WORKING PAPERS
  • Marketwide Price Pressure [SSRN]
    This paper provides evidence of the price-pressure hypothesis in the aggregate, daily stock-market return. Events that convey no new information about fundamentals, but entail large transfers of cash, predict the daily stock-market return. This predictability relates to the growth of passive investment strategies. Passive investment strategies are the conduit dispersing price pressure across securities. Three examinations -- of dividend payouts, reversals after ETF fund flows, and merger effective dates -- affirm the price-pressure hypothesis and show the daily stock-market return to be predictable.

  • Shareholder Litigation Risk and Its Effect on a Firm's Cash, Investment, and Debt [SSRN]
    Shareholder litigation risk varies across time and across firms. When shareholder litigation risk is high, it can increase (decrease) a firm's cash and investment before (after) a lawsuit filing. When shareholder litigation risk is low, little to no impact occurs. A quasi-natural experiment using two legal shocks, In re IPO and CAFA, supports a causal interpretation. Shareholder litigation risk can also impact a firm’s debt around the time of a lawsuit filing, but the results are less clear-cut.

  • A Model of Shareholder Litigation as a Determinant of a Firm's Financial Policies [SSRN]
    The option to file a lawsuit against an entrepreneur encourages shareholders to fund projects and to retain entrepreneurs. An entrepreneur, at risk of a lawsuit filing, may save cash as a precautionary measure. When cash accumulates and a lawsuit filing does not occur, an entrepreneur increases investment in hopes of superior future performance. But if future performance wanes notwithstanding, shareholders then file a lawsuit against their entrepreneur. When cash is limited, debt may act as an alternative precautionary measure against a lawsuit filing. In summary, shareholder litigation risk can increase cash, investment, and debt.