Research Statement
My research focuses on agency frictions and corporate finance with a slight tilt towards asset pricing
implications. My experience in applied theory provides a clear lens through to view data, develop
hypotheses, and warn of potential biases in empirical work. To do this, I sometimes develop structural
models that are able to provide counterfactuals. While many of my papers contain theoretical work, I
design models based on careful study of the institutional setting and strive to map model parameters to
data. My research investigates how firms interact with each other and how conflicts arise between
different stakeholders. Along this vein, I have studied conflicts in production network formation, capital
structure decisions, and regulation. I have also studied the asset pricing implications of corporate
governance and common stock ownership distribution.
My job market paper considers the effect of risky debt in a production network setting where firms
endogenously choose sourcing and leverage. Empirically, I find that firms increase the number of
suppliers following debt increases due to higher corporate tax rates. Given the empirical relevance of
this firm-level mechanism, I consider equilibrium network effects when all firms tradeoff between
operational and financial risk. Individual sourcing and leverage decisions forms the network and risk
propagation structure. In equilibrium, the model generates a new notion of debt overhang in tiered
production, where firms with risky debt under-produce because benefits from additional production
accrues disproportionately to creditors and downstream firms while equity bears the costs. This is
distinct from the under-investment issue described in Myers (1977), which relies on a dynamic notion of
production. This overhang issue cannot be easily resolved by increasing competition in the network
because it can increase financial risk.
In other work, I study how corporate governance affects firm value through the voting rights of common
stock. I develop a quantitative model to value the voting component in common stock through the lens
of managerial private benefits. This approach has the advantage of being able to estimate structural
parameters from the data. A cross country calibration informs how much cash flow may be diverted by
the median firm in each country and the average stock return when a proxy contest occurs. The model
can also be estimated at the individual firm level. Voting rights are valuable during proxy contests and
depend on the ownership structure of common stock. To validate certain predictions on the ownership
structure of equity, I empirically study the value of votes by taking the difference between actual stock
price from CRSP and the price of a synthetic stock constructed from options from OptionMetrics, using
the put-call parity and adjusting for American option early exercise value. This study on the control
rights of equity also provides a new channel through which the concentration of voting rights through
intermediaries can affect the probability of a value-increasing proxy contest.
Ben Charoenwong, Ph.D. Candidate in Finance
University of Chicago Booth School of Business
5807 S Woodlawn Ave, Chicago, IL 60637
Phone: +1 (734) 546-4820
Email: [email protected]
Website: https://phd.chicagobooth.edu/ben.charoenwong/
Applied theory also aids in applied empirical work. In a paper with fellow PhD candidates Alan Kwan
from Cornell and Tarik Umar from Chicago Booth, I study the impact of state versus federal regulators
on investment adviser malfeasance. Using the Dodd-Frank Act as a quasi-experiment for mid-sized
investment advisers, we find that investment advisers that switch from being federally regulated to state
regulated receive more complaints from investors. Intuition from agency theory where monitoring
signals are noisy reminds us to break up the observed complaints conceptually into those stemming
from potentially higher detection rates and those stemming from more malfeasance. This helped us to
more precisely develop and test hypothesis regarding the drivers of higher observed complaints. By
studying the cross sectional heterogeneity in treatment effects, we conclude that the evidence is most
consistent with increases in malfeasance.
My research approach in applied theory provides a bridge to collaborate with both theorists and
empiricists in future work. I plan to continue studying different settings where agency conflicts can affect
pricing and efficiency beyond the three papers discussed above. Follow up research will use the
network formation model in my job market paper to study optimal contracting between firms as well as
optimal network structures to maximize industry profits or customer surplus. The implications on risk in
production networks also opens up a set of further empirical research, such as the pricing of debt along
a supply chain, price stickiness between firms, and effects of vertical and horizontal consolidation.
Apart from research in production networks, I also plan to continue investigating how the misalignment
of incentives affects corporate outcomes, potentially in corporate social responsibility and different
payout policies. I also plan to expand the empirical work on regulation, touching on topics of the
incentives, mandates, and financing of regulatory agencies. This collection of research hopes to push
the needle on understanding how agency frictions and financial development can affect firms and their
owners both theoretically and empirically.
Ben Charoenwong, Ph.D. Candidate in Finance
University of Chicago Booth School of Business
5807 S Woodlawn Ave, Chicago, IL 60637
Phone: +1 (734) 546-4820
Email: [email protected]
Website: https://phd.chicagobooth.edu/ben.charoenwong/