I am an economist and an assistant professor of finance at The Chinese University of Hong Kong, Shenzhen.

My primary fields of interests: corporate finance, banking, and macro-finance.



Asset-side Bank Runs and Liquidity Rationing: A Vicious Cycle [Abstract] [Paper]
Selected presentations: AFA(2018)

This article studies the role of bank liquidity rationing in managing panics in a dynamic model of credit line run. In downturns banks tighten liquidity by cutting credit lines. Anticipating this, borrowers run to draw down credit lines in the first place, which imposes further pressure on banks. Thus liquidity rationing and credit line runs form a feedback loop that amplifies bank distress. This feedback effects contribute to about two- thirds of the total credit contraction in downturns.

Quantifying Reduced-Form Evidence on Collateral Constraints [Abstract] [Paper]
with Sylvain Catherine, Thomas Chaney, David Sraer, and David Thesmar
second round R&R at the Journal of Finance

While a mature literature shows that credit constraints causally affect firm-level investment, this literature provides little guidance to quantify the economic effects implied by these findings. Our paper attempts to fill this gap in two ways. First, we use a structural model of firm dynamics with collateral constraints, and estimate the model to match the firm-level sensitivity of investment to collateral values. We estimate that firms can only pledge about 19% of their collateral value. Second, we embed this model in a general equilibrium framework and estimate that, relative to first-best, collateral constraints are responsible for 11% output losses.

Dynamic Optimal Taxation with Endogenous Skill Premia [Abstract] [Paper]
with Jason Ravit and Michael Sockin
Selected presentations: Econometric Society North America Meeting(2017)

We embed imperfect substitutability across skill levels into a dynamic Mirrlees model and uncover a novel intertemporal wage compression channel in optimal labor taxation that can rationalize redistributive programs such as the Earned Income Tax Credit.

The Risk of Implicit Guarantees: Evidence from Shadow Banks in China [Abstract] [Paper]
with Xiang Shao and Ji Huang
Selected presentations: ABFER, CEPR and CUHK First Annual Symposium On Financial Economics

We use a micro-level data set on China's shadow bank products to quantify the risk of implicit guarantees. We find a robust empirical fact that banks extend more implicit guarantees to their shadow bank debt when their own default risks increase.

Security-bid Auctions with Information Acquisition (new draft coming soon) [Abstract]
with Yunan Li

We study security-bid auctions in which bidders compete for an asset by bidding with securities whose payments are contingent on the asset's realized value and can covertly acquire information at some cost before participating in an auction. We first consider auctions with ordered securities in which the seller restricts the security design to an ordered set and uses a first- or second-price auction. We show that steeper securities give agents lower marginal return to information and may yield lower revenues. We then study linear mechanisms in which payments linearly depend on the asset's realized value. We show that the revenue-maximizing linear mechanism assigns the asset efficiently, and the winner pays in cash if their expected values are high and pays in stock if their expected values are low. This result implies that the use of cash payment is positively correlated to synergies in merges and acquisitions. We empirically test this implication and find consistent results.

Haircuts and Credit Risk over the Cycle [Abstract]
Selected presentations: Econometric Society World Congress(2015)

This paper develops a dynamic general equilibrium model with heterogeneous beliefs and collateral constraints. The endogenously determined haircuts are countercyclical and thus lead to a downward margin spiral that exacerbates financial instability.

Mailing Address

School of Management and Economics, 2001 Longxiang Road
Longgang District, Shenzhen, 518172, China