PUBLICATIONS

1. Face Value: Trait Impressions, Performance Characteristics, and Market Outcomes for Financial Analysts
- with Lin Peng, Siew Hong Teoh, and Yakun Wang, 2022, SSRN
- Journal of Accounting Research 60 (2): 653-705. Top Downloaded Article
- Media Coverage: WSJ, UCLA Anderson Review, Chicago Booth Review

Abstract: Using machine learning–based algorithms, we measure key impressions about sell-side analysts using their LinkedIn photos. We find that impressions of analysts’ trustworthiness (TRUST) and dominance (DOM) are positively associated with forecast accuracy, especially after recent in-person meetings between analysts and firm managers. High TRUST also enhances stock return sensitivity to forecast revisions, especially for stocks with high institutional ownership. In contrast, the impression of analysts’ attractiveness (ATTRACT) is only positively associated with accuracy for new analysts or when a firm has a new CEO or CFO. Furthermore, while high DOM helps male analysts’ chances of attaining All-Star status, it reduces female analysts’ accuracy and the likelihood of winning the All-Star award. In addition, the relation between TRUST and accuracy is modulated by the disclosure environment and is attenuated by Regulation Fair Disclosure. Our results suggest that face impressions influence analysts’ access to information and the perceived credibility of their reports.

WORKING PAPERS

1. Do Shared Auditors Facilitate Follow-on Innovation?
- with Xuan Tian and Luo Zuo, 2024, SSRN
- Best Paper Award at 2022 MIT Asia Conference in Accounting

Abstract: We investigate whether shared auditors promote the dissemination of innovative knowledge among their clients, thereby fostering follow-on innovation. We find that a company cites more patents from another company when they are audited by the same audit office. To address concerns about potential confounding factors stemming from commonalities in the fundamentals of the two companies, we leverage a quasi-exogenous shock to auditor sharing: the demise of Arthur Andersen and the subsequent increase in auditor switching in 2002. Further analysis reveals that the effect of a shared auditor on cross-client patent citations is stronger when both clients engage in intensive innovation activities and when their products exhibit greater similarity. Additional evidence suggests that shared auditors exert more influence on the citations of recent patents and patents that are easier for outsiders to utilize. Overall, our findings suggest that auditors play a significant role in corporate innovation by facilitating the transfer of innovative knowledge among their clients.

2. Using Indirect Disclosure to Hide Bad News
- with Nicholas Guest, 2023, SSRN

Abstract: This paper examines a key aspect of semantic progression in financial reports. Namely, circuitousness reflects the indirectness of a disclosure narrative, which we operationalize as the extent to which related information is not grouped together. We find that 10-Ks of firms with lower current earnings and stock returns are more circuitous. Circuitousness is also negatively associated with the persistence of positive earnings, especially for firms with managerial incentives, monitoring, and other disclosure characteristics that indicate high potential for bad news obfuscation. Additional evidence suggests analysts do not immediately incorporate the negative performance implications of circuitousness. We also examine earnings conference calls and find consistent results that help rule out alternative explanations. Moreover, the explanatory power of circuitousness survives and dominates a host of alternative measures of linguistic complexity. Overall, managers seem to hide bad news from the market by presenting a more meandering narrative of the firm.

3. Earnings Pressure and Corporate Refocus
- with Eric Yeung and Xingyu Shen, 2023

Abstract: Facing the pressure to meet short-term earnings expectations, managers often take actions that are thought to be destroying firm value. Our study provides empirical evidence supporting an alternative view: Earnings pressure forces the managers to refocus on the firm's core products through cost-cutting, which can be value-enhancing. The documented product refocus is more pronounced when the CEO exhibits high-level agency problems. For identification, we exploit the setting of analyst brokerage mergers and closures. Our study suggests a bright side of earnings pressure - it helps reduce agency-motivated product diversification.