Working papers

Cross-State Strategic Voting

(with Gordon Dahl, Joey Engelberg and Runjing Lu )   SSRN link   
We estimate that 3.1% of the US voter population is registered to vote in two states, opening up the possibility for them to choose where to vote. Double registration is 3.5 times more likely in the wealthiest 1% of zip codes vs. the bottom quartile, giving wealthy Americans more voting power. Double-registrants respond to both incentives and costs, disproportionately choosing swing states (higher incentive) and states which automatically send out mail-in ballots (lower cost). We call this behavior cross-state strategic voting (CSSV) and estimate there were 217,000 such votes involving swing states in the 2020 presidential election. While there are more Democrat double-registrants, Republicans are more responsive to swing-state incentives. The net effect did not alter the 2020 election, although it could change the outcome in closer elections (e.g., Florida in 2000) or if one party increased CSSV relative to the other.

Partisan Entrepreneurship (R&R Journal of Finance)

(with Joey Engelberg, Jorge Guzman, and Runjing Lu)   SSRN link   SocArXiv link   
Republicans start more firms than Democrats. Using a sample of 27 million party-identified Americans between 1997 and 2017, we find that 8% of Republicans and 5% of Democrats become entrepreneurs. This partisan entrepreneurship gap is time-varying: Republicans increase their relative entrepreneurship during Republican administrations and decrease it during Democratic administrations, amounting to a partisan reallocation of 340,000 new firms over our 21 year sample. We find sharp changes in partisan entrepreneurship around the elections of President Obama and President Trump, and the strongest effects among the most politically active partisans: those that donate and vote.

The Social Signal

(with Tony Cookson, Runjing Lu and Marina Niessner )   SSRN link   
We examine social media attention and sentiment from three major platforms: Twitter, StockTwits, and Seeking Alpha. We find that, even after controlling for firm disclosures and news, attention is highly correlated across platforms, but sentiment is not: its first principal component explains little more variation than purely idiosyncratic sentiment. Using market events, we attribute differences across platforms to differences in users (e.g., professionals vs. novices) and differences in platform design (e.g., character limits in posts). We also find that sentiment and attention contain different return-relevant information. Sentiment predicts positive next-day returns, but attention predicts negative next-day returns. These results highlight the importance of distinguishing between social media sentiment and attention across different investor social media platforms. In the burgeoning social finance literature, nearly all papers examine single platforms; our paper cautions that attention-related results from these papers will likely generalize but results concerning sentiment may not.

Political Sentiment and Innovation: Evidence from Patenters

(with Joey Engelberg, Runjing Lu and Rick Townsend )   SSRN link   
We document political sentiment effects on US inventors. Democratic inventors are more likely to patent (relative to Republicans) after the 2008 election of Obama but less likely after the 2016 election of Trump. These effects are 2-3 times as strong among politically active partisans and are present even within firms over time. Patenting by immigrant inventors (relative to non-immigrants) also falls following Trump's election. Finally, we show partisan concentration by technology class and firm. This concentration aggregates up to more patenting in Democrat-dominated technologies (e.g., Biotechnology) compared to Republican-dominated technologies (e.g., Weapons) following the 2008 election of Obama.

Unconventional Monetary Policy Transmission and Bank Lending Relationships (R&R Management Science)

(with Anne Duquerroy and Christophe Cahn )   SSRN link    SocArXiv link   
Firms with only one bank relationship make up the majority of firms in many economies. This paper explores whether policy-driven lending is differentially transmitted to single-bank firms, in comparison to the multi-bank firms that have been the focus of the literature. Using unique variation in the ECB’s Very Long-Term Refinancing Operations (VLTROs), which affected lending to firms discontinuously across credit ratings but within banks, we find selective transmission of VLTRO liquidity to single-bank firms. Banks apply higher lending standards to single-bank firms, with banking relationships determining both new lending and lending maturity. By contrast, banks appear to transmit policy lending near-uniformly across multi-bank firms.

Credit Guarantees and New Bank Relationships

(with Patricio Toro)   
Government credit guarantees for bank loans direct vast volumes of credit and are the main policy tool used to improve firms' access to credit. This paper examines Chile’s credit guarantee scheme, which is similar to that of many OECD countries. Using a regression discontinuity design around the eligibility cutoff we find that guarantees more than double firms' borrowing without detectable increases in default rates. We also show that banks use guarantees to build new borrower relationships, an important and poorly understood process. The scheme also has an amplification effect: firms increase borrowing from other banks following a guarantee. Finally, we show that firms use the credit increase to significantly scale up their sales and employment. The fact that guarantees are not a common pool resource in this policy design is critical to understanding these results.

