Finance research insights

Balthrop, J., & Bitting, J. (2025). The threat of voiced shareholder disapproval and the value of voting. Journal of Financial Research, 48 (2): 473–502.

KU Business faculty co-author: Justin Balthrop

Research objective

This study examines how granting shareholders the right to cast advisory compensation votes affects their demand for voting rights. Rather than focusing on voting outcomes, the authors investigate whether the threat of shareholder disapproval changes shareholder bargaining power, corporate behavior, and firm value.

What the researchers find

Using the introduction of Say-on-Pay under the Dodd-Frank Act as a setting, the authors show that the value of shareholder voting rights declines after shareholders gain the ability to voice disapproval of executive compensation publicly. Voting premiums fall by about 14 percent following Say-on-Pay announcements, consistent with shareholders negotiating concessions before votes occur, reducing the need to exercise voting power. The decline in vote value is substantially larger for firms with high institutional ownership and a history of active shareholder voting, indicating that coordinated, experienced shareholders pose a more credible threat. Firms experiencing declines in voting premiums subsequently adjust corporate policies, including higher investment, increased dividends, and greater board independence. These firms also earn positive abnormal stock returns in the year following Say-on-Pay, suggesting that the threat of disapproval leads to value-enhancing outcomes.

Why it matters

The study reframes shareholder voting as a governance mechanism driven not only by voting outcomes but also by the credible threat of public disapproval. It helps reconcile puzzling evidence from prior Say-on-Pay research, including high approval rates alongside positive market reactions and continued executive pay growth. By showing that pre-vote negotiations and concessions can substitute for actual voting, the paper highlights an underappreciated channel through which shareholder voice influences firm behavior and value. The findings have implications for research on corporate governance, shareholder activism, and the valuation of voting rights.

Balthrop, J., & Cici, G. (2025). Conflicting incentives in the management of 529 plans. Journal of Law & Economics. 68 (2): 431–458. 

KU Business faculty co-authors: Justin Balthrop and Gjergji Cici

Research objective

This study examines how the revenue-generating incentives of U.S. state governments and program managers affect the fees, investment quality, and outcomes faced by investors in Section 529 college savings plans. The authors focus on whether state budget pressures distort plan design in ways that harm end investors.

What the researchers find

Using cross-sectional data on 529 plans, the authors show that states facing budgetary pressure when they renegotiate contracts with program managers subsequently offer plans with higher fees, weaker investment performance, and no meaningful offsetting benefits for investors. Plans negotiated under extreme budget deficits charge state fees that are materially higher than those negotiated under surplus conditions, and they also exhibit significantly higher underlying mutual fund fees.

These higher fees are not justified by better performance; instead, such plans deliver lower risk-adjusted returns. The authors find no evidence that investors receive compensating benefits, such as better investment menus, greater availability of low-cost index funds, age-based portfolios, higher participation, or indirect public benefits.

Evidence suggests that under fiscal stress, states accept contract terms that give program managers greater discretion, which managers then use to pursue their own interests, including opaque revenue-sharing arrangements with mutual fund providers.

Why it matters

The study provides the first direct evidence linking state fiscal incentives to poorer outcomes for investors in 529 plans, highlighting how reduced regulatory oversight and layered incentive conflicts can undermine investor welfare. It extends the literature on conflicts of interest in retirement and savings plans by showing that sponsor-level incentives, not just intermediary incentives, matter for investment quality.

The findings raise policy concerns as states increasingly sponsor other savings vehicles under similar regulatory regimes and suggest that stronger oversight or disclosure requirements may be needed to protect household investors.

Balthrop, J., & Bitting, J. (forthcoming). Implied future policy promises and firm leverage. Review of Quantitative Finance and Accounting.

KU Business faculty co-author: Justin Balthrop

Research objective

This paper examines whether Federal Reserve credit market interventions during COVID-19, both explicit support and implied future support, changed firms’ capital structure choices, especially leverage, during and after the crisis.

What the researchers find

Using a triple-differences design around the Secondary Market Corporate Credit Facility (SMCCF), the authors find that firms with stronger indicators of support increase leverage relative to other firms and that this gap is persistent. Leverage is about 4 to 7 percent higher for firms that are explicitly eligible and also match the Fed’s revealed purchase preferences, such as being in industries where the Fed bought at least one peer’s bonds.

