Yijun Zhou

PhD Candidate in Finance

INSEAD, France

Email: yijun.zhou@insead.edu

Research Interests: Empirical Corporate Finance; Labor and Finance; Mutual Funds; Information in Financial Markets

Working Papers

1. To Fire or Not to Fire? The Role of Job Security in Asset Management (Job Market Paper)

- Presented at: Northern Finance Association Conference 2019; LBS Trans-Atlantic Doctoral Conference 2019; Brown Bag at Amsterdam Business School 2019; Brown Bag at INSEAD 2019; Workshop at Tsinghua PBC School of Finance 2019

ABSTRACT: Does job security affect employees’ incentives and performance, and if so, in which direction? I study the causal effect of job security in the setting of asset management and exploit a novel quasi-natural experiment: When an asset management firm’s external subcontractor is involved in regulatory misconduct, the firm increases its reliance on its internal funds and becomes less likely to terminate its internal fund managers, resulting in exogenously increased job security for fund managers inside the firm. Using a difference-in-differences approach, I find that fund managers experiencing increased job security deliver lower performance, especially those who care less about their reputation in the labor market. Furthermore, I show that the firm provides higher pay-for-performance as an imperfect substitute to incentivize employees when internal job security exogenously increases. Overall, my results suggest that higher job security disincentivizes employees and can negatively affect productivity.

2. Strategic Complementarities in Monitoring: The Bright Side of Benchmarking

- Award: 30th AFBC PhD Forum Best Paper First Prize

- Presented at: Financial Management Association Conference 2018; China International Conference in Finance (CICF) 2018; 30th Australasian Finance and Banking Conference (AFBC) and PhD Forum 2017; 6th Wharton–INSEAD PhD Consortium 2017; Brown Bag at INSEAD 2017

ABSTRACT: In the mutual fund industry, investment styles act as benchmarks: each fund is required to invest in accordance to its style and their performance is benchmarked against other same-style funds. This paper examines how benchmarking affects the interactions between same-style funds in their monitoring decisions regarding portfolio companies. By scrutinizing the actual voting behavior of mutual funds and exploiting exogenous fire sales and purchases as instruments, I find that incentives of an individual fund to monitor a portfolio company increase with the presence of other same-style funds as shareholders in the company and increase with the holdings of other same-style funds. The results support the existence of strategic complementarities among same-style funds in monitoring. Consequently, companies that are subject to higher strategic complementarities among same-style funds receive more monitoring and make better M&A decisions. Overall, my findings shed light on a bright side of benchmarking—belonging to a same style can act as a coordination device and help mutual funds overcome the free-rider problem, contributing to governance in their portfolio companies.

3. Segmented Institutional Investor Attention in Deciphering Firm-Specific Information

- With Massimo Massa and Hong Zhang

ABSTRACT: What researchers often refer to as “firm-specific information” is complex in nature—it synchronizes news originated from different categories of economic sources. How capable institutional investors process information across different news-categories becomes crucial to market efficiency. We find that institutional investors specialized in fewer news- categories in trading better predict stock returns, implying that skillful investors face constraints in expanding their information-processing skills to different news categories. This specialization, however, reduces market informativeness, because the inattention of even a small fraction of investors may hinder information dissemination in their specialized news-categories. Our results highlight a fundamental friction to hinder market efficiency.

Conference Discussions

1. “Media-driven Comovement: Evidence from China” by Yi Li, Dehua Shen and Wei Zhang

China International Conference in Finance (CICF), Guangzhou, 2019

2. “Excess Volatility from Increasing Overreaction” by Daniele d’Arienzo

LBS Trans-Atlantic Doctoral Conference, London, 2019

3. “Colors, Emotions, and the Auction Value of Paintings” by Marshall (Xiaoyin) Ma, Charles N. Noussair, and Luc Renneboog

SFS Cavalcade Asia-Pacific, Singapore, 2018

4. “Risk Tolerance, Interest Rates, and Fund Flow Dynamics” by Woon Sau Leung and Zhongyan Zhu

Financial Management Association Conference, San Diego, 2018

5. “Watching the Wolves: Unveiling the Moderating Role of Corporate Governance on CEO Power” by Mark Humphery-Jenner, Emdad Islam, Lubna Rahman and Jo-Ann Suchard

30th Australasian Finance and Banking Conference, Sydney, 2017

Teaching Experience

MBA Finance Core Course Tutorial Instructor, INSEAD

1. Financial Markets and Valuation, 2017-2018

2. Corporate Finance Policy (Co-instructor), 2016-2017

3. Financial Markets and Valuation, 2016-2017

4. Financial Markets and Valuation, 2015-2016