Topic: More Cash Flows, More Options? The Effect of Cash Windfalls on Small Firms
Speaker: Xing Huang, Washington University in St. Louis
Time: Friday, 28 June, 12:15-13:30
Location: Room 217,Guanghua Building 2
This paper studies the effect of shocks to firms’ internal resources on business success and on owners’ economic behaviors. We use a new source of variation in cash flows by exploiting the bonus that retailers earn when selling jackpot-winning lottery tickets. Increases in the retailer’s internal resources reduce the probability the company will survive. The evidence is not consistent with deteriorating credit behavior or owner retirement but instead suggests that small business owners who receive large cash windfalls are more likely to start new businesses in non-retail industries. This effect becomes stronger when owners reside in low-income ZIP codes or do not own real estate assets. Finally, the amount of the bonus has a positive impact on revenues and number of employees for those retailers that remain open. Overall, our results suggest that small business owners may face financial constraints in their attempts to grow both internally and externally, which may result in both resource and talent misallocation.
Xing Huang is an Assistant Professor of Finance at the Olin Business School, Washington University in St. Louis. She received a Ph.D. in Economics from the University of California at Berkeley in 2013, and a B.A. and a M.A. in Finance from Peking University. Prior to joining Wash U, Dr. Huang served on the faculty of the Broad College of Business at Michigan State University. She has also worked as research associate at Morgan Stanley Capital International and summer research fellow at Federal Reserve Bank of Chicago.
Dr. Huang's research focuses on behavioral finance, asset pricing, and household finance. She is interested in empirically characterizing how market participants behave, and identifying how these (non-standard) behaviors can improve our understanding on the pricing of the financial market. Her work has been published in the Review of Financial Studies, the Journal of Financial Economics, the Review of Finance, and Management Science.
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