Working Papers

Panel Data Estimation in Finance: Preliminary Assumptions and Parameter Consistency, with Charles Hadlock

We examine the strict exogeneity assumption, a necessary and often overlooked condition for consistency of many panel data estimators that are used in financial research. We test this assumption in several common settings and find that these tests very frequently reject. We offer guidance on detecting violations of the strict exogeneity assumption and provide evidence on the possible magnitude of the resulting estimation errors. Alternative estimation approaches when strict exogeneity is violated are discussed. We investigate the testable assumptions underlying these alternative approaches and characterize current practices. Implications of our findings for empirical financial research strategies are discussed.

• Presented at the 2015 London Business School Symposium on Causal Inference, the 2016 Financial Research Association conference in Las Vegas, Iowa University, and the University of Nebraska

Corporate Investment and Innovation in the Presence of Competitor Constraints, with Zack Liu (Ph.D. Candidate)

We study the relation between investment behavior and competitor financial constraints. Using inter-firm patent citations and text-based product market similarities to identify intransitive competitor networks, we find that firms increase investment spending, patenting activity, and employee poaching when competitor constraints become more binding. In addition, firms shift their investment composition (product market and patent portfolios) towards competitors who experience a relative tightening in constraints. These effects are robust to controlling for selection and correlated effects across competitors. To mitigate endogeneity concerns, we exploit the 2004 AJCA tax holiday and the 1989 junk bond crisis as exogenous shocks to competitor constraints and find similar effects.

• Presented at the 2017 American Finance Association meetings in Chicago

• [Internet Appendix]

Fifty Shades of Corporate Culture, with Nishad Kapadia, Rachel Li (Ph.D. Candidate), and Andrei Simonov

We develop a new measure of integrity as it relates to corporate culture : the number of employees who use corporate emails to register for a website that facilitates extramarital affairs. This measure is associated with firm-level unethical behavior: it predicts a greater probability of SEC enforcement actions for accounting misstatements, and lower corporate ethics ratings by external analysts. However, consistent with research in psychology, we find that the measure also predicts more innovation and risk-taking. Our results suggest that it is difficult to engineer a perfect corporate culture due to potential trade-offs between employee creativity, risk-taking, and integrity.

• Media Coverage : Wall Street JournalNPR, Oxford University Law Blog,, and

• Presented at the Gaidar Institute for Economic Problems, Rice University, Iowa University, the University of Georgia, and the 2017 Midwest Finance Association

• [Internet Appendix]  

Clustering to Coordinate: Who Benefits from Knowledge Spillovers? with Gonzalo Maturana and Santiago Truffa

Firm clustering is positively correlated with productivity, and it exhibits significant cross-sectional variation across industries. Thus, it is important to understand the industry characteristics that drive firms’ decisions to co-locate. We develop a model of knowledge sharing and derive the prediction that riskier and more complex industries experience the greatest gains from knowledge spillovers. Using tests that account for the nonrandomness of location decisions, we find a strong positive relationship between industry risk or complexity and the clustering of: 1) firms’ headquarters, 2) patent inventors, and 3) R&D expenses. Customer–supplier proximity is also significantly and positively related to industry risk and complexity.

• Presented at the 2016 Regional Science Association International Conference

Work in Progress

Do Flexible Sources of Supplemental Income Promote Entrepreneurship? Evidence from Uber Introductions, with Joerg PicardKeith Teltser, and Parth Venkat (Ph.D. Candidate)

This paper uses the introduction of Transportation Networking Companies (TNC), such as Uber, to show that access to flexible sources of income facilitates entrepreneurship.  TNCs give prospective entrepreneurs the ability to earn a substantive wage, which provides the financial assurance to start their new businesses.  Because hours are set independently, entrepreneurs also maintain the temporal flexibility to work the unpredictable hours that characterize new ventures.  We employ a difference-in-differences approach that exploits variation in the timing and location of TNC introductions and find evidence that the introduction of TNCs increases young firm employment and proprietorship.  We also present survey-based evidence consistent with these findings; TNCs have provided artists, musicians, engineers and other entrepreneurs the financial and temporal flexibility to pursue their passions.