The estimated leverage increase persists beyond the immediate bond market effects documented in prior work and persists even after Fed purchases were unwound. The leverage response increases with more granular measures of eligibility, including proximity to the investment-grade threshold and similarity to purchased firms based on product-market measures.

The authors also document lower bond yields for firms with both explicit eligibility and signals of implicit support, consistent with investors viewing expected support as risk-reducing.

Why it matters

The study suggests that crisis interventions can shape real corporate financial decisions, not just short-run bond prices and liquidity. It highlights that firms may respond not only to written eligibility rules but also to implied policy promises inferred from who actually receives support, thereby broadening the effective reach of interventions and potentially raising leverage and risk-taking incentives over longer horizons.

Bazley, W., Cuculiza, C., & Pisciotta, K. (2025). Sleep disruptions and information processing in financial markets. Management Science. 71 (4): 2751–3636.

KU Business faculty co-authors: William Bazley, Carina Cuculiza and Kevin Pisciotta

Research objective

This study examines whether short sleep disruptions affect information processing in financial markets and whether these effects differ between more experienced and less experienced market participants.

What the researchers find

Using daylight saving time changes as an exogenous shock to sleep, the authors analyze earnings forecasts from both nonprofessional and professional forecasters. On average, forecast accuracy does not decline following spring daylight saving time, which helps explain why aggregate market outcomes appear largely unaffected. However, this aggregate result masks essential heterogeneity.

Nonprofessional forecasters experience a meaningful decline in forecast accuracy relative to professionals in the days following the springtime change. Similar patterns emerge among professional equity analysts: Those with less experience or skill show lower forecast accuracy after sleep disruptions, while more experienced analysts are largely unaffected. Multiple placebo tests, including fall daylight saving time and international settings without clock changes, support sleep disruption as the underlying mechanism.

Why it matters

The findings reconcile mixed prior evidence on sleep and financial markets by showing that sleep disruptions do impair information processing, but primarily among less experienced participants. This finding helps explain why market-level outcomes appear resilient even as individual decision-makers are not.

The study highlights the role of expertise in buffering cognitive shocks. It has implications for how investors, firms, and policymakers think about analyst performance, workload, and the broader costs of practices that disrupt sleep.

Bindal, S., Joseph, K., & Meschke, F. (2025). Corporate shutdowns in the time of Covid-19. Journal of Corporate Finance. 92: 102766.

KU Business faculty co-authors: Shradha Bindal, Kissan Joseph and Felix Meschke

Research objective

This study examines what factors influenced how quickly large U.S. companies shut down their corporate headquarters during the early stages of the COVID-19 pandemic. The authors focus on whether financial flexibility, the ability to work remotely, CEO personal traits, and political alignment help explain shutdown timing.

The study aims to understand how firms responded when guidance was limited and uncertainty was high. Rather than evaluating outcomes or performance, the objective is to identify which characteristics shaped shutdown decisions. The analysis concentrates on large publicly traded firms. 

What the researchers find

The researchers find that financial flexibility does not explain how quickly firms shut down their headquarters. CEO characteristics, such as age, gender, power, pay structure, or overconfidence, also show no meaningful relationship with shutdown timing. Instead, firms that could more easily transition to remote work shut down earlier. Local shelter-in-place rules and nearby COVID cases also played an important role. Political alignment emerges as a key factor: Firms that lean Democratic shut down earlier, particularly when led by Democratic-leaning CEOs. 

Why it matters

Corporate shutdown decisions affected employee safety operations and public health during the pandemic. This study shows that political and regulatory context mattered more than financial strength or executive traits in shaping these decisions.

For policymakers, the findings highlight how partisanship and local rules can influence corporate behavior during crises.

For managers and boards, the results suggest that operational flexibility, such as remote work capability, is central to crisis response.

More broadly, the study improves understanding of how firms behave in the face of extreme uncertainty.

Cici, G., Hendriock, M., and Kempf. A. (in press). Finding your calling: Matching skills with jobs in the mutual fund industry, Management Science.

KU Business faculty co-author: Gjergji Cici

Research objective

This study examines whether matching mutual fund managers’ skills to the investment styles that best fit those skills improves manager productivity and firm value, and how fund companies respond once such matches are identified.

