Working Papers:

1. "Pay(out) for Performance" with Zhi Li and Rachel Peng.

  • Under Review

In recent years, the SEC and pay activists proposed to mandate disclosure on executive compensation that is “actually paid”. We provide the first evidence on the realized pay-performance relation for CEOs’ long-term incentive pay. Our findings can help policymakers evaluate the costs/benefits of such disclosure.

Motivated by the SEC’s proposal for requiring disclosure on “actually paid” executive compensation, we use hand-collected actual payout information to provide the first evidence on the realized pay-for-performance relation for CEOs’ performance-based incentive plans. On average, firms tie payouts to both stock and accounting performance. The payout-performance relation, however, is weaker in firms with weak governance and no ex-ante disclosure on performance hurdles. Some poorly governed firms reward CEOs with abnormal payouts that are not backed up by accounting performance. After such abnormal payouts, firms underperform, and CEOs significantly reduce their equity holdings. Our findings support the SEC’s proposal on enhancing “actually paid” compensation disclosure and highlight an understudied agency problem – poorly-governed firms may suboptimally execute incentive compensation.


2. "Do Firms’ Disclosure Choices Conform to Social Attitudes? Evidence from the CEO Pay Ratio Estimation" with Zinat Alam, Chinmoy Ghosh, and Harley E. Ryan

  • [SSRN Link] Best Paper Award in Corporate Finance at the FMA European Conference, 2022; Semi-finalist for the Best Paper Award in Corporate Finance at the FMA Annual Meetings, 2021; 2021 Conference on Financial Economics and Accounting. Under Review

The CEO's pay is 192 times of the median employee pay when the simplest method is used to determine the median employee. When the most complex method is used, however, the CEO pay ratio drops to 70, a 64% decline. We study why firms choose different methods.

We use the first mandated pay inequality disclosure in U.S. firms, the CEO-employee pay ratio disclosure, to examine firms’ disclosure decisions under social pressure. We find that firms use disclosure discretions to lower reported pay ratios when their headquarter states exhibit stronger income inequality aversion and when the CEO has higher reputational concerns. Industry, size, and compensation design differences do not explain the findings. Firms do not appear to make real changes to reduce the pay ratio. Together, our results highlight the influence of societal attitudes on social disclosure and cast doubt on the informativeness of the pay ratio disclosure.


3. "Culture and Wealth Creation: Evidence from Global Stock Markets" with Cheol Eun and Ernest Jang

  • Prepare for journal submission [Updated Draft Coming Soon]

"If we learn anything from the history of economic development, it is that culture makes all the difference" (Landes, 1999, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor)

Using the method of Bessembinder (2018), we estimate stock market wealth creation around the world and show the importance of national culture in explaining wealth creation. The 88 stock markets in our sample create $76.6 trillion in wealth from 1973 to 2019, with the U.S. contributing the most (52.5%). Among industries, finance creates the most wealth (17.6%). We find that countries with more individualistic, less masculine, and less uncertainty avoidant cultures have comparative advantages in stock market wealth creation. We show that culture influences wealth creation through multiple channels, including innovation, governance, information, education (for females in particular), and sustainability.


4. "CEO Interfirm Mobility and Firm Outcomes" with Qing Cao and Chip Ryan

  • Prepare for journal submission [Updated Draft Coming Soon]

Among the S&P 500 CEOs, 17% are stationary CEOs that have worked for only one firm in their entire career and 22% are mobile CEOs that have worked in five or more firms.

Motived by the rising prominence of CEOs with a diverse career background, we introduce CEO interfirm mobility as an important CEO construct and examine its influences on CEO hiring decision and firm outcomes within the upper-echelons framework. Using data on the complete employment histories of S&P 1500 CEOs, we find that CEOs with high interfirm mobility match with firms in need of change. When matched to firms in need of their skills, CEOs with higher interfirm mobility improve operating performance, increase firm risk, and alter scope of operations. We use novel instruments to control for potential endogeneity. The influence of CEO interfirm mobility is economically significant and cannot be explained by the CEO’s age, ability, inside/outside status, functional experience, or education background.


5. "On the Effectiveness of the CD&A Disclosure: Evidence from Textual Analysis " with Jieqiong Gao and Chinmoy Ghosh

  • Semi-finalist for the Best Paper Award in Corporate Finance at the FMA Annual Meetings, 2022; Under Review

Why some firms need the length of an academic research paper (~40 pages) to describe their compensation design for executives while the others only need one or two pages? We study the cross-sectional differences of the CD&A textual features and their implications for disclosure effectiveness.

Based on 10,000+ Compensation Discussion and Analysis (CD&A) disclosures of large U.S. firms, we provide some first evidence on the relations between the CD&A’s textual features and the effectiveness of the disclosure in achieving the SEC’s objective for the CD&A mandate. Information asymmetry increases and support on executive pay decreases after firms file longer and more negative CD&As. Say-on-Pay vote participation is also lower when the CD&As are longer, more uncertain, and more litigious. We dissect the disclosure into compliance component that is necessary to satisfy SEC requirements and discretionary component that is associated with agency motives, and find that the latter drives all the undesired disclosure outcomes.


6. "Executive Pay Cuts: Solidarity or Bargaining? Evidence from the COVID-19 Pandemic" with Cianna Duringer, Sam Piotrowski, and Yiming Qian

  • Under Review

Downward pay rigidity is a well-established empirical observation that holds for both rank-and-file employees and executives. The COVID-10 pandemic provides a unique opportunity to examine when and why the downward pay rigidity breaks.


One of the first decisions many firms take as a response to the COVID-19 pandemic is cutting executive pay, which are rare events in normal times. Using a hand-collected sample of all executive pay cuts among the Russell 3000 firms, we examine two non-mutually exclusive motives for executive pay cuts: (i) solidarity – executives share pains to improve employee morale, and (ii) bargaining – executives make a gesture first to get employee concessions. Our results support both motives.


7. "The Cultural Origin of Green Price Premium" with Zinat Alam and Miran Hossain

Does it pay to add green features to residential properties? Economically, no! But psychologically, yes!

We find a significant price premium ($21,000+ per house on average) for houses with energy-saving (green) features. Using hand-collected data to estimate the house-specific NPV of individual green features, we find that the economic value of green feature(s) cannot explain the green price premium. Instead, the green price premium depends on the homebuyers’ cultural origins - homebuyers who are less individualistic, less indulgent but more uncertainty avoidant pay a higher price premium for green houses. Our findings point to the social value of green houses and highlight the role of investors’ preferences in understanding the value of green investments.