Research

Job Market Paper
Accounting Standards Codification (ASC) 606 altered the timing of revenue recognition for variable consideration trade promotions, potentially increasing perceived revenue volatility and compliance costs for manufacturers. I hypothesize that ASC 606 adoption led manufacturers to reduce their use of variable consideration trade promotions, diminishing retailers' incentives to offer temporary price reductions to consumers. Using retail scanner data and a difference-in-differences design exploiting variation in adoption timing, I document that retail prices for products from ASC 606 adopters increase by 4.4% relative to those from manufacturers that had yet to adopt. I provide evidence of a significant shift from variable to fixed consideration promotions post-ASC 606 adoption, providing insight into the potential channel through which this price increase operates. Cross-sectional analyses reveal that both increased revenue volatility and compliance costs significantly influence manufacturers' responses to ASC 606. This study documents product market decisions that firms make in response to reporting changes and contributes to the literature on the broader consequences of accounting rules.

Working Papers
  1. Retail Investor Trading and Market Reactions to Earnings Announcements (with Friedman, H.L.)
    Revise & Resubmit
    • Presented at 2021 Trans-Atlantic Doctoral Conference, 2022 FARS Midyear Meeting, 2022 Conference on Financial Economics and Accounting, 2022 Hawaii Accounting Research Conference, 19th London Business School Accounting Symposium
    • Featured in 'When Individuals Concentrate in a Stock, Earnings Surprises Play Out Differently' by Carla Fried in the UCLA Anderson Review, Jan 18, 2023
Retail traders can help or hinder the impounding of earnings information into price, but inferences are complicated because retail traders select when, where, and how much to trade. We use trade-level data and exploit retail brokerage outages to provide causal evidence on how retail investors affect the pricing of public earnings information. We find that retail trading is associated with stronger price responses to earnings news during the earnings announcement (EA) window and greater post-earnings announcement drift, but only the EA-window effect is robust to identification using plausibly exogenous outages. Outage-based results are stronger for earnings announcements expected to have high retail activity ex ante. Furthermore, retail buy-sell imbalance during EAs is not associated with price responses to earnings news, inconsistent with retail trade as informed per se. Overall, our evidence is consistent with a model in which retail trade, particularly when it is identifiable to market makers, facilitates liquidity provision to other traders around earnings announcements.

  1. The Effects of Management Guidance on Investor Responses to Earnings Announcements (with Friedman, H.L., Huang, K., and Wu, K.)
    • Presented at Southern University of Science and Technology, Shanghai University of Finance and Economics, 2024 CUHK-Shenzhen Forum of Asian Accounting Scholars, 2024 AAA/Deloitte Foundation/J. Michael Cook Doctoral Consortium, 2024 Conference in Financial Economics and Accounting，New Institutional Accounting Conference at Tsinghua University, 2025 FARS Midyear Meeting (Scheduled)
We examine the causal effects of management guidance on market reactions to earnings announcements by exploiting a regulatory change in China that shifted guidance preceding some earnings announcements from mandatory to voluntary. Following this policy shock, approximately 60% of affected firms immediately discontinued guidance. Using the regulatory shift to instrument for guidance, we find that providing management guidance significantly increases abnormal trading volume around subsequent earnings announcements. However, the increased trading volume is associated with higher bid-ask spreads and return volatility, indicating an increase in inventory cost from noise trading. These results are primarily driven by small and less visible firms. Overall, our findings suggest that guidance can attract noise traders who potentially decrease market quality for small firms.

  1. Financial Misconduct Announcements and Product Quality (with Zhou, Y.)
    • Presented at 2023 CUHK Annual Conference, UCLA Anderson, NUS, UC Irvine, 2024 Hawaii Accounting Research Conference
This study examines the impact of financial misconduct announcements on product quality. Using Amazon consumer reviews and difference-in-differences analyses, we show that product quality significantly improves for fraud firms after public announcements of misconduct. The observed effect is stronger when there is more media coverage, and for products that are either high-volume or more expensive. Exploring the reasons for enhanced product quality, we observe a significant decrease in sales and public perception post-fraud announcements. This highlights a need for reputation management in fraudulent firms to rebuild consumer trust. Our study sheds light on firms' strategies to restore their reputations post-misconduct and the real economic impact of such behaviors on product markets.

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