What the researchers find

Using the mutual fund industry as a setting, the authors identify moments when fund managers discover the investment style that best fits their skills, a process they refer to as match finding. After a match is found, managers deliver substantially higher risk-adjusted performance, on the order of about 150 basis points per year relative to unmatched peers at the same fund company. Fund companies actively exploit this information. They assign matched managers to more funds and larger funds, significantly increasing assets under management, and they charge higher management fees on these funds.

In addition, fund companies spread the expertise of matched managers by placing them in teams, often with junior managers, allowing knowledge and skills to transfer within the organization. The results are robust to alternative explanations related to experience, fund reassignment effects, and career trajectories.

Why it matters

The findings provide direct evidence that matching employees’ skills to the right tasks can generate significant productivity gains and increase firm value. Beyond documenting performance improvements, the study shows how organizations strategically reallocate resources, scale responsibilities, and structure teams once valuable skill–job matches are identified.

The results have broader implications for labor allocation, talent management, and organizational design, highlighting that productivity depends not only on individual ability but also on placing people in roles that best fit their skills.

C. Cuculiza, A. Kumar, W. Xin, and C. Zhang. (forthcoming). Temperature sensitivity, mispricing, and predictable returns. Management Science. 

KU Business faculty co-author: Carina Cuculiza

Research objective

This study examines whether some firms are more sensitive to changes in temperature, whether this exposure affects their performance, and if market participants recognize these effects.

What the researchers find

The authors develop a new, firm-level measure of temperature sensitivity based on how a firm’s stock returns move in response to abnormal changes in temperature. Firms with higher temperature sensitivity have lower profitability and riskier corporate policies. 

Firms’ exposure to temperature changes also have asset pricing implications. Specifically, firms with a high temperature sensitivity are overpriced and systematically earn lower future returns. The mispricing persists because nonlocal institutional investors allocate higher portfolio weights to firms with a high temperature sensitivity and sell-side equity analysts issue forecasts that are less accurate for these firms. That is, financial markets underreact to information related to firms’ exposure to changes in temperature, generating an economically meaningful return predictability: a strategy that buys low-temperature-sensitivity firms and sells high-temperature-sensitivity firms produces risk-adjusted returns of more than 4% from 1968 to 2020. Overall, the evidence indicates that financial markets are slow to fully incorporate firm-level exposure to temperature changes into asset prices.

Why it matters

The study uses publicly available data to develop a novel measure that quantifies firms’ exposure to changes in temperature. It shows that firms with a higher temperature sensitivity have lower future profitability, riskier corporate policies, and lower future stock returns. These firms are overpriced as financial market participants underreact to information related to firms’ temperature sensitivity.

The findings highlight an important channel through which changes in temperature can affect asset prices and generate systematic mispricing in financial markets.

C. Cuculiza, C. Antoniou, A. Kumar, and L. Yang. (2025). Seeing is believing: Tourism and foreign equity investments. Journal of Banking and Finance. 178, 107498.

KU Business faculty co-author: Carina Cuculiza

Research objective

This study examines whether international tourism affects investors’ cross-country capital allocation through increasing their willingness to invest in foreign equity markets and reducing home bias.

What the researchers find

Using more than 20 years of data across 30 countries, the authors show that foreign countries that become more salient and recognizable to investors through their travels attract greater capital investments. That is, investors allocate higher portfolio weights to countries they visit, relative to global benchmarks. The results are consistent with a familiarity-based channel rather than an information advantage. The authors find no evidence that tourism improves portfolio returns, suggesting that travelers are not gaining superior investment information.

The paper addresses endogeneity concerns using instrumental variables, significant sporting events as quasi-natural experiments, health-related travel shocks, and multiple placebo tests. Across all approaches, the link between tourism and foreign equity investment remains robust. The effect is stronger for long-distance travel and holds for both institutional and retail investors, but not for central banks as their portfolio allocations are determined by unique factors that are less influenced by familiarity-based mechanisms. 

Why it matters

The findings show that tourism generates positive spillovers in financial markets by influencing investor behavior and capital flows. In particular, international travel contributes to a reduction in home bias through increased foreign portfolio investment in destination countries.

More broadly, the study highlights the role of familiarity and behavioral factors in international investment decisions, even when no informational advantage is present.

Frame, W. S., McLemore, P., & Mihov, A. (in press). Haste makes waste: Banking organization growth and operational Risk. Review of Corporate Finance Studies

KU Business faculty co-author: Atanas Mihov

Research objective

This study examines whether faster growth among large banking organizations is associated with higher operational risk. The researchers aim to understand whether expanding quickly creates challenges in managing internal processes, people, and systems. They focus on large banks to assess how growth relates to day-to-day operational problems rather than lending or market activity.

