1. “Culture and the Regulation of Insider Trading across Countries”, with Brandon Cline and Claudia Williamson. Journal of Corporate Finance, (2021) Vol. 67, 101917.

We find that individualistic countries regulate insider trading activities more intensely. The result is robust to controlling for alternative culture variables, additional controls, and instrumental variable analysis. We also document that individualism’s effect is magnified in democratic countries. In addition, we study the economic and financial consequences of individualism, insider trading regulation, and its enforcement. The analysis suggests that individualism and the enforcement of insider trading regulation promote financial development. Interaction effects reveal that individualism and insider trading regulation serve as complements to promote financial development. These findings contribute to the insider trading debate since regulation alone may not be the primary determinant of market efficiency. Combined, our results challenge prior works concluding that individualism is anti-regulation.

2. “Trust, Regulation, and Market Efficiency”, with Brandon Cline and Claudia Williamson. Public Choice, forthcoming.

Building from the interest group theory of regulation, we posit that trust alters the payoff from regulatory rent-seeking relative to profit-seeking. Trust reduces the costs of productive economic exchange by lowering transaction costs, thus raising the cost of rent-seeking behavior. In addition, trust also increases political accountability, discouraging politicians from creating regulatory rents. We therefore hypothesize that trust reduces the extent of business regulation while simultaneously facilitating market efficiency. To test that hypothesis, we construct an overall business regulation index measuring procedures, time, and cost along eight dimensions of doing business in a country. The empirical results reveal that trust negatively relates to business regulation but positively relates to market efficiency. Interaction and split-sample results indicate further that trust and business regulation are substitutes. Collectively, the findings reported herein suggest that business regulation itself is not the root cause of market inefficiency, but rather lack of trust is the dominant factor.


3. “Off-the-job Managerial Indiscretions and Insider Trading”

We study whether and how personal off-the-job managerial indiscretions impact corporate insiders’ insider trading behavior. We find that executives accused of personal indiscretions earn significantly higher abnormal returns from their insider trading in a 15-day window around each trade. Further, insiders’ historical trading pattern or corporate culture has less explanatory power than personal attributes. We also document that exposure of these indiscretions to the public provides a disciplinary effect, as those executives’ insider trading profits significantly drop following the announcement of an indiscretion. Corporate governance mechanisms, such as blackout policies, significantly reduce abnormal returns earned by indiscretion executives.

4. “Value Creation in Chinese Equity Transfers”, with Jiawei Chen and Wei He.

Chinese equity transfer involves public announcement of equity shares transferred. The market reacted positively to the public announcements over various event windows. The companies going through equity transfers exhibit significantly positive long-term abnormal returns, indicating investors’ confidence in improved corporate performance after equity structure changes. The value creation is more evident among firms experiencing five or more equity transfers. The three-year abnormal returns are positively related to the change in the proportion of shares to total shears, the percentage of negotiable shares, and when equity transfer results in an increase in the ownership of controlling shareholders. Overall, our findings support the hypothesis that Chinese equity transfer effectively improves corporate governance and creates value.

5. “The Graduate School Origins of Finance Faculty”, with Todd Jones.

Where do finance faculty in the U.S. receive their PhDs? In this paper, we provide descriptive results on the doctoral origins of finance faculty from finance departments in the U.S. Faculty from the top 25 Ph.D. programs make up nearly half of faculty in our main sample, with many of these coming from the top 5 Ph.D. programs. The top-ranked faculty departments tend to hire from the top-ranked Ph.D. programs. We also find evidence that, at least among the regional universities, geography plays a large role—many of the faculty from a given geographic region come from a Ph.D. program in that same region.


6. “The World Price of Insider Trading Revisited”