Research Interests
Institutional Investors, ESG Investing, Corporate Social Responsibility
Publications
Investor Horizons, Long-Term Blockholders, and Corporate Social Responsibility
Journal of Banking and Finance, June 2019, Volume 103, Pages 78-97
Presentations: PRI Academic Network, AEFIN Finance Forum, EFMA, AFFI, 14th Doktorandenseminar Süddeutschland“This paper investigates whether or not shareholders benefit from corporate social responsibility (CSR) by studying the effect of institutional investors on CSR. After all, arguing against CSR is hard when investors push for it. I find that longer investor horizons lead to significantly more CSR. This positive effect, however, is moderated by long-term investors who hold large ownership blocks. Long-term blockholders ensure, through monitoring, that managers do not blindly increase CSR, but rather that managers pursue a CSR strategy that reduces the risk of costly incidents. A battery of robustness tests indicates causality. Overall, these findings indicate that CSR is in the interests of long-term investors if CSR prevents incidents.”
Working Papers
ESG Incidents and Shareholder Value [revised]
Western Finance Association Meeting Conference Paper
Cubist Systematic Strategies PhD Candidate Award for Outstanding Research
Presentations: UVA Darden Business School Brownbag, University of Lille Seminar, AEFIN Finance Forum, WFA, AFFI, EUROFIDAI Paris December Meeting, PFMC, DGF (poster session)
Media coverage: Forbes, Columbia Law School Blue Sky Blog, Forbes“This paper uses novel environmental, social, and governance (ESG) incident news data to study poor ESG practices. I find that firms’ past ESG incident rates predict more incidents, weaker profits, and lower risk-adjusted stock returns. When examining the cause of these abnormal returns, I find analyst forecast errors as well as lower returns around earnings announcements and subsequent incidents. Moreover, incident rates predict stronger abnormal returns in firms with higher short-term ownership, higher valuation uncertainty, and lower investor attention. Overall, these findings suggest that poor ESG practices negatively impact long-term value, which is not fully reflected in stock prices.”
Do Institutional Investors Stabilize Equity Markets in Crisis Periods? Evidence from COVID-19, with Pedro Matos, Stefano Ramelli, and Alexander F. Wagner
Presentations: LSE Systemic Risk Centre Online Seminar*, FSU SunTrust Beach Virtual Conference, Midwest Finance Association Meeting, Virtual Asset Management Seminar Series, UVA Darden Business School Brownbag*
Media coverage: Darden Ideas to Action, Harvard Law School Forum on Corporate Governance, Bloomberg, Institutional Investor, NZZ“During the COVID-19 market crash, U.S. stocks with higher and more active institutional ownership performed worse. The effect was stronger when institutional investors experienced larger client outflows and held more financially exposed portfolios. This relation holds even when controlling for changes in analysts’ earnings forecasts, suggesting that stocks held more by institutions exhibited a larger wedge between stock price drops and firm fundamentals. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized corporate financial strength over “soft” environmental and social performance. Trading data from a large discount brokerage (Robinhood) confirm that retail investors acted as liquidity providers. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes by fire-selling and seeking shelter in “hard” measures of firm resilience.”
Do Responsible Investors Invest Responsibly?, with Rajna Gibson Brandon, Philipp Krueger, Pedro Matos, and Tom Steffen
John L. Weinberg/IRRCi Research Paper Award (semi-finalist)
Fordham Gabelli - PVH Corp Global Thought Leadership Grant
ICPM Research Award
American Finance Association Annual Meeting Conference Paper
Presentations: European Finance Association Meeting (scheduled), SFS Cavalcade North America, Eastern Finance Association Meeting, University of Delaware Weinberg Center/ECGI Corporate Governance Symposium*, Midwest Finance Association Meeting, ICPM Virtual Fall Discussion Forum*, Schroders Systematic Investments Seminar*, FMA Conference, PRI Academic Week, Vanguard ESG Investing Seminar*, GRASFI 3rd Annual Conference, AFA*, SMU-TBLI Conference*, PRI Knowledge Sharing Session*, Sustainable Finance Forum*
Media coverage: Harvard Law School Forum on Corporate Governance, PRI Blog“We explore a novel survey on responsible investing by institutional investors around the world and match it to archival data on their equity portfolio holdings. We document that institutions that publicly commit to responsible investing exhibit better environmental, social, and governance (ESG) portfolio-level scores but this holds only outside of the United States. US-domiciled investors that commit to responsible investing, in contrast, exhibit at best similar, if not significantly worse portfolio ESG scores than their uncommitted peers. This disconnect between words and actions in the U.S. appears to be partly driven by underperforming investors seeking to attract fund flows, consistent with concerns of “greenwashing.””
Russell Index Reconstitutions, Institutional Investors, and Corporate Social Responsibility
Conditionally accepted, Critical Finance Review“My paper discusses four empirical approaches of the Russell 1000/2000 index reconstitutions to identify the effects of institutional investors on firm outcomes. Unbiased empirical approaches suggest that between 1998 and 2006, firms ranked at the top of the Russell 2000 had at most a 2 percentage points higher ownership of passive investors than firms ranked at the bottom of the Russell 1000. There is no significant difference in total institutional ownership around the threshold. Thus, the quasi-experiment can only identify the effects of passive investors. I also find that passive investors have no significant effect on corporate social responsibility (CSR).”