“The Effect of Major Customer Concentration on Firm Profitability: Competitive or Collaborative?” with Kai Wai Hui and P. Eric Yeung, forthcoming at Review of Accounting Studies 
- Conference presentations: 2016 MIT Asia Conference, 2016 AAA FARS Midyear Meeting
Abstract: We test two potential hypotheses regarding the effects of major customer concentration on firm profitability. Under the collaboration hypothesis, both the supplier firm and its major customers obtain benefits. Under the competition hypothesis, the major customers benefit at the expense of the supplier firm. We document that major customer concentration is negatively associated with the supplier firm’s profitability but positively associated with the major customers’ performance. We demonstrate that these effects weaken as the supplier’s power grows over its relationship with major customers, supporting the competition hypothesis. We carefully reconcile our results with prior findings that focus only on the supplier firm’s profitability by identifying their research design and interpretation problems. We obtain similar inferences when using alternative customer concentration measures as well as in a setting of major customers’ horizontal mergers. 


“Advertising Rivalry and Discretionary Disclosure” 
- Conference presentations: 2019 AAA FARS Midyear Meeting, 2018 AAA Annual Meeting
- Abstract: Advertising is a critical competition device that affects interactions among firms in the product market. I find that a nontrivial portion of public firms, even among those with intense advertising activities, do not disclose advertising expenses in their financial statements, indicating significant disclosure discretion. I further use product category-level data to construct measures that capture firm-level advertising rivalry. I predict and find that the likelihood of disclosing advertising expenses is negatively associated with advertising rivalry. This association is more pronounced when firms have less trackable media outlets, more volatile underlying advertising expenditures, and more mature products. These findings suggest that firms consider their advertising expenditures proprietary and that concerns of product market competition discourage their disclosure of advertising expenses despite the materiality constraint. 


Stock Market Reaction to Intangibles Surprises with P. Eric Yeung
- Conference presentations: 2019 UCI-UCLA-USC-UCSD Accounting Conference, 2017 AAA Annual Meeting, 2017 MIT Asia Conference,  2017 AAA FARS Midyear Meeting
- Abstract: Firms are not allowed to capitalize internal investments in intangibles on the balance sheet, but they are required to recognize fair value estimates of externally acquired identifiable intangibles as assets (e.g., R&D, customer-relations, brand).  We examine stock market reactions to the recognized intangibles after mergers, against the null hypothesis that fair value estimates are too noisy to be informative.  We find that the acquirer’s stock prices react positively to brand surprise but insignificantly to other categories of intangibles surprises.  Stock price reaction to brand surprise is concentrated among unamortizable brand intangibles and stronger when the acquirer merges with the target in the same industry and has lower abnormal accruals or higher institutional ownership.  These results are consistent with smaller noise in fair value estimates when intangibles are unamortizable.  Results from the target peer firms’ stock price reactions generate similar inferences. 


“Learning Through Failure: The Effect of Banks’ Recent Default Experience on Borrowers’ Timely Loss Recognition”  with Janet Gao, Kenneth Merkley, and Joseph Pacelli
Conference presentations: 2016 AAA Annual Meeting, 2016 MIT Asia Conference*, 2016 CMU Mini Camp*, 2016 Northern Finance Association (NFA) Conference*, 2017 University of Kentucky Finance*, 2017 European Finance Association (EFA) Annual Meeting*                
- Abstract: This study examines the effects of lenders’ recent default experience on borrowers’ timely loss recognition. We exploit a unique empirical setting whereby the defaults of unrelated borrowers (i.e., different geography and industry) prompt lenders to update their monitoring standards and demand higher levels of timely loss recognition from existing borrowers who are otherwise financially sound. In additional analyses, we find that higher levels of timely loss recognition allow lenders to increase control by tightening existing covenants, and allow firms to maintain their access to credit. Using a unique dataset containing loan officer identities, we provide additional evidence that individual loan officers update their monitoring standards after experiencing defaults in their own portfolios. Overall, our study provides new evidence on how lenders can influence firms’ financial reporting choices.






*presented by coauthors