Research

Revise and Resubmit at Review of Finance

Abstract: I document that the network structure of the online economy significantly contributes to rising industry concentration.  Firms that are central in the online economy are aided by feedback effects that drive users to their websites, providing further benefits via economies of scale and network effects.  Industries with firms that are more central become more concentrated and central firms have larger increases in market share during the sample period.  It appears that central firms are better able to generate revenue, as central firms earn higher risk-adjusted returns and have more positive earnings surprises.  Finally, centrality is more strongly associated with increasing productivity than decreasing competition, providing generally positive welfare implications.

Conditionally Accepted at Journal of Financial and Quantitative Analysis

Abstract: We develop an extensive mapping of the revolving door phenomenon by examining the work experience of 420,153 individuals in top corporate positions at 12,869 firms. More than half of these firms have at least one such individual with prior experience in one of 187 executive branch agencies. We find that firms are more likely to receive procurement contracts following the appointment of a former regulator transitioning within two years of leaving the agency. This result is consistent with the “knowledge” hypothesis. Furthermore, less-complex contracts signed following the appointment of former regulators are more likely to be renegotiated, resulting in higher costs for the government.

Media Coverage: Columbia Law School Blue Sky Blog

Abstract: We use patent thickets to study how patent-right uncertainty impacts target selection in mergers and acquisitions. This uncertainty can create additional costs that disrupt technological synergies. We find that firms are less likely to be acquired when their patents are in thickets exacerbating these costs. Conversely, firms are more likely to be acquired when their patents create thickets mitigating these costs. When a firm occupies the same thicket as the acquirer, acquisition probability depends on each firm's ability to impose costs on the other. Consistent with patent-right uncertainty disrupting synergies, we find that targets' thickets are associated with post-acquisition profitability.

Media Coverage: WSJ Heard on the Street, Morningstar, Quantpedia 

Abstract: The distribution of market capitalization in the U.S. is highly concentrated. We investigate how this phenomenon impacts the difference in returns between small and large firms (i.e., the size premium). If the stock market is sufficiently concentrated (i.e., granular), large firms may carry a risk premium because their idiosyncratic risk is not diversified in the market portfolio. At the same time, prior work has shown that small firms may be allocated too little capital in concentrated stock markets, which could increase their expected returns. We find that the expected size premium increases by 13.33 percentage points per annum during periods of higher concentration, indicating that the capital allocation effect dominates. Evidence from a variety of tests on investor attention, equity financing, fundamental volatility, and capital intensity support this conclusion. Nonetheless, we also find evidence of an active granular diversification effect, as the size premium weakens following idiosyncratic increases in granularity.

2018 Western Finance Association Meeting  (Coronado, CA)

Abstract: Using investor internet access, we show that increased information access leads to decreased geographic bias in retail investor portfolios, although this ultimately harms the portfolio performance. With internet access improving information access, investors must choose whether to focus their attention on local or distant stocks, subsequently increasing or decreasing their geographic bias, respectively. We find that investors are more likely to invest in more distant stocks after starting to trade online. This is especially true for investors from rural areas and the southern region of the U.S. However, online investors are less likely to invest in new industries, increase their trend-chasing behavior, and appear to lose their advantage in local holdings, resulting in decreased Sharpe ratios despite the diversification benefits. The evidence is most consistent with distant stocks grabbing the attention of online investors and distracting them from their competitive advantage. Our findings demonstrate that while information access provides benefits for investors, it can also exacerbate behavioral biases, which places additional responsibility on investors to carefully manage how they use their access.