Publications

"The strategic use of corporate philanthropy: Evidence from bank donations" (with Seungho Choi and Raphael Jonghyeon Park), Forthcoming, Review of Finance

Working Papers

(* indicates presentation by coauthor)

[1] "Environmental regulatory risks, firm pollution, and mutual funds' portfolio choices" (Job market paper) [pdf]

Selected presentations (includes scheduled and invited): 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 Conference PhD Symposium (2023), Alliance for Research on Corporate Sustainability Annual Research Conference PhD Workshop (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]

Selected presentations (includes scheduled and invited): SFS Cavalcade North America (2023), Swiss Accounting Research Alpine Camp (2023), Alliance for Research on Corporate Sustainability Annual Research Conference (2023), EasternFA Annual Meeting (2023), MFA Annual Meeting (2023), SWFA Annual Meeting (2023), JAAF Conference (2023), FMCG 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 and Raphael Jonghyeon Park) [pdf]

Presentations (includes scheduled and invited): SWFA Annual Meeting (2023), FMCG Conference (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)*, Asia-Pacific Association of Derivatives Annual Conference (2022)*, AsianFA Annual Conference (2022), UC Berkeley Haas School of Business Finance Seminar (2021)

Abstract. This paper examines how stock markets react to changes in environmental regulation and firm pollution. Our empirical setting exploits county-level ozone nonattainment designations induced by discrete policy changes in air quality standards as part of the Clean Air Act. Nonattainment designations impose strict environmental regulations on polluting firms and thus serve as an exogenous source of variation in local regulatory stringency. On the extensive margin of pollution, investors react positively to ozone-emitting firms impacted by nonattainment designations. However, in the cross-section, heavy ozone-polluting multi-plant firms experience less favorable stock price reactions. In contrast, during attainment redesignations, the overall stock market reaction is negative on the extensive margin of pollution, but investors revise upwards the valuation of heavy ozone-polluting multi-plant firms. Our results suggest that the stock market internalizes the perceived benefits and costs of local environmental regulation. Further analysis of the underlying market forces reveals that while nonattainment designations benefit incumbent firms by decreasing competition and improving environmental performance, they also impose additional compliance costs.

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.