Publications

"The strategic use of corporate philanthropy: Evidence from bank donations" (with Seungho Choi and Raphael Jonghyeon Park)
Review of Finance, September 2023, 27(5): pp 1883-1930.

Working Papers

(* indicates presentation by coauthor)

[1] "Environmental regulatory risks, firm pollution, and mutual funds' portfolio choices" (with Seungho Choi and Raphael Jonghyeon Park) [pdf]

Awards: Runner-up, 3rd Annual FIASI-Gabelli School Student Research Competition on ESG (2023), Best Paper Award, FMCG PhD Symposium (2023), Best Paper Award, Melbourne Asset Pricing Meeting (2022), Best Paper Award, Ivey-ARCS PhD Sustainability Academy (2022), Semi-finalist of Best Paper Award for Investments, FMA Annual Meeting (2022), Inquire Europe Travel Grant (2023), European Finance Association Travel Grant (2022), American Finance Association Travel Grant (2022), OFR PhD Symposium Travel Grant (2022)

Media coverage: NBS, B The Change

Selected presentations (includes scheduled and invited):  Fordham University JAAF Symposium (2023), FIRN Asset Management Meeting (2023)*, Tongji Finance Symposium (2023), CEIBS Finance and Accounting Symposium (2023), SGF Conference (2023), Inquire Europe Joint Spring Seminar (2023), Georgia Tech Scheller College of Business Finance Seminar (2023), EasternFA Annual Meeting (2023), MFA Annual Meeting (2023), JAAF ISB Symposium (2023), SWFA Annual Meeting (2023), Annual Hedge Fund Research Conference (Poster) (2023), FMCG PhD Symposium (2023), ARCS Annual Research Conference PhD Workshop (2023), AFFI PhD Workshop (2023), AsianFA Annual Conference (2023), EuropeanFA Annual Meeting (2022), CICF (2022), Yale Initiative on Sustainable Finance Annual Symposium (2022), OFR PhD Symposium (2022), AFBC PhD Forum (2022), FMA Doctoral Student Consortium (2022), LBS Trans-Atlantic Doctoral Conference (2022), CAFM Doctoral Student Consortium (2022), Ivey-ARCS PhD Sustainability Academy (2022), CEMLA/Dallas Fed Financial Stability Workshop (2022), GRETA CREDIT (2022), Melbourne Asset Pricing Meeting (2022), EBA Policy Research Workshop on Technological Innovation, Climate Finance and Banking Supervision (2022), Conference on CSR, the Economy and Financial Markets (2022), FMA Annual Meeting (2022), New Zealand Finance Meeting (2022), SouthernFA Annual Meeting (2022), GRASFI (2022), Frontiers of Factor Investing Conference (2022), UC Berkeley Haas School of Business Finance Seminar (2022), UC Berkeley Financial Economics Seminar (2022)

Abstract. This paper examines how mutual funds' portfolio holdings respond to environmental regulations. Using county-level ozone nonattainment designations induced by discrete policy changes in the National Ambient Air Quality Standards as a source of exogenous variation in local regulatory stringency, we find that funds underweight (overweight) those polluting stocks whose cash flows covary negatively (positively) with the regulatory shock. Our results are consistent with active portfolio rebalancing in response to expected changes in firm fundamentals due to negative cash flow shocks stemming from the costs of nonattainment regulation. Further analyses in the post-nonattainment period show that stocks with high exposure to nonattainment designations exhibit worse operating performance and increased regulatory compliance costs. The most underweighted of such firms also exhibit worse abnormal stock return performance. Funds that reduce their portfolio exposure to nonattainment designations see an improvement in their investment performance.

[2] "Every emission you create—every dollar you'll donate: The effect of regulation-induced pollution on corporate philanthropy" (with Seungho Choi and Raphael Jonghyeon Park) [pdf]

Awards: Best Paper Award (General), Southwestern Finance Association Annual Meeting (2023), WRDS Best Empirical Finance Paper Award, New Zealand Finance Meeting (2022), Samsung Securities Best Paper Award, CAFM (2022), Best Paper Award in Green Finance, Asia Conference on Business and Economic Studies (2022), Best Paper Award in Sustainability, Conference on Behavioral Research in Finance, Governance and Accounting (2022), KDI Frontiers in Development Policy Conference Grant (2022)

Selected presentations (includes scheduled and invited): SFS Cavalcade North America (2023), ARCS Seminar Series (2023), Nanyang Business School Accounting Conference (2023), UMass Boston Conference on Corporate Social Responsibility (2023), Swiss Accounting Research Alpine Camp (2023), FIRN Annual Conference (2023)*, FIRN Corporate Finance Meeting (2023)*, ARCS Annual Research Conference (2023), EasternFA Annual Meeting (2023), MFA Annual Meeting (2023), SWFA Annual Meeting (2023), FMA Annual Meeting (2023), JAAF Conference (2023), FMCG (2023), AsianFA Annual Conference (2023), APAD Annual Conference (2023)*, IWH-FIN-FIRE Workshop (2022), Haskell & White Academic Conference (2022), KDI Frontiers in Development Policy Conference (2022), University of Sydney Business Financing and Banking Research Group Annual Workshop (2022)*, Frontiers of Factor Investing Conference (2022), AFBC (2022)*, New Zealand Finance Meeting (2022)*, CAFM (2022)*, UC Berkeley Financial Economics Seminar (2022)

