- Working Papers
Firm Foreign Activity and the Geography of Exchange Rate Risk, (with Francesca Carrieri)
Abstract: Globally-focused firms, more than domestic ones, are the key drivers of foreign exchange rate (FX) risk. They explain a larger fraction of the factors’ variation and have higher FX exposure, specifically during the home currency depreciation. Their exposure is higher in countries more dependent on the export sector and to neighbors’ currencies, in line with gravity effects. Consistent with the geography of FX risk, those in the core of the global trade network are less exposed, especially to relatively close currencies, reflecting diversification benefits. Overall, we find the economic origins of FX risk pricing in the trade channel over investment.
Accepted for presentation in: Northern Finance Association annual meeting (NFA), Montreal, Canada, 2024, Global Finance Conference, Treviso, Italy; China International Conference in Finance (CICF), Shanghai, China, 2023; Conference of the French Finance Association (AFFI), Bordeaux, France, 2023; Southern Finance Association (SFA), Key West, US, 2022; International Risk Management Conference (IRMC), Bari, Italy, 2022; Asia FA, Hong Kong, 2022; US. Midwest Finance Association (MFA), Chicago, US, 2022
Cyclicality in the Prices of Risk: What More Can We Learn from Explainable AI?, (with Francesca Carrieri)
Abstract: We uncover the temporal patterns of the prices of risk through industry portfolios with varying sensitivities to the economic and financial cycles. Conditioning on the highs and lows of the cycles is key for statistical significance of the intertemporal component. Unlike market risk, its price decreases during an economic downturn but increases under tight funding conditions. Predictive machine learning models and their SHAP values suggest that a limited number of firm characteristics convey the most informative signals about asset risk premia. Valuation ratios are more important determinants for Cyclical relative to Defensive industries, whereas Return characteristics become crucial during recessions.
Accepted for presentation in: Financial Management Association (FMA), Grapevine, US 2024
The Real Effects of Protecting Biodiversity (with Lilian Ng, Man Duy Pham, and Jing Yu)
[Revision Resubmitted to the Review of Finance]
Abstract: Protected areas are increasingly recognized as the central instrument in biodiversity conservation. However, their broader implications for corporate behavior and financial performance remain underexplored. This study examines how proximity to newly designated protected areas shapes establishment-level environmental, operational, and financial outcomes from 1990 to 2021. We find that nearby establishments significantly reduce toxic emissions, driven not by cleaner technologies but by production cutbacks and workforce contraction. Heightened regulatory oversight, as reflected in enforcement activity, is a key mechanism that constrains operations and contributes to declines in profitability and stock valuations. These results underscore the environmental benefits of conservation but also reveal the material costs imposed on affected firms. As global conservation initiatives expand, our findings show that biodiversity-related regulatory exposure constitutes a material financial risk that should be incorporated into policy design, corporate strategy, and capital allocation decisions.
Accepted for presentation in: Special Issue on Biodiversity and Natural Resource Finance Workshop, Cambridge, UK 2024; Conference on Biodiversity and Natural Resource Finance, London, UK 2025
Corporate Biodiversity Exposure and the Informativeness of Earnings Announcements (with Lilian Ng, Tracy Wang, Nathan Zhu)
Abstract: Biodiversity loss is increasingly recognized as a material financial risk, yet its governance implications for capital markets remain underexplored. We examine whether corporate biodiversity exposure (CBE), defined as the extent to which a firm’s polluting facilities are located near conservation-priority areas, impairs the market’s interpretation of earnings news. We argue that CBE generates location-based interpretive frictions that weaken the information content of earnings announcements. Consistent with this prediction, firms with higher CBE exhibit significantly weaker earnings response coefficients, indicating reduced earnings informativeness. Exploiting the staggered expansion of protected areas, a stacked difference-in-differences design establishes causality. The magnitude of this effect varies systematically with governance institutions: it is amplified in institutional settings that heighten ecological and regulatory uncertainty, such as states with weaker species protection, lower biodiversity ratings, non-attainment air quality designations, limited biodiversity-related media coverage, or low population density. In contrast, it is mitigated at the firm level where stronger information environments, supported by biodiversity disclosure, institutional ownership, analyst coverage, media attention, or NGO activism, reduce interpretation costs. Overall, our findings reveal a distinct informational channel through which biodiversity exposure constrains price discovery and underscore the role of governance and disclosure in managing nature-related financial risks.