Publications

Earnings News and Over-the-Counter Markets
with Chongho Kim and Edward Watts
Forthcoming at Journal of Accounting Research

Using a comprehensive sample of corporate bond transactions, we document significant improvements in execution prices (i.e., liquidity) for investors during earnings \linebreak announcements relative to non-earnings announcement days. Our evidence shows that, despite concurrent increases in information asymmetry during these periods, these improvements derive from two primary sources: (i) better access to dealers and reduced search costs and (ii) increased participation from well-connected investors.  We also show that these improvements are primarily driven by information-based trade, contrast with a concurrent deterioration of liquidity in equity markets, and generalize to other firm-specific information events. Overall, our findings highlight new channels through which firm-specific information impacts asset prices and the importance of market structure in understanding the capital market effects of earnings news.

Working Papers

Loan Loss Measurement and Bank Lending
solo-authored

I use both theoretical and empirical models to assess how alternative measurement approaches to banks’ loan loss allowances affect lending when banks are subject to regulatory capital requirements. I find that: (1) the Current Expected Credit Loss (CECL) method increases loan loss allowances on average by 16% relative to the Incurred Credit Loss (ICL) method; (2) the difference between CECL loan loss allowances and ICL loan loss allowances is larger in economic downturns than upswings; (3) banks reduce lending on average by 3.15% (50 basis points) when switching from ICL to CECL; and (4) CECL results in less procyclical lending than ICL, specifically, the difference between lending in up- vs. downturns decreases by 0.8% (37 basis points) when moving from ICL to CECL.   

Accounting for Goodwill
with Charles McClure

Currently, goodwill is not amortized but tested annually for impairment. When managers care about earnings, goodwill's accounting treatment can have large effects on future earnings and may influence how much a manager will bid for a target. We quantify the effects of goodwill accounting by estimating a structural model of corporate takeovers. Our estimates suggest that accrual accounting increases buyout premia by an average of nearly 10 percentage points. If firms needed to amortize goodwill over 10 years, we estimate premia would reduce by 6 percentage points and M&A volume would shrink by 4.29% or $68.6 billion per year. Furthermore, the fraction of private equity acquirers increases by 7.74 percentage points, shifting control over productive assets to the private and financial sector.  Our results suggest the accounting treatment for goodwill has a meaningful effect on the market for corporate control.  

The Role of Decentralized Budgeting in Public Procurement Efficiency
with Marco Errico and Delphine Samuels (draft available upon request)

Draft available upon request

Work-In-Progress

Does ASC 606 Affect Contracting with Customers? Evidence from Highway Construction
with Maria Khrakovsky and Delphine Samuels