Main Page
Curriculum Vitae


McLain Family Professor

Associate Professor of Finance

Auburn University

Multinationality and Opaqueness 

Tom Aabo, Christos Pantzalis, and Jung Chul Park, Journal of Corporate Finance, forthcoming.


We investigate whether and how multinationality affects the opaqueness of the firm. We use multiple alternative measurements of multinationality and opaqueness. Spanning nearly three decades for a large sample of US non-financial firms, we find a statistically and economically significant, positive relationship between multinationality and opaqueness. We find that this positive relationship hinges on whether or not the degree of foreign involvement is compatible with the structure of the firm's foreign operations network. Our results imply that multinationality's impact on opaqueness is alleviated when there is harmony between the size of foreign involvement and the extent of the MNC network's geographic dispersion. Previous literature has implicitly assumed a simple, positive relationship. This is the first study to explicitly address the question in a comprehensive manner.


Corporate Governance and Bankruptcy Risk

Ali F. Darrat, Stephen Gray, Jung Chul Park, and Yanhui Wu, Journal of Accounting, Auditing and Finance, forthcoming.


We examine how firm characteristics, particularly the degree of firm complexity and the firm's need for specialty knowledge, affect the relationship between corporate governance and the risk of bankruptcy. We find that having larger boards reduces the risk of bankruptcy only for complex firms. Our results also suggest that the proportion of inside directors on the board is inversely associated with the risk of bankruptcy in firms that require more specialist knowledge, and that the reverse is true in technically unsophisticated firms. The results further reveal that the additional explanatory power from corporate governance variables becomes stronger as the time to bankruptcy is increased, implying that although corporate governance variables are important predictors, governance changes are likely to be too late to save a firm on the verge of bankruptcy.


Exuberance Out of Left Field: Do Sports Results Cause Investors to Take Their Eyes Off the Ball?

Christos Pantzalis and Jung Chul Park, 2014, Journal of Economic Behavior and Organization, Volume 107, 760-780.


This study investigates whether stock price performance contains a sizeable component that emanates from local sports sentiment. We measure sports sentiment by the performance of sports teams from the four major professional sports leagues (NFL, MLB, NBA, and NHL) that are based nearby firms' headquarters. We find that concurrent stock returns and sports performances associated with the same locality are highly correlated. Consistent with the notion that mispricing is indeed caused by sports sentiment, we also determine that sentiment is related to a subsequent gradual return reversal, which occurs over the following three year period. In addition, we confirm that local comovement is more pronounced in the presence of sports sentiment in support of the notion that local stock preference of relatively less sophisticated retail investors can be driven by factors that are not information-based. Finally, we devise investment strategies based on recent past observations of sports sentiment and find that they generate sizable abnormal returns, especially in cases of firms located in areas where fan base support appears to be stronger.


Too Close for Comfort? Geographic Propinquity to Political Power and Stock Returns

Christos Pantzalis and Jung Chul Park, 2014, Journal of Banking and Finance, Volume 48, 57-78.


We show that firm headquarters' geographic proximity to political power centers (state capitals) is associated with higher abnormal returns. Consistent with the notion that this effect is rooted in social network links, we find it is more pronounced in communities with high levels of sociability and political values' homophily, and that it dissipates when firms move their headquarters to another state. Finally, in line with the view that investors perceive such networks to be associated with political risk, we find that this effect is particularly strong when there are substantial levels of corruption, dependency on government spending, and politicians' turnover.

Do Family Owners Use Firm Hedging Policy to Hedge Personal Undiversified Wealth Risk?

Chansog (Francis) Kim, Christos Pantzalis, and Jung Chul Park, 2014, Financial Management, Volume 43, Issue 2, 415-444.


We examine whether family ownership affects the value impact of the operational and financial dimensions of firms’ hedging policies. In the process, we confirm that family firms’ market valuation is higher than non-family firms, consistent with a view that family firms benefit from family owners’ long term perspective and ability to monitor managers. We also find that while both operational and financial hedging policies per se are valuable in non-family firms, they do not create any value in family firms. These results support the notion that founding families’ need to hedge the risk of their undiversified personal wealth portfolio leads to suboptimal risk management decisions.

Equity-Based Incentives, Risk Aversion, and Merger-Related Risk-Taking Behavior

Bradley W. Benson, Jung Chul Park, and Wallace N. Davidson III, 2014, Financial Review, Volume 49, Issue 1, 117-148.


We find that post-merger equity risk is negatively related to the sensitivity of CEO wealth to stock return volatility (vega), but is concentrated in CEOs with high proportions of options and options that are more in-the-money. The probability of industrial diversification also increases in vega. Additional tests show that the decline in post-merger equity risk results in a significant decrease in shareholder wealth. This decrease is concentrated among firms with CEOs having the highest delta and the highest delta and vega. Our results suggest that the increased convexity provided by option-based compensation does not necessarily increase risk-taking behavior by CEOs.