The study also examines whether different types of growth and business activities are associated with distinct risk patterns. Overall, the objective is to clarify how organizational growth relates to non-financial sources of loss within banks.

What the researchers find

The study finds that faster-growing banks tend to incur higher operational losses relative to their size. These losses are more common when growth comes from expanding core activities, such as lending and deposit-taking, or from mergers and acquisitions.

The relationship is stronger for certain types of problems, including failures in customer obligations and weaknesses in business practices. Faster-growing banks also face a higher likelihood of significant and infrequent loss events, which can be especially difficult to manage. In periods of financial stress, banks that previously grew more aggressively tend to experience worse operational outcomes than their peers.

Why it matters

Operational failures can impose high financial and reputational costs on banks and erode confidence in the financial system. This study helps clarify that rapid growth may create strains that increase the risk of internal breakdowns, even when growth appears successful on the surface.

The findings are relevant for bank managers who oversee expansion decisions and internal controls. They are also informative for regulators who monitor bank stability and organizational resilience. More broadly, the research highlights that growth strategies can carry hidden risks beyond traditional financial measures.

Lieberman, P., Mihov, A., Naranjo A., & Velikov, M. (2025). Show me the receipts: B2B payment timeliness and expected returns. Journal of Financial Economics. 172: 104108.

KU Business faculty co-author: Atanas Mihov

Research objective

This study examines whether faster growth among large banking organizations is associated with higher operational risk. The researchers aim to understand whether expanding quickly creates challenges in managing internal processes, people, and systems. They focus on large banks to assess how growth relates to day-to-day operational problems rather than lending or market activity.

The study also examines whether different types of growth and business activities are associated with distinct risk patterns. Overall, the objective is to clarify how organizational growth relates to non-financial sources of loss within banks.

What the researchers find

The study finds that not all late payments convey the same message to investors. Firms that suddenly begin paying suppliers later than usual tend to experience lower future stock returns, consistent with these payment delays reflecting emerging financial strain that investors incorporate only gradually. 

In contrast, firms that consistently pay moderately late tend to earn higher future returns. This pattern appears to reflect stable bargaining power over suppliers rather than financial weakness.

The findings suggest that investors react differently to abrupt changes in payment behavior versus steady payment practices, and that these distinctions matter for future returns.

Why it matters

Business-to-business payment behavior is widely observed by suppliers and credit intermediaries but overlooked mainly by equity investors. This study shows that such information can help distinguish between firms facing financial stress and firms exercising strategic leverage in their supply chains.

For investors, the findings highlight a new way to interpret payment behavior as a signal about risk and expected returns. For managers and suppliers, the results clarify how payment practices may shape perceptions beyond the supply chain itself. More broadly, the study helps connect everyday operational decisions to financial market outcomes.

Lin, L., Mihov, A., & Sanz, L. (in press). Economic policy uncertainty and multinational Companies. Review of Finance.

KU Business faculty co-author: Atanas Mihov

Research objective

This study examines how uncertainty about foreign governments' economic policies affects United States multinational companies. The researchers focus on firms with subsidiaries operating across borders and ask whether policy uncertainty in host countries influences firm value and real business activity. They aim to understand whether global operations help firms absorb uncertainty or instead expose them to additional risk.

The study also explores whether these effects differ across firms and countries with different characteristics. Overall, the objective is to clarify how policy uncertainty travels through multinational subsidiary networks.

What the researchers find

The study finds that higher economic policy uncertainty in countries with subsidiaries is associated with lower overall firm valuations. Subsidiaries in countries with higher uncertainty tend to slow their asset and employment growth. These effects are stronger for firms that rely more on intangible assets, face tighter financial constraints, or operate in countries with weaker institutions.

On average, firms do not appear to shift activity across countries to offset uncertainty elsewhere. However, there is some evidence that uncertainty affects other subsidiaries when they are closely linked through production relationships.

Why it matters

Multinational companies play a central role in the global economy, yet they face risks that arise outside their home countries. This study shows that uncertainty about foreign economic policies can meaningfully affect firm value and business activity, even for globally diversified firms.

