Presentations: SFA 2026 (scheduled), FMA 2026 (scheduled), Worcester Polytechnic Institute, Humboldt University of Berlin(virtual)
I study how hedge fund activists’ specialization affects campaign performance. I distinguish between industry specialization—concentrating campaigns in certain industries—and objective specialization—focusing on specific activist demands. Industry specialists create more value: their campaigns generate higher announcement returns, achieve objectives more often, prompt cash-generating actions, strengthen governance, and improve long-term operating performance. In contrast, objective specialists create less shareholder value and underperform across these outcomes. Industry specialists show greater monitoring effort, stronger stock-picking skills, and learning-by-doing ability, while objective specialists mute in these aspects. As a result, industry specialization shows performance persistence while objective specialization suffers performance reversal. Using an instrumental-variables approach, I provide suggestive evidence that industry specialization causally increases announcement returns. Overall, the results highlight the importance of specialization type, skill accumulation, and targeted strategies in hedge fund activism.
(Sole-author Paper)Presentations: FMA 2026 (scheduled), Pitt/CMU/PSU Finance Conference 2024
How do private information rents shape institutional investors’ incentives to monitor corporate management? I study this question by introducing a firm-level measure of informed trading profitability constructed from institutional holdings and subsequent abnormal returns. The evidence shows that firms with higher informed trading profitability exhibit weaker governance: executives receive higher compensation, pay is less sensitive to performance, and forced CEO turnover is less responsive to poor firmspecific performance. These patterns are stronger in opaque firms and are attenuated when outside monitoring is stronger. To address endogeneity concerns, I exploit Regulation Fair Disclosure as a shock that reduced one source of selective-disclosurebased information rents. Difference-in-differences tests show that firms with high pre-Reg FD informed trading profitability experience lower total direct compensation, higher forced CEO turnover, and stronger turnover-performance sensitivity after the regulation. Overall, the results suggest that institutional monitoring depends not only on ownership stakes and monitoring capacity, but also on the private trading rents available to investors.
(with Yuchen Li and Xintian Liu)We examine whether Opportunity Zones, a federal place-based tax incentive for private investment in designated low-income communities, affect local governments' cost of capital. Counties with greater OZ exposure experience a 3.3-basis-point decline in secondary-market municipal bond yields after the program's introduction, equivalent to approximately 7.3% of the average adjusted yield. The decline is concentrated among general obligation bonds and is substantially larger in counties with lower pre-treatment debt burdens and stronger initial credit profiles. New-issue yields exhibit similar debt-burden heterogeneity, and low-debt-burden counties also issue longer-maturity bonds. County-level evidence shows increases in charges revenue and own-source revenue, together with targeted growth in residential construction, real estate activity, and related service sectors, while aggregate employment and business activity change little. These findings support an indirect fiscal-capacity channel: federally subsidized private development lowers public borrowing costs when local governments have sufficient fiscal flexibility to convert expected economic gains into credible repayment resources. More broadly, the incidence of place-based tax incentives extends beyond private investors and firms to municipal issuers and bondholders.
Does Hedge Fund Activism Create Value Through Labor Decisions?
(With Yuchen Li and Ce Li)
The Impact of Relaxing Labor Mobility on Institutional Investments: Evidence from a Natural Experiment
(With Yuchen Li and Ce Li)