Abstract. We investigate the insurance-motives of polluting firms' charitable giving by analyzing donations from philanthropic foundations to nonprofit organizations in the local community. Our empirical setting exploits the National Ambient Air Quality Standards as localized exogenous shocks to pollution. Using regression discontinuity, we find that firms with more pollution subsequently donate more to local nonprofits. Firms maximize the insurance value of donations by reallocating donations to areas where they pollute the most. Potential mechanisms include firms' local media coverage, reputational risk exposure, and history of regulatory noncompliance. Welfare analysis indicates that firms underpay for the insurance value of corporate philanthropy at the cost of society. Overall, the evidence suggests that firms leverage their reputation in local communities through corporate philanthropy as a form of insurance.

[3] "Environmental regulation, pollution, and shareholder wealth" (with Seungho Choi, Ross Levine, and Raphael Jonghyeon Park) [pdf]

Awards: Semi-finalist of Best Paper Award for Corporate Finance, FMA Annual Meeting (2022)

Presentations (includes scheduled and invited): CICF (2023), SWFA Annual Meeting (2023), FMCG (2023), SFS Cavalcade Asia-Pacific (2022), CEPR Endless Summer Conference (2022), Conference on CSR, the Economy and Financial Markets (2022), FMA Annual Meeting (2022)*, FIRN Corporate Finance Meeting (2022)*, Boca Corporate Finance and Governance Conference (2022)*, Frontiers of Factor Investing Conference (2022), ICEF-CInSt International Finance Conference (2022)*, CAFM (2022)*, APAD Annual Conference (2022)*, AsianFA Annual Conference (2022), UC Berkeley Haas School of Business Finance Seminar (2021)

Abstract. This paper investigates the stock market's reaction to changes in the interaction between local environmental regulations and a firm's polluting behavior. Our identification strategy uses county-level noncompliance designations induced by discrete policy changes in the National Ambient Air Quality Standards as a source of exogenous variation in local regulatory stringency. On average, the market responds positively to firms exposed to  noncompliance designations compared to non-exposed firms. In the cross-section, firms' value initially increases with noncompliance exposure but declines at higher levels. Examining the mechanisms reveals that this nonlinear variation arises from the offsetting effects of noncompliance exposure on incumbent firms, encompassing a tradeoff between the benefits of competitive advantages and the costs of regulatory compliance. Furthermore, short-term market reactions to noncompliance designations are consistent with their long-term effects on firms' accounting performance. Overall, the evidence suggests that the stock market internalizes the perceived benefits and costs of local environmental regulation.

[4] "When the EPA is in play, risk-taking goes away: The effect of environmental regulations on CEO compensation" (with Seungho Choi, Ross Levine, and Raphael Jonghyeon Park)

Awards: Best Paper Award, Financial Information Society of Korea (2023)

Presentations (includes scheduled and invited): SWFA (2024)*, BAR Annual Conference (Harvard) (2023), Haskell & White Academic Conference (2023), Boca Corporate Finance and Governance Conference (2023)*, CAFM (2023)*, Financial Information Society of Korea (2023)*, AFBC (2023)

Abstract. We examine the impact of environmental regulations and firms' polluting behavior on CEO incentive compensation. Using the application of the National Ambient Air Quality Standards as an exogenous source of variation in regulatory stringency, we find that noncompliance prompts boards to reduce risk-taking incentives by decreasing the convexity of compensation payoffs. The decrease stems from boards changing the structure of CEO compensation rather than CEOs changing their holdings of their firm's securities. Higher regulation intensity and operating risk amplify the decrease in risk-taking incentives, while financially distressed firms exhibit a less pronounced reduction. Existing governance structures including CEO entrenchment, institutional investors, bargaining power, and overconfidence interact with regulatory exposure to shape changes in incentive compensation. Our findings highlight the active role of boards in adjusting incentive contracts to align the risk preferences between shareholders and managers in response to environmental regulations.

Publications (Pre-PhD)

"The long-term impact of sovereign wealth fund investments" (with Francis In and Raphael Jonghyeon Park)
Journal of Financial Markets, September 2019, 45: pp 115-138.

"Naive versus optimal diversification: Tail risk and performance" (with Inchang Hwang and Francis In)
European Journal of Operational Research, February 2018, 265(1): pp 372-388.

"Systemic risk and cross-sectional hedge fund returns" (with Inchang Hwang, Francis In, and Tong Suk Kim)
Journal of Empirical Finance, June 2017, 42: pp 109-130.

"Systemic risk in the European sovereign and banking system" (with Catherine Forbes, Inchang Hwang, and Francis In)
Quantitative Finance, April 2017, 17(4): pp 633-656.

"The effect of diversification on tail risk: Evidence from US equity mutual fund portfolios" (with Inchang Hwang and Francis In)
International Review of Finance, September 2016, 16(3): pp 483-495.