Brooke's Research

Google Scholar | SSRN

Publications

[1] Anand Vijh and Jiawei (Brooke) Wang, Negative Returns on Addition to S&P 500 Index and Positive Returns on Deletion? New Evidence on Attractiveness of S&P 500 vs. S&P 400 Indexes, Financial Management, forthcoming, https://doi.org/10.1111/fima.12391

Working Papers 

[2] Waiting or Acting: The Effects of Climate Policy Uncertainty (Job market paper) [View on SSRN]

 This paper studies the effects of climate policy uncertainty on firms' environmental performances and efforts. I find that firms reduce toxic emissions under high climate policy uncertainty. Instead of a "wait-and-see" strategy, firms take pre-emptive actions by accelerating environmental innovation and adopting abatement technologies when climate policy uncertainty arises. Further analyses suggest that institutional investors withdraw capital from polluting firms under high uncertainty of climate regulation. Exploiting the lagged political polarization of the U.S. House roll-call votes and the standard deviation of the pro-climate votes in the Senate on environmental and climate change-related bills to instrument the climate policy uncertainty index, I suggest that the effect of climate policy uncertainty on reducing emissions is causal.

Presentations

[3] Natural Disasters and Firm Leasing: A Collateral Channel (sole-authored paper) [View on SSRN]

This paper studies the effects of natural disasters on lease financing. The destruction of natural disasters leads to collateral constraints in disaster-affected firms. However, these firms demand funds for post-disaster reconstruction. Although collateral constraints create external financing frictions in disaster-affected firms, I find that operating leases alleviate their post-disaster financing needs. The significance of the findings highlights the importance of operating lease financing for affected firms after natural disasters.

Presentations

[4] Disaster Risk, Politicians, Firms, and Capital Exuding: A New Role of Stock Market Participation (with Art Durnev) [View on SSRN]

We propose a new function of stock market – to align voters’ preferences to politicians’ policies. We build a model with politicians’ ability to abate negative disaster shocks. Pro-business politicians are more likely to get re-elected when voters hold firm equity, and because of less severe disaster shocks, firms exude less capital and allocate investment more efficiently. We construct a novel stock market participation data for U.S. states using IRS statistics. We find that companies in states with higher stock market participation invest more efficiently and elect pro-business politicians. We use a novel neighboring states methodology and financial literacy instrument to eliminate endogeneity concerns.

Presentations

[5] Managerial Incentives to Innovate (with Petra Sinagl) [View on SSRN]

How are managerial incentives to innovate affected by financial crises? We study the role of managerial long-term compensation in inducing innovative output. We document that awarding managers with options during crises substantially increases their incentives to invest in risky projects and produce innovation. We find that an exogenous increase in CEO option pay awarded during times of high bank distress is associated with an increase in both the quantity and quality of innovation produced by the CEO's firm. In contrast, the same increase in option pay awarded during normal times does not have a significant effect on firm innovative output. We explain our results using Schumpeter's theory of creative destruction where managers exploit unique growth opportunities that arise during crises. Exogenous variation in option compensation is identified using pre-negotiated multi-year option plans.

Presentations

[6] Boardroom Networks and Corporate Investment (with Suyong Song) [View on SSRN]

Although a rich literature documents significant network effects among firms, some important questions remain unanswered: whether firms herd strategically or blindly, and what factors would influence the dynamics of network effects. We investigate firms' strategic herding behavior among board-interlocked networks where two firms share at least one common board member. Our identification strategy to resolve the endogeneity issue is to adopt the characteristics of the peers of peers as legitimate instrumental variables. We document significant network effects on firms' investment.  Further evidence suggests that firms strategically herd their connected firms with high-quality information. 

Presentations

[7] Optimal Investment, Tobin's q, and Cash Flow: Does the Unobserved Productivity Matter? (With Kyoo il Kim and Suyong Song) [View on SSRN]

We study the classical relationship between a firm’s investment and Tobin’s q for which unobserved productivity is another factor of a firm’s decision. Besides the potential measurement problem of Tobin’s q, controlling unobserved productivity is a new challenge. We develop an econometric method that tackles both issues given timing and information set assumptions. Using 15,079 unique public firms in the U.S. from 1975 to 2017, we find that cash flow remains a significant factor of investment even after controlling for productivity and that investment becomes less sensitive to q and more sensitive to cash flow.

Presentations

Work in progress

[8] Lessor Rights and Cost of Leasing: Evidence From the Airline Industry (sole-authored paper)

Unique database: hand-collected fleet and aircraft leasing data of U.S. airline companies from 1990 to 2020

Preliminary results documented