Working Papers

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1. "Impact Investing and Venture Capital Industry: Experimental Evidence" 2021

Presentation: WFA (2022), RBFC (2022), ABFER (2023), Active Management Research Symposium - ESG Investing in Private Markets (2022), the 1st Conference in Sustainable Finance at the University of Luxembourg (2022), Conference on Ageing and Sustainable Finance (2022), AsianFA Annual Conference (2022), FMA European Conference (2022), FMARC (2022), IFN (2022), the Fourth Israel Behavioral Conference (2022), Bayes Business School (2022), SFiC (2022), MISUM (2022)

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Abstract: This paper studies the effect of startups' ESG characteristics on venture capitalists' investments by linking investors’ behavior in an incentivized experiment to their real-world portfolio data. I find that investors perceive impact ventures to be less profitable and harder to evaluate than similar profit-driven startups. Investors’ interest in impact ventures positively correlates with their social preferences, supporting the non-pecuniary motivation for impact investing. Impact ventures are also associated with better ex-post performance. The paper uses a dynamic Bayesian model to demonstrate how these identified beliefs and preferences affect impact investment in the venture capital industry.

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2. "How Venture Capitalists and Startups Bet on Each Other: Evidence From an Experimental System" 2020 with Mehran Ebrahimian

Presentation: WFA (2023), NBER SI Entrepreneurship (2023), ​EFA (2023), NFA (2023), AEF (2022), ENTFIN (2022), FMA Asia Pacific Conference (2022), IFN (2023), IBEFA (2023), FMA Europe (2023)

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Abstract: We estimate a dynamic search-and-matching model with bargaining between venture capitalists (VCs) and startups using two symmetric incentivized resume rating (IRR) experiments implemented with real US VCs and startups. Participants evaluate randomized profiles of potential collaborators and are incentivized by real opportunities of being matched with their preferred cooperative partners. Using these experimental behaviors and real-world portfolio data as inputs to our structural model, we identify that both investors' human capital (i.e., entrepreneurial experiences) and funds' organizational capital (i.e., previous financial performance, fund size), as well as startups' human assets (i.e., educational background, entrepreneurial experiences) and non-human assets (i.e., traction, business model) impact matching payoff and continuation values of startups and VCs. While an average VC gets more value in equilibrium than an average startup due to better outside options, startups altogether receive four-fifths of the total present value of all matches in our environment.

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3. "Discrimination In the Venture Capital Industry: Evidence from Field Experiments" 2020

Reject and Resubmit the Journal of Finance

Presentation: HEC Paris Entrepreneurship Workshop (2021), NFN Young Scholars Workshop (2021), SFA (2022), HKUST (2021), UW Foster (2021), SSE (2021), Warwick (2021), CUHK Shenzhen (2021), University of Gothenburg (2022), EasternFA (2023), CES North America Conference (2023)

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Abstract:  This paper examines discrimination by early-stage US investors based on startup founders' gender and race using complementary field experiments. Consistent with the prediction of discrimination theories, results show that investors implicitly discriminate against women and Asians when evaluating attractive startups but favor them when evaluating struggling startups. Among multiple coexisting sources of discrimination identified, statistical discrimination and implicit discrimination are important reasons for investors' ``anti-minority'' behaviors. A novel consistent estimator is developed to measure the polarization of investors’ discrimination behaviors and their separate driving forces. Furthermore, gender homophily exists when investors provide anonymous encouragement to startup founders.

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4. "Does ESG Investing Help VC Funds to Attract Startups? Experimental Evidence" 2022

Best Paper Awards (ESG) at SWFA Annual Conference 2023

Vinnova Funding Grants 2022

Presentation: CICF (2023), Oxford Sustainable Private Markets Conference (2022), the KWC/SNEE Conference on Sustainable Finance (2022), YSBC (2022), FMA Asia Pacific Conference (2022), SWFA (2023), FMA Europe (2023)

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Abstract: Despite recent progress in examining investors' ESG preferences, little is known about firms' preferences for ESG investors. This paper studies whether aiming for ESG influences startups' intentions to collaborate with venture capitalists through two complementary field experiments that involve real US startup founders and real-world stakes. The first experiment requires entrepreneurs to evaluate multiple randomly generated investor profiles so that they can receive a recommendation list containing real matched investors' information. The second experiment is a novel payment game created to elicit entrepreneurs' taste-driven preferences. Provided with real monetary incentives, entrepreneurs decide whether to pay for a more comprehensive investor recommendation list that contains a randomized number of ESG investors and is sold at a randomized price. Results find that (i) Aiming for E, S, and G has heterogeneous effects. Environmental initiatives reduce venture capitalists' attractiveness to startups while social initiatives might improve investors' attractiveness. (ii) Positive assortative matching based on ESG exists in the startup fundraising process. (iii) Male investors benefit from aiming for social impact while female investors get punished for aiming for environmental impact. (iv) A random utility model suggests that startup founders have taste-driven preferences for ESG investors.

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5. "Two-sided Discrimination in an Entrepreneurial Financing Setting: Experimental and Theoretical Evidence" 2022 with Junlong Feng, Weijie Zhong

Research Funding from Stanford GSB

Presentation: AEA Poster (2022), Columbia Experimental Design Workshop (2022)

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Abstract: Women's participation rate in the entrepreneurial community has been constantly lower than in other high-skilled jobs for the previous decades. This paper aims to explain this phenomenon through the angle of gender bias on both sides of a two-sided matching market (i.e. entrepreneurial financing process). We first prove the existence of implicit gender bias against female investors among U.S. startup founders by using a startup-side incentivized resume rating (IRR) experiment. When evaluating randomized venture capitalist profiles, startup founders indicate lower interest in female investors when they become fatigued. Also, female founders show more interest in contacting female investors and gender homophily exists. Similarly, Zhang (2020) implements an investor-side IRR experiment proving the implicit gender bias against female startup founders among U.S. VC investors. Combining this experimental evidence, we provide a theoretical framework to investigate how discrimination together with homophily in two-sided matching marketing can lead to a long-lasting low participation rate of women. Although we also tested racial bias related to Asian groups, the bias against Asians only exists during the investors' investment process rather than the founder's fund-seeking process. Hence, Asians' participation rate in entrepreneurial activities still increased in the previous few years.
 

6. "Do Rounding-Off Heuristics Matter? Evidence from Bilateral Bargaining in the U.S. Housing Market" 2023 with Haaris Mateen, Franklin Qian, and Tianxiang Zheng

Supersedes the paper "The Microstructure of U.S. Housing Market: Evidence from Millions of Bargaining Interactions" 2021 with Haaris Mateen, Franklin Qian 

Presentation: Atlanta Fed (2022), Columbia Experimental Design Workshop (2023), AREUEA Annual Conference (2024)

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​​Abstract: Using confidential offer-level data on the US housing market, this paper examines the rounding-off heuristics in the bilateral bargaining process. We demonstrate that home sellers and home buyers follow different rounding-off heuristics. While sellers' list prices cluster more frequently around charm numbers (e.g. 349,999), buyers' offer prices and negotiated final sales prices cluster at salient round numbers. When sellers use round numbers as initial listing prices, buyers are also more likely to use round numbers as their offer prices and make greater counteroffer adjustments. A round offer price reduces the probability of the offer leading to a successful home purchase. Consistent with the cheap talk hypothesis, a round list price significantly correlates with a lower sales price, more offers received, and less time on the market. Compared with round-price listings, charm-price listings are associated with fewer offers, longer time on the market, and lower sales price, although the latter is used more frequently by sellers. These empirical findings provide novel insights into bilateral bargaining behavior in the U.S. housing market.