The findings suggest that operating across borders does not fully protect firms from policy-related risks abroad. For managers and investors, the results highlight the importance of monitoring policy environments across all countries in which a firm operates. For policymakers, the study provides insight into how uncertainty can influence foreign investment and multinational activity.

Heston, Steven L., Christopher S. Jones, Mehdi Khorram, Shuaiqi Li, and Haitao Mo. (in press). The variance premium and seasonal momentum in options returns. Review of Financial Studies.

KU Business faculty co-author: Haitao Mo

Research objective

This study examines how returns on equity options vary over time and whether they display predictable seasonal patterns. The authors aim to improve the measurement of option-based returns linked to individual equity volatility using tradable option portfolios. They then investigate whether past option performance at regular calendar intervals is related to future option returns.

A central goal is to understand whether these patterns reflect predictable movements in underlying equity volatility. Overall, the study seeks to clarify how option returns relate to recurring changes in realized and investor-expected volatilities of underlyings.

What the researchers find

The researchers find that option returns show a strong seasonal continuation pattern, meaning options that performed well at certain regular intervals in the past tend to perform well again. This pattern appears at quarterly and yearly frequencies and persists over long horizons.

The results indicate that investors’ expectation of underlying equity volatility does not fully reflect predictable seasonal changes in realized volatility. As a result, option returns linked to volatility continue to exhibit return persistence. These seasonal patterns are distinct from standard momentum effects and remain even after accounting for other known predictors of option returns.

Why it matters

Options play a key role in risk management, trading, and price discovery in financial markets. This study highlights that predictable patterns in equity volatility are not fully incorporated into equity option prices.

For investors and practitioners, the findings suggest that equity option markets may systematically underreact to recurring changes in equity volatility. The results also provide insight into how investors’ expectations about risk evolve. More broadly, the study deepens understanding of how market expectations differ from realized outcomes in derivatives markets.

Duarte, Jefferson, Christopher S. Jones, Mehdi Khorram, Haitao Mo, and Junbo L. Wang. (in press). Too good to be true: Look-ahead bias in empirical options research. Review of Financial Studies.

KU Business faculty co-author: Haitao Mo

Research objective

This study examines whether unusually high returns reported in empirical options research reflect real economic patterns or methodological issues. The authors focus on whether look-ahead bias, meaning the use of information not available at the time trading decisions would have been made, affects common option trading results. They revisit influential findings in the literature that report very high Sharpe ratios.

The goal is to understand how data filters and sample construction choices influence reported option returns. More broadly, the study aims to clarify which option return patterns remain when only feasible information is used.

What the researchers find

The researchers find that many option trading strategies with extremely high reported returns rely on filters that unintentionally use future information. When these strategies are replicated using only information available at the time portfolios are formed, the large returns and Sharpe ratios largely disappear. This pattern holds for strategies based on stock characteristics and for strategies linked to option illiquidity.

The results suggest that illiquidity is weakly related to option returns and that only a small number of stock characteristics are meaningfully associated with expected option returns. Very high Sharpe ratios often signal methodological problems rather than strong economic effects.

Why it matters

Academics, practitioners, and regulators widely use empirical option studies to understand risk and pricing. This research highlights how seemingly minor data choices can generate misleading results. It encourages greater caution when interpreting unusually strong trading performance in academic studies.

The findings also promote better research transparency and a more realistic evaluation of option strategies. Overall, the study helps improve the credibility and reliability of financial research that informs real-world decisions.

Cornaggia, K., Hund, J., Pisciotta, K., and Ye, Z., 2025. Spillover effects of opioid abuse on skilled human capital and innovation activity. Management Science.

KU Business faculty co-author: Kevin Pisciotta

Research objective

This study examines how widespread opioid abuse in a community affects the movement and productivity of highly skilled workers who contribute to corporate innovation. The authors focus on whether public health shocks influence where skilled workers choose to live and work, and how these choices shape local innovation outcomes.

Rather than studying opioid users themselves, the paper centers on spillover effects experienced by non-users. The research seeks to understand how changes in community conditions linked to opioid abuse alter the local environment for innovation. Overall, the objective is to clarify the broader economic consequences of a public health crisis.

What the researchers find

The study finds that areas more heavily affected by opioid abuse experience greater out-migration of skilled workers, including inventors and research personnel. This movement is associated with declines in both the amount of innovative activity and the economic value of that innovation in affected locations.

