Jun Chen
Assistant Professor of Finance
College of Business Administration - Department of Finance
University of Illinois at Chicago
601 S Morgan St
Chicago, IL 60607
E-mail: chenjun@uic.edu
Research Interests
Entrepreneurial Finance, Labor and Finance, Empirical Corporate Finance
Publications
"Venture Capital and Startup Agglomeration," with Michael Ewens, Journal of Finance, 2024, Forthcoming.
"The Labor Effects of R&D Tax Incentives: Evidence from VC-Backed Startups," with Shenje Hshieh, Review of Finance, 2024, Forthcoming.
"Hiring High-Skilled Labor through Mergers and Acquisitions," with Shenje Hshieh and Feng Zhang, Journal of Financial and Quantitative Analysis, 2023, Forthcoming.
"Capability Accumulation and Conglomeratization in the Information Age," with Matthew Elliott and Andrew Koh, Journal of Economic Theory, 2023, Vol. 210, 105647.
"Venture Capital Research in China: Data and Institutional Details," solo, Journal of Corporate Finance, 2023, Vol. 81, 102239.
"The Role of High-Skilled Foreign Labor in Startup Performance: Evidence from Two Natural Experiments," with Shenje Hshieh and Feng Zhang, Journal of Financial Economics, 2021, Vol. 142(1), Pp. 430-452.
- Winner of 2019 TCU Finance Conference Best Paper Award
Working Papers
"Immigrants in Finance," with Shenje Hshieh, Melvyn Teo and Feng Zhang, 2023
Presentations: City University of Hong Kong, Singapore Management University, Southern Methodist University, the 2022 Financial Management Association Meetings in Atlanta, the 14th Annual Hedge Fund Conference in Paris, the 2023 Finance Down Under Conference in Melbourne, the 2023 Midwest Finance Association Meetings in Chicago, and the 2023 SGF Conference in Zurich
We examine the value of skilled immigrants in finance by exploiting two natural experiments. We find that hedge fund management companies that secure more H-1B visas in random lotteries deliver higher alphas, Sharpe ratios, and information ratios. Moreover, an unexpected reduction in the H-1B quota undermined the performance of hedge funds that were dependent on H-1B workers. The superior performance of funds with high H-1B visa allocations can be attributed to highly-educated, well-paid, and motivated H-1B workers with quantitative skills. H-1B workers add value by helping hedge funds overcome capacity constraints, arbitrage prominent stock anomalies, and develop distinctive investment strategies.
Presentations: Renmin University of China, University of Wilsconsin-Milwaukee
The Qualified Small Business Stock (QSBS) exemption allows certain entrepreneurs, their employees, and their investors to sell shares of their companies without paying any—or only greatly reduced—capital gains taxes. Using a diff-in-diff identification strategy, we show that the QSBS exemption increase in 2010 led to a 12% increase in firm births in industries eligible for the exemption relative to non-eligible industries. We show that the exemption's effect on entrepreneurship is concentrated in industries that have a high rate of startup exits, in high-tech industries, and in those with a high fraction of STEM employment. The exemption also led to an increase in startup employment—but only among employees with a bachelor's or higher degree. These findings suggest that the QSBS exemption spurred entrepreneurship by increasing prospective entrepreneurs' after-tax benefit of founding a successful startup and by making it easier for them to attract highly-educated talent. In addition, we show that the QSBS exemption increased startups' ability to raise their first round of venture capital. Taken together, our findings suggest that the QSBS exemption increases both the willingness of prospective entrepreneurs to become founders and their ability to raise the resources they need to be successful. Finally, we also show that the QSBS exemption led to higher patenting in treated startups, thus suggesting that it was particularly helpful to innovative startups.
"Did the Game Stop for Hedge Funds?" with Byoung-Hyoun Hwang and Melvyn Teo, 2023
Presentations: UBS investor conference
Can retail investors on social media platforms effectively target hedge fund short positions? We show that the disclosure of hedge fund short positions drives social media activity on WallStreetBets. Social media activity in turn precipitates price increases for heavily shorted stocks. The resultant short squeezes hurt hedge funds, which respond by shorting less aggressively, leading to prolonged overpricing in the stock market. In line with a causal interpretation, the impact of social media on stock returns manifests around the publication dates for short sales, but not around the settlement dates, and attenuates during trading restrictions imposed by Robinhood.
Presentations: 2021 Five Star Workshop
We study how intellectual property (IP) protection impacts local firms' innovation incentives and patenting strategies. Exploiting the staggered establishment of specialized IP courts across Chinese regions, we show that strengthening IP protection leads to higher R&D investments but lower patenting activities. Higher litigation risk from disclosing inventions seems to dominate the benefit of stronger protections gained from patenting. Consistent with this explanation, we find that firms reduce patenting mainly in technology fields where their industry rivals have previously patented. Overall, our findings suggest that enhancing IP protection encourages more innovation efforts, possibly in uncharted technology areas.
Publications in Math
"A Generalized Pólya's Urn with Graph-based Interactions," with Michel Benaim, Itai Benjamini and Yuri Lima, Random Structures & Algorithms 46.4 (2015): 614-634.
"Vertex-reinforced Random Walk on Z with Sub-square-root Weights Is Recurrent," with Gady Kozma, Comptes Rendus Mathematique 352.6 (2014): 521-524.
"A Generalized Pólya's Urn with Graph-based Interactions: Convergence at Linearity," with Cyrille Lucas, Electronic Communications in Probability 19 (2014), No. 67, 1-13.
"Two Particles' Repelling Random Walks on the Complete Graph," Solo Author, Electronic Journal of Probability 19 (2014), No. 113, 1-17.
"Natural `Flow' Not in the Le Jan-Raimond Framework," with Kainan Xiang, Stochastics and Dynamics Vol. 12, No. 2 (2012) 1150014.
Teaching
Renmin University of China, Beijing, China
Undergraduate Courses:
Entrepreneurial Finance. 2022 - 2024.
Venture Capital. 2021 - 2024.
Financial Derivatives. 2018 - 2020.
PhD Courses:
Research Topics in Corporate Finance. 2019 - 2024.
California Institute of Technology, Pasadena, CA USA
Teaching Assistant for Professor Michael Ewens: Introduction to Financial Accounting. Spring 2017 - 2018.
Teaching Assistant for Professor Richard Roll: Introduction to Finance. Fall 2016.