Topic: Risk Shocks, Ambiguity Shocks, and Corporate Policies
Speaker: Minwen Li, Assistant Professor, School of Economics and Management, Tsinghua University
Date: November 19th, 2014 (Wed.)
Time: 12:30-1:30pm
Location: Building 1, Room 501, Faculty Lounge
Language: English
Abstract:
We measure two types of uncertainty shocks, risk and ambiguity, through textual analysis of corporate annual 10-K reports, and examine their implications on the ecosystem of corporate policies. We find that risk shocks lead to simultaneous negative adjustments in leverage, investment, employment and payout, and positive adjustment in cash holdings. The economically significant impact of risk shocks persists for years, and is stronger for firms with smaller size, lower credit ratings, and negative earnings. Not all policies respond to positive and negative risk shocks symmetrically, i.e., firms appear not to increase payout and reduce cash holdings after risk level reduces. In contrast, ambiguity shocks only lead to short-term reduction in leverage, which could be partially caused by shrinking external credit supply. Managers appear to adopt a "wait-and-see" strategy until ambiguity resolves.
About the speaker:
Minwen Li is an assistant professor at the Department of Finance in the School of Economics and Management, Tsinghua University. She received her Ph.D. in Finance from Robert H. Smith School of Business of University of Maryland, College Park MD in 2010, and Masters in Economics from School of Economics and Management, Tsinghua University in 1999, and BA in Finance from Guanghua School of Management, Beijing University in 1997. Her research interests are Corporate Finance, Corporate Governance, Board Composition, CEO Turnover and Compensation and Financial Development. Dr. Li teaches Theory of Investment for IMBA students at the School of Economics and Management, Tsinghua University.