Evidence suggests that firms also respond by closing or relocating research facilities, reinforcing local losses in innovative capacity. The authors show that these effects are more substantial among highly productive inventors and in places where community conditions deteriorate more sharply. The patterns are consistent with skilled workers responding to declines in local amenities such as school quality, safety, and overall community well-being.

Why it matters

Innovation depends not only on firms and capital but also on the quality of the communities where skilled workers live. This research highlights how public health problems can weaken local economic growth by making places less attractive to the people who drive innovation.

The findings are relevant for policymakers and community leaders seeking to retain skilled workers and sustain long-term growth. They also suggest that addressing public health challenges can have benefits beyond health outcomes, extending to economic vitality. More broadly, the study underscores the interconnected nature of public health, human capital, and innovation.

Allen, F., Haas, M., Nowak, E., Pirovano, M., & Tengulov, A. (2025). Squeezing shorts through social media platforms. Management Science.

KU Business faculty co-author: Angel Tengulov

Research objective

The study investigates whether and how coordination among retail investors via social media platforms (Reddit, Twitter/X, StockTwits) contributed to the January 2021 meme-stocks short squeezes.

The authors examine the mechanisms (retail trading, securities lending constraints, and options markets) as well as the consequences for market quality and efficiency, both for the squeezed stocks and their product market competitors.

What the researchers find

Short squeezes did occur in GameStop and six additional restricted meme stocks, contrary to claims that GameStop did not experience a squeeze. Evidence comes from an analysis of detailed securities lending data and is consistent with both market squeezes and lender squeezes. Further, social media activity amplified the effect of retail trading on stock returns: when social media mentions surged, retail order imbalances had a significantly stronger association with short-horizon returns, especially during the event window.

Moreover, options markets played a key role once brokers restricted stock purchases: the authors document trader migration from the stock to the options market. Heightened options usage likely induced options market-maker hedging that added further price pressure to the underlying stocks.

Finally, market quality deteriorated for squeezed stocks: the authors document higher volatility, wider bid-ask spreads, and violations of put–call parity, indicating reduced market efficiency. The authors also find negative spillovers extended to product-market competitors, suggesting broader distortions beyond the restricted meme stocks.

Why it matters

The study provides systematic empirical evidence that retail investors, when coordinating via social media platforms, can collectively move prices and introduce limits to arbitrage, challenging the traditional view that retail traders are largely “unsophisticated” with little to no market impact.

The study also informs regulatory debates by documenting real deterioration in market quality and by complementing official reports (e.g., the SEC’s October 2021 report on the topic) with detailed securities-lending and stock and options-market evidence.

It shows that social media can act not only as an information channel but also as a coordination technology, with potentially adverse consequences for market efficiency, making it highly relevant for modern market design regulation, enforcement, and investor protection.

Allen, F., Haas, M., Pirovano, M., & Tengulov, A. (2025). How prevalent are short squeezes? Evidence from the U.S. and Europe. Journal of Banking & Finance.

KU Business faculty co-author: Angel Tengulov

Research objective

The paper aims to systematically measure how prevalent short squeezes are across the United States and Europe, and assess their determinants and consequences for price discovery. To do so, the authors develop a novel market-squeeze measure based on sharp price increases combined with abrupt declines in short interest, and compare this measure to existing lender-squeeze measures based on share recalls.

What the researchers find

At the quarterly frequency, squeezes are not negligible: On average, about 9.9% of U.S. stocks and 12.3% of EU stocks experience a market squeeze in a given quarter; lender squeezes occur at similar but not identical frequencies. Market squeezes and lender squeezes are fundamentally different phenomena. Market squeezes are driven primarily by high short interest, firm size, price dispersion, and turnover, and are associated with sharp declines in short interest afterward.

Lender squeezes are driven mainly by securities-lending conditions (fees, utilization, lendable quantity) and do not trigger sustained reductions in short interest. The authors also find that only market squeezes impair price discovery: After market squeezes, the speed of price discovery deteriorates, consistent with short sellers being forced out. In contrast, price discovery remains largely unaffected after lender squeezes.

Why it matters

The paper provides the first large-sample, cross-country evidence on how common equity short squeezes actually are. By clearly separating market squeezes from lender squeezes, the study shows that not all squeezes are equally harmful — only market squeezes meaningfully disrupt price discovery and the information intermediation role of short sellers.