Differential Effects of Pre- and Post-Acquisition R&D Expenditures on Post-Acquisition Performance

Son A. Le, Jung Chul Park, and Mark Kroll, 2014, Journal of Business Research, Volume 67, Issue 2, 92-99.


Drawing from the behavioral theory of the firm and the resource-based view, we argue that different types of R&D (explorative and exploitative) and the timing of R&D investments (pre- and post-acquisition) have differential effects on post-acquisition performance. By using a sample of 396 technology acquisitions, we find that pre-acquisition explorative and post-acquisition R&D expenditures are more beneficial for post-acquisition performance than are pre-acquisition exploitative and post-acquisition explorative R&D expenditures. Our results also show that firms investing in explorative R&D in the pre-acquisition stage and then exploitative R&D in the post-acquisition stage have better post-acquisition performance than firms that do otherwise.

Agency Costs and Equity Mispricing

Christos Pantzalis and Jung Chul Park, 2014, Asia-Pacific Journal of Financial Studies, volume 43, Issue 1, 89-123.


We investigate a link between agency costs and equity mispricing. We employ comprehensive multi-dimensional measures of agency costs and mispricing, and find that mispricing is significantly and positively related with agency costs. We also explore the effect of equity-based compensation on the impact of agency costs on mispricing. Our investigation extends previous studies that do not separately account for the options and restricted stock grants components of equity-based compensation. We show that stock options, originally intended to resolve conflicts of interest, exaggerate the problem and this phenomenon is pronounced especially when firms are overvalued. Overall, our results imply that compensation packages that are not structured optimally could lead to greater mispricing.

Business in Troubled Waters: Does Adverse Attitude Affect Firm Value?

Jung Chul Park, Dipanwita Sarkar, Jayanta Sarkar, and Keven Yost, 2013, Journal of Corporate Finance, Volume 22, 221-235.


This paper investigates the relationship between US MNCs' valuations and anti-Americanism in countries where MNCs' foreign subsidiaries are located. We find that MNCs suffer value-destruction when they enter markets where people express severe anti-Americanism. However, we uncover that geographic diversification into these high anti-Americanism countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater when barriers to competition are higher.

Press Coverage and Stock Price Deviation from Fundamental Value

Chia-Wei Chen, Christos Pantzalis, and Jung Chul Park, 2013, Journal of Financial Research, Volume 36, Issue 2, 175-214.


We find that excessively high levels of press coverage can significantly exaggerate stock price deviation from fundamental value. We show that being “in the news” a lot is associated with both greater liquidity and more information risk. When we examine signed mispricing, we find that the effect of abnormal press coverage is significant only for stocks with high relative valuations, consistent with the concurrent existences of media-induced sentiment and media bias. Indeed, we uncover that the sentiment effect is attenuated when firms with low valuations receive heavy coverage in the local press.

Does It Help to Have Friends in High Places? Bank Stock Performance and Congressional Committee Chairmanships

Daniel M. Gropper, John S. Jahera Jr., and Jung Chul Park, 2013, Journal of Banking and Finance, Volume 37, Issue 6, 1986-1999.


Does a politician with power in the U.S. Congress positively affect the value of firms headquartered in their home state?  We investigate this question by examining the profitability and stock performance of commercial banks.  Banks can be enormously influenced by the political and regulatory environment. We find that banks headquartered in states where a Senator or member of the House of Representatives serves as the chairman on their respective banking committee in Congress outperform banks headquartered in other states. In addition, we find that this “chair effect” is more pronounced when the committee chairs are strongly aligned with other politicians in Congress, when they are more experienced, and when banks are clustered in the home state, suggesting that the potential benefits generated from chairmanship are in more demand.  Overall, our results suggest that there are some important value implications of a local politician’s power in Congress.

Corporate Boards' Political Ideology Diversity and Firm Performance

Incheol Kim, Christos Pantzalis, and Jung Chul Park, 2013, Journal of Empirical Finance, Volume 21, 223-240.


We investigate whether diversity in points of view within corporate boards, as captured by the diversity in political ideology of board members, can affect a firm’s performance. We employ personal political contributions’ data to measure political ideology distance among groups of inside, outside directors and the CEO. Our empirical evidence strongly supports the notion that outside directors’ monitoring effectiveness is more likely to be enhanced when their viewpoints are distinct from those of management. We find that ideologically diverse boards are associated with better firm performance, lower agency costs and less insiders’ discretionary power over the firm’s Political Action Committee (PAC) spending. Taken together, our results lead us to conclude that multiplicity of standpoints in corporate boardrooms is imperative for board effectiveness.

