as a clear solution to specific macroeconomic risks, such as volatility in foreign-exchange rates or weak IP-protection in offshore locations.
• How a firm reshores matters: The market reacts negatively to firms shutting down overseas contractors to build new plants in the US, likely reflecting fears of start-up overruns. Conversely, bringing a company-owned plant home is viewed slightly positively.
• Domestic politics can play a role: Announcing a move to a Democratic-led state can dampen returns, suggesting that investors worry about perceived tighter regulations and higher labour costs.

Implications for Chinese Manufacturers

These findings show that US firms benefit from reshoring only when such a move clearly reduces macroeconomic risks. This presents an opportunity for Chinese manufacturers. By offering solutions that protect IP and hedge against volatile foreign exchange rates, Chinese manufacturers can actually strengthen their position within the supply chain. This is because existing supply chain risks are minimised and are lower than the risk of starting up a new factory in the US.

In the current climate of US–China trade tensions, a “Made-in-USA” announcement boosts a company’s stock price only when it is also a credible story about mitigating risk. Therefore, firms on both sides of the Pacific must accurately assess the risks they face. Ultimately, strategies that reduce risk within the global supply chain can help multinational firms maintain efficient supply networks.

Journal of Management Studies, Advanced online publication

In our newly published article in the Journal of Management Studies, Dr Yuyuan Chang and I explore how government officials’ perceptions influence a company’s ability to gain political access. Traditionally, research has focused on the demand side of corporate political activities (CPA)—what companies do to gain influence. However, we shift the focus to the government’s side (the supply side), examining how officials react to corporate social responsibility (CSR) initiatives, especially when a company’s political reputation is at stake. We analysed a manually coded dataset of 3,531 Chinese firms from 2012 to 2020 to understand the relationship between a firm’s political reputation, its CSR efforts, and the political access it receives.

Key findings:

1. When a firm’s political reputation is damaged due to a negative event (a “stigma” event), government officials are less likely to grant that firm political access in the form of government subsidies or personal visits.
2. CSR activities can help mitigate these negative effects by repairing a firm’s damaged political reputation, thereby restoring its political access.
3. However, the effectiveness of CSR in restoring political access is constrained by officials’ “stigma anxiety”. This anxiety depends on three characteristics of the negative event:
   • Stigma controllability: The extent to which officials believe the firm was responsible for the negative event.
   • Stigma disruptiveness: The extent to which the negative event is perceived as a threat to others.
   • Stigma visibility: The extent to which the negative event stands out and attracts sustained attention.

By shifting the perspective from firms’ CPA efforts (the demand side) to government officials’ receptivity (the supply side), our findings offer new insights into how political access is granted. They highlight the complex interplay between a company’s political reputation, its CPA efforts, and the receptiveness of government officials.

Management Science, Forthcoming

This paper investigates the effect of climate risks on corporate bond mutual funds' trading activities and explores its mechanism. We find that investor flows negatively respond to mutual funds' carbon exposure, using the Paris Agreement as a shock event. Such carbon-induced redemptions prompt mutual funds to sell bonds issued by high-carbon companies, especially for funds with high outflow-to-carbon sensitivity. Our findings do not support the alternative hypothesis that a fundamental shift in funds' investment preferences drives the reduction in high-carbon holdings. Finally, we document a deterioration in the liquidity of high-carbon bonds, particularly those heavily owned by mutual funds.

Journal of Finance, Accepted

An investor receives utility bursts from realizing gains and losses at the individual-stock level (Barberis and Xiong, 2009, 2012; Ingersoll and Jin, 2013) and dynamically allocates his mental budget between risky and risk-free assets at the trading-account level. Using savings, he reduces his stockholdings and is more willing to realize losses. Using leverage, he increases his stockholdings beyond his mental budget and is more reluctant to realize losses. While leverage strengthens the disposition effect, introducing leverage constraints mitigates it. Our model predicts that investors with stocks in deep losses sell them either immediately or after stocks rebound a little.

Review of Accounting Studies, 2025, 30, 2134–2183

Insurers can boost their earnings by accruing interest income from their corporate bond investments. We document that insurers have higher corporate bond investments as well as less equity and cash holdings, when their parents meet or just beat analysts’ quarterly earnings forecasts, compared to when their parents miss or comfortably beat the forecasts. The investment in corporate bonds to boost earnings is more pronounced when bond offerings provide more opportunities for accruing interest income, when the parent’s corporate governance is weaker, when the parent’s managers have more equity incentives, when insurers face more competition, when other earnings management techniques are used, or when the insurance segment is more important to the parent. Finally, insurers suspected of helping their parents meet or beat earnings benchmarks experience worse investment performance in subsequent years, presumably because, by investing more in corporate bonds, the insurers forgo investment opportunities with higher longer-term returns.

