Assistant Professor of Finance
School of Business - Department of Finance
Renmin University of China
No.59, Zhongguancun Street, Haidian Dist.
Beijing 100872 China
Phone: +86 (010) 8250-0579
Entrepreneurial Finance, Labor and Finance, Empirical Corporate Finance
"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
"Venture Capital Research in China: Data and Institutional Details," solo-authored, Journal of Corporate Finance, Forthcoming.
"Venture Capitalists' Access to Finance and Its Impact on Startups," with Michael Ewens, 2021, under review
Presentations: Fourteenth Annual Conference on Innovation Economics, 34th Australasian Finance and Banking Conference, 2022 FIRS Finance Conference (accepted), 2022 WFA Conference (accepted)
We explore the role of financial-intermediary financing constraints in venture capital (VC). Exploiting the passage of the Volcker Rule as a shock on the
supply of VC funds, we find that the rule change disproportionately impacted regions of the U.S. historically lacking in VC financing. Local VC investors' exposure to the shock led to a decline in fund size and the likelihood of raising a follow-on fund. Startups simultaneously experienced increases in their own constraints: capital raised and pre-money valuations fell. Lastly, the likelihood startups move out of impacted states increases, thus exacerbating the geographic disparity in high-growth entrepreneurship.
"Hiring High-Skilled Labor through Mergers and Acquisitions," with Shenje Hshieh and Feng Zhang, 2022, under review
Presentations: 2021 AFA Meetings, Fifth Annual Mergers & Acquisitions Research Centre Conference, 2021 FIRS Finance Conference, Labor & Finance Online Seminar, Corporate Finance Workshop, 2021 MFA Conference
In two natural experiments based on H-1B visa lotteries and a drastic cut in the annual H-1B visa quota, we document that firms respond to shortages in high-skilled workers by acquiring target firms that have these workers. Additional tests show that the desire for the target's skilled workers is an important driver of these acquisitions. Acquirers that successfully obtain skilled workers from their targets outperform acquirers that withdraw their acquisition bids for exogenous reasons. Our findings suggest that skilled labor is a driver of acquisition decisions and a source of synergy gains.
"Capability Accumulation and Conglomeratization in the Information Age," with Matthew Elliott and Andrew Koh, 2021, under review
Presentations: Kellogg, Bocconi, Carnegie Mellon, Oxford, Glasgow, 2019 INFORMS Annual Meeting, 2017 AEA Meetings, 7th European Meeting on Networks, 6th Network Science in Economics Conference, Adansonia Conference, 72nd European Meeting of the Econometric Society
The past twenty years have witnessed the emergence of internet conglomerates fueled by acquisitions. We build a simple model of network formation to study this. Following the resource-based view of competitive advantage from the management literature we endow firms with scarce capabilities which drive their competitiveness across markets. Firms can merge to combine their capabilities, spin-off new firms by partitioning their capabilities, or procure unassigned capabilities. We study stable industry structures (stable networks) in which none of these deviations are profitable. We find an upper and lower bound on the size of the largest firm, and show that as markets value more of the same capabilities abrupt increases in these bounds occur.
"The Labor Effects of R&D Tax Incentives: Evidence from VC-Backed Startups," with Shenje Hshieh, 2022, under review
Presentations: The 2021 New Zealand Finance Meeting, The 2021 AFA Annual Meeting, The 2021 Greater Bay Area Finance Conference, The 2022 MFA (accepted), Renmin University of China
We examine whether VC-backed startups respond to R&D tax incentives by attempting to scale R&D activities through employment. We exploit a provision of the PATH Act of 2015, which allows qualified small businesses to offset payroll taxes with R&D tax credits, and show that marginally eligible startups increase their demand for R&D workers more than marginally ineligible startups after the PATH Act’s enactment in 2015. Marginally eligible startups not only ramp up recruiting of workers of higher quality, but also subsequently file more patents with new inventors. Our findings reveal that tax incentives can stimulate startup R&D activities through skilled labor recruitment.
"Foreign Talent and Hedge Fund," with Shenje Hshieh, Melvyn Teo and Feng Zhang, 2022
Presentations: City University of Hong Kong
We examine the value of skilled foreign labor for hedge funds by leveraging on two natural experiments. We find that hedge funds 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 allocations can be attributed to highly-educated STEM majors operating systematic strategies. Notwithstanding the valuable skills that foreign workers possess, racial and ethnic homophily induces some fund managers to eschew foreign labor.
"IP Protection, Innovation Incentives, and Patenting Strategies," with Zhao Jin, 2022, under review
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.
"What Role Does Angel Finance Play in the Early-stage Capital Market?" 2019
This paper focuses on angel financing, and its interaction with the venture capital (VC) market. I collect the first systematic dataset on angel financing. Using this data, I find that the angel capital market is large, and angel financing has causal impacts on VCs: initial angel investments lead VCs to re-allocate financing from early to later rounds.
Working in Progress
"Going Public and Drug Development"
Publications in Math
"A Generalized Polya 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 Polya's Urn: 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.
Renmin University of China, Beijing, China
Entrepreneurial Finance. 2022 - Present.
Venture Capital. 2021 - Present.
Financial Derivatives. 2018 - 2020.
Research Topics in Corporate Finance. 2019 - Present.
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.