Political Geography and Stock Returns: The Value and Risk Implications of Proximity to Political Power

Chansog (Francis) Kim, Christos Pantzalis, and Jung Chul Park, 2012, Journal of Financial Economics, Volume 106, Issue 1, 196-228.


We show that political geography has a pervasive effect on the cross-section of stock returns. We collect election results over a 40-year period and use a political alignment index (PAI) of each state’s leading politicians with the ruling (presidential) party to proxy for local firms’ proximity to political power. Firms whose headquarters are located in high PAI states outperform those located in low PAI states, both in terms of raw returns, and on a risk-adjusted basis. Overall, although we cannot rule out indirect political connectedness advantages as an explanation of the PAI effect, our results are consistent with the notion that proximity to political power has stock return implications because it reflects firms’ exposure to policy risk.

Investment Opportunities and Dividend Omissions

Hui Liang, Laura Moreau, and Jung Chul Park, 2011, Journal of Business Research, Volume 64, Issue 10, 1108-1115.


This study examines the market’s reaction to dividend omission announcements and finds that if dividends are skipped to preserve cash for good investments, investors do not necessarily regard the omission as negative information.  Markets penalize firms for dividend omissions only in the absence of a good stream of investments. In addition, the positive relation between investment opportunity and abnormal stock returns around the announcements is stronger when the level of information asymmetry between management and the rest of the market participants is low.  Additional tests reveal that good omitters overcome underperformance faster in the post period.  Overall, the results suggest that financial markets interpret differently the information conveyed in the announcement of dividend omission depending on the firm’s future prospects.

Consumption-Based CAPM Models: International Evidence

Ali F. Darrat, Bin Li, and Jung Chul Park, 2011, Journal of Banking and Finance, Volume 35, Issue 8, 2148-2157.


We examine the performance of several types of the consumption-based CAPM (C-CAPM) models to explore if consumption factors matter for determining excess returns across 17 MSCI country indexes. While the classic world C-CAPM does exhibit some power in explaining cross-sectional variations of expected excess returns, the model seems to require an implausibly large coefficient of risk aversion. The more sophisticated models including the heterogeneous C-CAPM, the world surplus consumption and the habit-formation models provide more reasonable estimates and add substantial explanatory power for the variation in the cross section of excess stock returns. Our results suggest that country-specific consumption risk is not fully diversified thus implying that stock returns are related to idiosyncratic consumption risk.

Job Market Signaling: What Drives the Productivity of Finance PhDs?

Donald Flagg, Otis W. Gilley, and Jung Chul Park, 2011, Financial Management, Volume 40, Issue 2, 483-513.


We study the research productivity of new Finance Ph.D.s as measured by the number of quality publications. A commonly accepted notion is that the highest-ranked schools produce the candidates with the greatest potential for high quality publications. Our results, however, find publications or revisions in top-tier journals during the doctoral program are a stronger measure of potential research productivity than the school attended. Our findings demonstrate how candidates outside of the top schools can signal their future research productivity. Even though we examine the specialized labor market, our results have broader implications for markets outside academics.

Women in Top Management and Agency Costs

Anthony F. Jurkus, Jung Chul Park, and Lorraine S. Woodard, 2011, Journal of Business Research, Volume 64, Issue 2, 180-186.


This study investigates gender diversity among the top managers of Fortune 500 firms and its effect on agency costs. The study finds that firms with a greater percentage of female officers present lower agency costs but that the negative relation is not robust when considering the endogeneity of diversity. The study also finds that external governance influences the relationship. Although increasing diversity does not reduce agency costs for all firms, the evidence shows that diversity is significantly negatively related to agency costs in firms in less competitive markets. The results suggest that increasing diversity in management can have beneficial effects for firms where strong external governance is absent.

Corporate Hedging Policy and Equity Mispricing

J. Barry Lin, Christos Pantzalis, and Jung Chul Park, 2010, Financial Review, Volume 45, Issue 3, 803-824.


We show that firms’ use of derivatives is negatively associated with stock mispricing. This result is consistent with the notion that hedging improves the transparency and predictability of firms’ cash flows resulting in less misvaluation. Furthermore, we show that the negative relationship between mispricing and hedging is particularly strong when market value is below fundamental value, which is consistent with prior evidence that hedging has a positive impact on firm valuation. Finally, we provide evidence that a “spread-out” hedging policy that entails the use of a variety of derivative contracts can be more effective in reducing mispricing.