The Governance Impact of Indexing: Evidence from Regression Discontinuity


Publications

Partisan Fertility and Presidential Elections
American Economic Review: Insights (2022)

(with Gordon Dahl and Runjing Lu )   SSRN link    SocArXiv link    NBER WP    Co-author video    Slides   
Changes in political leadership drive large changes in economic optimism. We exploit the surprise 2016 election of Trump to identify the effects of a shift in political power on one of the most consequential household decisions: whether to have a child. Republican-leaning counties experience a sharp and persistent increase in fertility relative to Democratic counties: a 0.7 to 1.4% increase in annual births, depending on the intensity of partisanship. Hispanics, a group targeted by Trump, see fertility fall relative to non-Hispanics, especially compared to rural or evangelical whites. Further, following Trump pre-election campaign visits, relative Hispanic fertility declines.

Echo Chambers
Review of Financial Studies (2022)

(with Tony Cookson and Joey Engelberg )   SSRN link    SocArXiv link   Slides    Data   
We find evidence of selective exposure to confirmatory information among 300,000 users on the investor social network StockTwits. Self-described bulls are 5 times more likely to follow a user with a bullish view of the same stock than self-described bears. This tendency is strong even among professional investors and is more pronounced on earnings announcement days. Placing oneself in an information “echo chamber” generates significant differences in the newsfeeds of bulls and bears: over a 50-day period, a bull will see 70 more bullish messages and 15 fewer bearish messages than a bear over the same period. Selective exposure creates “information silos” in which the diversity of received signals is high across users’ newsfeeds but is low within users’ newsfeeds. Finally, we show that this siloing of information is positively related to trading volume.

Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic
Review of Asset Pricing Studies (2020)

(with Tony Cookson and Joey Engelberg )    SSRN link    SocArXiv link      sentiment time series   
We use party-identifying language – like “Liberal Media” and “MAGA”– to identify Republican users on the investor social platform StockTwits. Using a difference-in-difference design, we find that the beliefs of partisan Republicans about equities remain relatively unfazed during the COVID-19 pandemic, while other users become considerably more pessimistic. In cross-sectional tests, we find Republicans become relatively more optimistic about stocks that suffered the most from COVID-19, but more pessimistic about Chinese stocks. Finally, stocks with the greatest partisan disagreement on StockTwits have significantly more trading in the broader market, explaining 28% of the increase in stock turnover during the pandemic.

How do CEOs see their roles? Management Philosophies and Styles in Family and non-Family Firms
Journal of Financial Economics (2016)

(with Antoinette Schoar)   SSRN link    Non-technical summary   Appendix 1    Survey Appendix    Appendix 2   
Using a survey of 800 Chief Executive Officers (CEOs) in 22 emerging economies, we show that CEOs' management styles and philosophies vary with the ownership and governance structure of their firms. Founders and CEOs of firms with greater family involvement display a greater stakeholder focus and feel more accountable to employees and banks than to shareholders. They also have a more hierarchical management approach, and see their role as maintaining the status quo rather than bringing about change. In contrast, CEOs of non-family firms emphasize shareholder-value-maximization. Finally, firm-level variation in ownership is as important in explaining management philosophies as cross-country or industry-level differences.


Other Publications

Unrest in Chile - HBS Case Study (2020)

  
In 2020, Chileans would head to the ballot box to decide their country’s future. Many international observers credited Chile’s decades of neoliberal governance with turning the country into Latin America’s “Tiger,” a prosperous, diversified economy on its way to becoming the continent’s first developed country. But in October of 2019, a mass protest movement ground the country to a halt and shocked its political class, showing the world a different Chile—one defined by inequality, social distrust, and a young generation of political activists. As Chile prepared to vote in the fall of 2020 on whether to adopt a new constitution, could it sculpt a more equitable society while remaining “the exception” on a continent known for its political instability? Or would Chile’s prosperity go the same way as its neoliberal experiment?

Walmart Chile After the Unrest: Doubling Down or Pulling Out? - HBS Case Study (2021)