The proposed measure offers a practical monitoring tool for regulators, particularly relevant given new short-selling disclosure rules in the US and longstanding disclosure requirements in the EU. More broadly, the findings reinforce the idea that short sellers play a critical role in market efficiency, and that short-sale constraints, e.g., via market squeezes, can have real welfare and regulatory implications.

Tengulov, A., Zechner, J., & Zwiebel. J. (2025). Valuation and long-term growth expectations. Journal of Financial & Quantitative Analysis.

KU Business faculty co-author: Angel Tengulov

Research objective

This study examines how long-term corporate growth rates can be estimated more systematically for valuation purposes. The authors aim to identify which firm, industry, and market characteristics are associated with higher or lower long-term growth. They also assess whether market prices reflect this long-term growth information or only partially incorporate it into valuations.

A related goal is to evaluate whether statistical prediction frameworks can generate useful out-of-sample estimates of long-term growth. The study focuses on improving practical guidance for the long-term growth input that strongly affects discounted cash flow valuations.

What the researchers find

The researchers find that a set of observable characteristics is meaningfully related to subsequent long-term growth, and their models explain a nontrivial share of the variation in long-term growth outcomes. Firms with higher leverage tend to be associated with lower long-term growth, and larger or older firms also tend to grow more slowly over the long run. Measures linked to competitive positioning, such as indicators consistent with stronger barriers to entry, are associated with higher subsequent long-term growth.

In contrast, indicators of industry contraction are associated with weaker growth. Variables related to investment opportunities, including capital spending, are positively associated with later long-term growth, and analyst-based measures of long-term expectations and coverage are also positively associated with growth outcomes. In return tests, firms with higher predicted long-term growth earn higher subsequent stock returns, even after accounting for common return predictors, consistent with long-term growth information not being fully reflected in market prices.

Why it matters

Long-term growth assumptions often drive valuation results, yet many practitioners rely on rules of thumb that may not fit a given firm. This study offers evidence-based guidance on what observable factors tend to be linked with stronger or weaker long-term growth, which can improve how analysts and investors build valuation models. The results also suggest that market prices may not fully incorporate long-horizon growth information, which is relevant for investors who focus on fundamentals.

For corporate decision-makers, the findings highlight how financing choices, firm size, and investment intensity can be linked to longer-run growth trajectories. Overall, the study helps introduce more structure and discipline to a valuation input that is often handled ad hoc.

Beracha, E., Kim, E., Wintoki, M.B., & Xi, Y. "Highly Skilled Immigrants and Local Housing Prices: Evidence from the H-1B Visa Lottery."  Journal of Real Estate Research, 1–26. https://doi.org/10.1080/08965803.2025.2536358.

KU Business faculty co-author: Jide Wintoki

Research objective

This study examines whether an influx of highly skilled immigrants is associated with subsequent changes in local home prices.

A longstanding challenge in this area of research is that economic conditions tend to attract immigrants and simultaneously affect home prices, making it difficult to separate the two. To address this, the study uses the H-1B visa lottery, a program that randomly selects which foreign-born, highly educated workers receive permission to work in the United States, to isolate an inflow of skilled immigrants that is not driven by local economic conditions.

The study examines whether areas receiving more H-1B lottery winners experience greater home price appreciation the following year.

What the researchers find

Areas receiving a greater inflow of H-1B visa lottery winners tend to experience higher home price appreciation the following year. This relationship is stronger in areas experiencing faster overall population growth and in areas where the supply of land available for new housing development is more constrained, meaning that when demand rises and housing supply cannot easily expand, prices tend to increase more.

Interestingly, the inflow of highly skilled immigrants does not appear to be meaningfully associated with changes in local rent prices, which distinguishes this group from the broader immigrant population studied in earlier research. These findings suggest that immigrants' economic profiles, particularly their income and wealth levels, may matter considerably when assessing how immigration affects housing markets

Why it matters

Home prices are a central component of household wealth and community economic health, and understanding what drives local price appreciation is important for homeowners, investors, and policymakers alike. This study offers insight into one specific but consequential factor: the arrival of highly skilled, well-compensated workers in a local area.

For real estate investors, the findings suggest that tracking skilled immigration flows may offer useful signals about where home values are likely to rise. For policymakers, the results highlight that immigration policy, specifically programs targeting high-skill workers, may have meaningful effects on local housing market conditions. The study also underscores that not all immigration affects housing markets in the same way, and that the income level and spending capacity of new residents can shape local real estate outcomes.