Publications

Fracking Disclosure, Collateral Value, and the Mortgage Market

• The Accounting Review
• Abstract: This paper examines whether laws requiring oil and gas firms to disclose the chemicals used in their fracking operations affect the mortgage lending activity for properties located in nearby areas. I hypothesize and find that the disclosure mandate reduces uncertainty about the value of housing collateral and subsequently increases 1) the probability of obtaining a mortgage by 2.5 percentage points (pp) and 2) loan-to-value by 2.2 pp. My main analyses exploit the variation in the location of properties relative to fracking wells. Cross-sectional tests that exploit heterogeneity in drinking water sources and the content of firm disclosures further substantiate my inferences and mitigate endogeneity concerns. These findings suggest that disclosure regulation for oil and gas firms affects housing collateral values, thereby impacting the mortgage market.

Working Papers

Social Media Toxicity and Capital Markets (with Elizabeth Blankespoor and Jedson Pinto)

• Revise and resubmit at The Accounting Review
• Abstract: This paper examines the drivers and implications of toxic content in financial social media. Using state-of-the-art machine learning algorithms to measure toxic content on Seeking Alpha, we find persistent toxicity primarily in the comments rather than articles, with over 50% of firms on the platform experiencing toxicity in recent years. Further analyses reveal three key findings. First, toxic content displays a feedback loop in platform participation: past toxicity predicts more future toxic contributors for a given firm. Second, firms receiving more toxic comments have higher retail trading volume but less informative retail order trades. Third, toxic content is associated with slower price discovery around earnings announcements, indicating potential broader market efficiency implications. Our findings suggest financial social media toxicity might influence both user behavior and market outcomes, raising important considerations for platform governance in financial markets.

Real Effects of Lagged Guidance from Prudential Regulators on CECL (with Riddha Basu and Sugata Roychowdhury)

• Revise and Resubmit at Journal of Accounting and Economics
• Abstract: This paper examines the impact of a lag in guidance from prudential regulators when new accounting standards are issued. Using the recent introduction of the Current Expected Credit Losses (CECL) standard, we examine whether the lack of concurrent guidance from accounting standard setters and bank regulators had adverse real effects. We refer to the period following CECL pronouncement in 2016 but prior to the 2018 issuance of guidelines from prudential banking regulators on how they would incorporate CECL’s impact into their bank assessments as the lagged guidance period. We find that during the lagged guidance period, banks reduce loan amounts and increase loan spreads for affected loans (Term Loan As, or TLAs) relative to unaffected loans (Term Loan Bs, or TLBs). Following the issuance of regulatory guidelines in 2018, however, banks relax their loan terms, i.e., increase loan amounts and reduce loan spreads on TLAs relative to TLBs. Furthermore, we show that the stricter TLA terms during the lagged guidance period coincide with decreased investments by corporate borrowers dependent exclusively on TLAs relative to other borrowers. Cross-sectional tests show that the decrease in investments is stronger for firms that are frequent borrowers and are financially constrained. The findings indicate that delayed guidance from industry regulators when new accounting standards are issued may adversely affect regulated economic entities and have spillover effects in the economy.

Deadly Regulation: Evidence from Mandatory Hospital Surveys (with Davide Cianciaruso and Vedran Capkun)

• Revise and Resubmit at the Review of Accounting Studies
• Abstract: We study whether mandating hospitals to adopt a survey of patient experience affects patient mortality. We exploit two settings where U.S. healthcare regulators mandated the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey: the 2003 Maryland pilot study and the 2007 nationwide adoption. Difference-in-difference
  
  analyses show increased mortality for hospitals that were subject to the mandate, relative to other comparable hospitals. We observe this effect before hospitals disclose their HCAHPS ratings, suggesting that it is attributable to measurement, rather than disclosure. Further, we control for hospital and patient characteristics and, hence, our results cannot be explained just by changes in the matching between patient and hospital. Cross-sectional results provide support for the hypothesis that mandated hospitals shifted resources from clinical care to patient experience. In sum, our analyses provide new evidence of pre-disclosure negative spillovers of mandated measurements.

Politics, CSR Investment, and Real Effects (with June Huang and Shivaani MV)

• Abstract: We examine whether political influence affects firms’ corporate social responsibility (CSR) investments and whether it has implications for local communities. Leveraging detailed district-level CSR project data from India, we exploit the timing of state elections to reveal that firms significantly increase CSR investment-particularly in health, education, and employment-related projects-during election years compared to non-election years. This effect is more pronounced for publicly listed firms, in districts aligned with the state’s ruling party, and in districts with closely contested elections. We find that election-year CSR investments are positively correlated with improved electoral performance for incumbents. Post-election, ruling party districts continue to attract higher CSR investment and exhibit greater improvements in health, education, and living standards compared to other districts. Additionally, we present suggestive evidence that firms facing financial constraints are more likely to exhibit politically influenced CSR, highlighting the role of state bank credit as a potential mechanism. Our findings demonstrate that political influence can distort CSR investments, with real consequences for local economies.

Workforce Gender Diversity and Firm Outcomes: Evidence from Voluntary EEOC Disclosures (with Tuhin Harit, Vikram Nanda, and Sunil Parupati)

• Abstract: This paper uses the firm level gender diversity data to study the effects of workforce diversity on firm outcomes. Using a novel instrumental variable, state childcare funding in states with a democratic inclination, and workforce data from Equal Employment Opportunity Commission (EEOC) disclosures, we find that workforce diversity leads to an improvement in firm innovation and overall firm value. Importantly, we show that workforce diversity can lead to improved outcomes even when firms have low board diversity. We further show that gender diverse firms incur fewer and less serious employee violations and receive better social scores, suggesting the positive effects of workforce diversity on non-financial outcomes. We identify less unionization, higher employee productivity, and more women researchers as potentially important channels through which women in the workforce impact firm innovation and value. Finally, using textual measures of culture and MeToo movement as an exogenous cultural shock, we show that the positive impact of gender diversity on firm outcomes is more pronounced in firms with a conducive organizational culture. Overall, our study is one of the first to provide evidence on the advantages of a diverse workforce beyond board diversity.

Product Market Relatedness, Antitrust and Merger Decisions (with Rajkamal Vasu)

• Abstract: We study how merger decisions between public firms in the US are affected by the similarity between the product markets of the acquirer and the potential target. The relation between the likelihood of the merger and the product market similarity is non-monotonic, in the shape of an inverted U. We offer two reasons for this finding. First, when the product markets are very similar, there is a high chance that antitrust investigations will block the merger. We find that this effect is stronger in markets that are more concentrated and in years where antitrust regulatory intensity is high. Second, the synergies from the merger are less if the product markets are very related. Hence, firms are more likely to acquire targets with which they have a medium rather than a high level of product market similarity.