Contemporary Accounting Research, Advanced online publication

This study examines the informational role of local newspapers in institutional investments. Exploring local newspaper closures across US counties, we document that institutional investors significantly reduce their holdings in firms located near the closed newspapers. The post-closure decrease in institutional holdings is concentrated for non-local or non–hedge fund institutions. In contrast, institutions that are likely to possess information advantages—local institutions or hedge funds—do not decrease their holdings and may even increase them when faced with a lack of local news coverage. Further analysis reveals that local newspaper closures adversely impact institutional investors' ability to predict firms' stock returns, particularly for non-local or non–hedge fund institutions. Collectively, we provide novel evidence suggesting that local newspapers are a key channel through which institutional investors acquire geographically scattered information.

Journal of Financial Economics, Forthcoming

Identifying firms’ bond-market-specific economic links through credit-rating comovement of their corporate bonds, a long-short strategy for stocks based on these links generates a risk-adjusted alpha of 0.45% per month, which cannot be explained by existing economic links in the literature. Market segmentation between the equity and bond markets appears to be the underlying mechanism: (i) The cross-return predictability is muted in the bond market; (ii) The cross-return predictability is mitigated in the presence of cross-holding investors; (iii) Equity analysts slowly incorporate information from rating-comovement links to their forecasts.

Contemporary Accounting Research, 2025, Advanced online publication

Lenders are reluctant to finance firms' innovation activities because such activities tend to be opaque, with a high likelihood of negative outcomes that could hamper loan repayment. We posit that public credit registries (PCRs), which play an important role in credit information sharing in many countries, can facilitate financing by reducing adverse selection and moral hazard and increasing bank competition. Using the staggered establishment of PCRs in different countries and an international firm–patent data set, we find that credit information sharing positively affects firm innovation, especially in firms that experience a larger increase in bank debt financing after the establishment of a PCR. This finding is consistent with the notion that credit information sharing promotes firm innovation by easing bank debt financing frictions. We also find a stronger effect in countries that experience a large increase in bank competition after the establishment of a PCR—consistent with increased bank competition serving as a channel through which credit information sharing facilitates bank debt financing, thereby generating a positive effect on firm innovation. The positive effect is more pronounced when the established PCR has features that promote credit information sharing. It is also more pronounced for opaque firms and firms in innovation-intensive industries, indicating that credit information sharing helps to reduce financing frictions. Finally, we posit and find evidence that firm efficiency in transforming innovation inputs into outputs improves after the establishment of a PCR. Overall, our paper offers novel insights into how credit information sharing facilitates firm innovation.

Production and Operations Management, Advanced online publication

This study examines the relationship between major customer concentration and supplier firms’ adoption of blockchain. Using a sample of 9,745 Chinese firm-year observations spanning 2018–2021, we find that the likelihood of suppliers’ blockchain technology adoption in supply chain management is negatively associated with major customer concentration. The negative relation is reduced when supplier firms possess greater bargaining power and demonstrate governance mechanisms against information leakage, and when major customers have less incentive to engage in opportunistic behaviors, and have fewer concerns regarding information leakage by suppliers. Our findings suggest that major customers tend to discourage supplier firms from adopting blockchain due to the concerns regarding competitive advantages and information leakage risk.

Organization Science (Providence, R.I.), 2024, 35(6), 2016–2039

Chief executive officers (CEOs) are expected to guard their firms against corporate social irresponsibility (CSIR) incidents. In this study, we hypothesize that CEO humility relates negatively to CSIR occurrence and positively to correction because of CEO preferences for protecting stakeholder interests and employing systematic information processing. These associations are stronger in industries with a high number of CSIR incidents and when top management teams have a higher ratio of gender and racial minorities. We develop and validate a new unobtrusive measure of CEO humility by using automated, objective behavioral indicators derived from earnings conference call transcripts. Our arguments and hypotheses are mostly supported by a sample of 197 Fortune 500 firms, 275 CEOs, and 1,243 firm-year observations from 2002 to 2015. Our study contributes to a more complete understanding of CEOs’ role in CSIR prevention and correction, widens the scope of CEO humility research by including stakeholder-centered firm outcomes, and mitigates measurement constraints in understanding CEO humility-firm action relationships.