Research

Research Interest

Disclosure, Accounting Regulation, Financial Institutions, Bank Accounting, Debt Contracting, Corporate Social Responsibility

(* : presented by coauthors; Manuscripts are available upon request)

[1] Spillover Effects of CSR Disclosure Regulations across Lending Relationships, solo-author

Presented at University of Michigan, HKUST, EAA Talent Workshop, NUS, Miami Rookie Camp
Summary: This paper studies whether and how CSR disclosure regulations imposed on banks generate spillover effects along the lending channel. I use a setting of U.S. firms borrowing from non-U.S. banks and exploit the staggered adoption of CSR disclosure regulations in banks' home countries. I find that exposed borrowers that depend on affected banks improve their CSR performance following the disclosure mandate. The effects are stronger when a disclosure regulation induces a greater increase in the amount of new and hard information provided by banks, and when the lending relationship is more important for a borrowing firm. Furthermore, exposed borrowers with better CSR performance obtain more favorable loan terms and are more likely to maintain the relationship with affected banks. Collectively, this study documents the role of lending relationships in transmitting the effect of CSR disclosure regulations from banks to borrowing firms.

[2] Do Depositors Respond to Banks' Nonfinancial Performance?, with Yi-Chun Chen and Mingyi Hung

Revise and Resubmit, The Accounting Review
Presented at HKUST*, Accounting Cooperation Forum of Jiaotong University*, Accounting Theory Summer School at Duke University, Sustainable Finance Forum*, AAA Annual Meeting
Summary: We study whether and how bank social performance affects depositors, who hold demandable debt with pervasive government protection and contribute to the majority of bank funding capital. Exploiting the regulatory releases of bank performance ratings for community development, we find a decline in deposit growth following rating downgrades but no change following rating upgrades. Further analyses show that the results hold similarly among insured and uninsured deposits. We contribute to the literature by documenting the importance of nonfinancial performance to non-shareholder stakeholders and providing implications for bank stability.

[3] The Impact of Bank Liquidity Injections on Borrowers’ Voluntary Disclosures and Real Investments, with Mingyi Hung, Yupeng Lin, and Zilong Zhang

Under Review
Presented at HKUST, Shanghai Lixin University*, CityU Hong Kong*, CUHK Shenzhen*
Summary: This paper examines how an increase in bank lending affects firms’ voluntary disclosures. Exploiting the unconventional liquidity injections by the European Central Bank, we find that US borrowers of EU banks increase management capital expenditure (capex) forecasts following the liquidity injections, relative to other US borrowers. Further supporting the notion that increased relationship lending motivates managers to issue capex forecasts to elicit market feedback on real investments, we find that the association between capex adjustments and stock market reactions to these forecasts increases following the liquidity injections. Overall, we contribute to the literature by documenting a different channel through which bank liquidity affects borrowers’ disclosure choices and providing new micro-evidence of monetary interventions.

[4] Learning from Peers: Evidence from Disclosure of Customer Complaints, with Yiwei Dou, Mingyi Hung, and Guoman She

Supported with research funding from the Hong Kong Research Grant Council (RGC) (Project No:16503320)
Presented at HKUST, HKU*, PKU Guanghua*
Summary: The Consumer Financial Protection Bureau (CFPB) released a database of consumer complaints against banks under its supervision in 2013. We find that after the disclosure, rival non-CFPB-supervised banks exhibit a greater increase in mortgage approval rates in markets with more intensive complaints about mortgages of CFPB-supervised banks. This effect translates into a 4.03% increase in the market share. Our evidence supports the learning-from-peers channel, through which disclosure regulation imposes real effects.

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