Cameron Truong

This paper asks whether mandatory data breach disclosure laws affect stock liquidity. Using a stacked difference-in-differences design that exploits the staggered adoption of U.S. state data breach notification laws, we find that relative and effective spreads fall by about 7.5% and 8.3% of their sample means. However, this average effect masks substantial heterogeneity across firms, with the liquidity gain depending on two conditions. We find that the net gain accrues only to firms with low ex-ante cybersecurity risk. For high-cyber-risk firms, expected disclosure and litigation costs offset the potential benefit. Additionally, within the low-cyber-risk group, the liquidity benefits are concentrated in less opaque firms. Our results suggest that disclosure mandates and reporting quality therefore act as complements rather than substitutes.

Natural disasters are exogenous shocks to credit rating agencies (CRAs)’ rating behaviors. We find that firms located in the disaster states are abnormally downgraded. CRAs’ reactions to natural disasters are also consistent with investors’ negative reactions. Using instrumental variable (IV) analysis to extract affected firms’ disaster-induced rating changes, we further investigate the spillover effects of natural disasters. We find that the rating changes experienced by firms affected by natural disasters in their headquarters state lead to the same (opposite) directional changes in credit ratings to connected (competitive) firms that are not directly impacted by affected firms’ natural disasters. Interestingly, we also find that CRAs’ reactions to natural disasters are timelier than investors’ reactions. This is significant evidence of CRA's sensitivity to natural extreme events.

Health concerns among employees can cause stress and anxiety, which can result in a shift in their priorities. We investigate how factors such as ethnicity‐related immunity, gender, and older age can impact audit quality due to perceived health‐related risks, anxiety, and fear among engagement audit partners. Our research shows that client firms with female and older engagement audit partners tend to have lower quality audits because the perceived health‐related risks and fears lead them to prioritize their family and personal well‐being over work. Our study provides evidence of the negative impact of health‐related risks and fears on engagement audit firms' ability to conduct effective and efficient audits, leading to more discretionary accruals. Contrary to the belief that female and more experienced engagement audit partners are associated with higher quality audits, our findings suggest otherwise. This has implications for investors, regulators and auditors, as it highlights how health‐related issues can influence employee performance and calls for a more empathetic and considerate approach to addressing these issues.

We document a significant positive relation between extreme positive stock returns around past earnings announcements and stock returns in the 10‐day window before current earnings announcements. The average of risk‐adjusted return differences between stocks with the highest earnings announcement maximum returns and stocks with the lowest earnings announcement maximum returns is 85 basis points in the 10 days leading up to earnings announcements. This is consistent with the argument that investors have a preference for stocks with large payoffs during earnings announcements.

This study explores whether firms decrease their carbon emissions in response to heightened political risk. Political risk often imposes significant economic consequences, prompting companies to engage in costly strategies such as political lobbying. Alternatively, firms may opt to manage their emissions to partially mitigate political risk. We posit that high carbon emissions can attract unwanted political scrutiny, making emissions reduction a strategic response to escalating political risk. Our findings demonstrate that firms indeed lower their emissions in response to political risk. Moreover, we find that specific firm characteristics can affect the relationship between political risk and carbon emissions. Finally, we show that firms achieve emissions reductions through investments in environmental innovation. To investigate robustness, we employ multiple identification strategies, including entropy balancing, instrumental variable analysis, and quasi-natural experiments. Our findings highlight the strategic importance of emissions reduction as a response to political risk, offering insights for policymakers, investors, and corporate decision-makers on aligning sustainability efforts with risk management strategies. Link to published paper: https://doi.org/10.1016/j.eneco.2025.108847

We investigate the nexus between the early-life disaster experiences of chief executive officers (CEOs) and their firms' environmental performance metrics. We hypothesize that first-hand experience of the adversities of natural disasters in the formative years of a CEO can catalyze a transformation in their environmental cognizance and perspective. This transformation is postulated to have a beneficial influence on their corporations' strategic frameworks for environmental risk mitigation. Our results show that entities steered by CEOs exposed to disasters in their early life have fewer incidences of environmental issues. These findings remain consistent even when controlling for other factors or using alternative methods. We suggest that CEOs with early disaster experience have an enhanced perception of risk ramifications, which inculcates a prudential approach to decision making, potentially heightening the environmental risk profile of their enterprises.

We present evidence that auditors consider audit committees with political connections in their audit pricing decisions. Our tests exploit Document 18 released in China in 2013 as a quasi‐experiment where government officials are required to resign from serving as independent directors in Chinese publicly listed firms. We identify 2862 treatment firms whose audit committees immediately lost political connections due to the exogenous shock imposed by Document 18. Our difference‐in‐differences analyses show that treatment firms incur significant audit fees increases after Document 18. Overall, our findings support the view that external auditors perceive client firms whose audit committees possess political connections as of lower audit risk.