CEO Decision Horizon and Firm Performance: An Empirical Investigation

Murad Antia, Christos Pantzalis, and Jung Chul Park, 2010, Journal of Corporate Finance, Volume 16, Issue 3, 288-301.


We investigate the effect of top managers' myopia on firms' market valuation. We devise a measure of expected CEO tenure as a proxy for the length of CEO decision horizon. After accounting for the endogenous nature of CEO horizon, our empirical tests show that shorter CEO horizon is associated with more agency costs, lower firm valuation and higher levels of information risk. The results are consistent with the notion that a short CEO decision horizon is indicative of preference for investments that offer relatively faster paybacks at the expense of long-term value creation.

Equity Market Valuation of Human Capital and Stock Returns

Christos Pantzalis and Jung Chul Park, 2009, Journal of Banking and Finance, Volume 33, Issue 9, 1610-1623.


We investigate whether and how well firms’ stock market valuations reflect their employees’ collective skills and effectiveness relative to that of their industry peers and competitors. We devise a relative stock market valuation measure of human capital intangibles (EVHC) and find that portfolios of low EVHC firms systematically outperform portfolios of high EVHC firms by an average 1.34% per month. However, this is primarily a small firms effect, because for large firms the excess returns of the arbitrage portfolio that is long on the low EVHC stocks and short on the high EVHC stocks is zero. Our results suggest that reliance on human capital intangibles may proxy for risk not fully accounted for by conventional asset pricing models, or alternatively, that the market cannot correctly price human capital intangibles for small size firms.

Derivatives Use, Information Asymmetry, and MNC Post-Acquisition Performance

J. Barry Lin, Christos Pantzalis, and Jung Chul Park, 2009, Financial Management, Volume 38, Issue 3, 631-661.


We utilize a sample of US acquiring firms that engaged in international M&As to document the effects of corporate derivatives use on post-M&A long-term performance. We find that derivatives users outperform nonusers. Furthermore, we find that acquirers with derivative policies that are more comprehensive and sophisticated outperform those with less comprehensive and sophisticated policies. They, in turn, outperform acquirers with no existing policies in place. Our results are consistent with the notion that the use of derivatives lowers information asymmetry related agency problems. Furthermore, our evidence indicates that derivatives use is an important corporate activity that has a profound effect on post-M&A performance.

Legal Environment, Internalization, and U.S. Acquirer Gains in Foreign Takeovers

Christos Pantzalis, Jung Chul Park, and Ninon Sutton, 2008, Journal of Financial Research, Volume 31, Issue 2, 167-191.


In examining takeovers of foreign targets by U.S. firms, we investigate the effect of the target country’s legal environment on acquiring firm value. Our results indicate that acquirers of target firms located in civil law countries experience significant positive abnormal returns, especially when the acquirer possesses a high level of intangibles. Furthermore, we find that acquirers with high levels of intangibles are more likely to acquire target firms in civil law countries. These findings suggest that the transfer of intangibles overseas provides relatively larger efficiency benefits for multinational corporations in cases where the alternative, contracting in external markets, is more difficult.

Corruption and Valuation of Multinational Corporations

Christos Pantzalis, Jung Chul Park, and Ninon Sutton, 2008, Journal of Empirical Finance, Volume 15, Issue 3, 387-417.


This paper examines the relationship between U.S. MNCs' valuation and corruption in countries where the MNCs' foreign subsidiaries are located. We uncover that country-level corruption has a multi-dimensional impact on MNCs' valuation. We find that the impact of intangibles is less pronounced for MNCs operating primarily in corrupt countries, consistent with the view that the lack of property rights protection and information asymmetry problems are more prevalent in corrupt environments. We also find that the expansion of a MNC network dominated by corrupt countries negatively affects MNCs’ valuation, suggesting that investors may recognize it as an additional risk. However, more importantly, we find that geographic diversification in corrupt countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Assuming that transactions costs in corrupt countries are higher, our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater in the presence of corruption. Our findings remain unchanged when we account for endogeneity at the country-and firm-level, when we use alternative corruption measures, and when we re-estimate models by omitting MNCs with operations in locations with big “negative” shocks during the sample period. Moreover, we show that firms with expertise in dealing with corruption enjoy greater benefits from internalization.

Corporate Use of Derivatives and Excess Value of Diversification

J. Barry Lin, Christos Pantzalis, and Jung Chul Park, 2007, Journal of Banking and Finance, Volume 31, Issue 3, 889-913.


We provide a link between diversification discount and corporate use of financial derivatives. We show that diversified firms benefit from financial risk management. Our findings are consistent with the notion that derivative usage lowers information asymmetry and thereby reduces the negative valuation effects of diversification. Our evidence complements the earlier findings of both the risk management literature and diversification discount literature and is robust to controls for endogeneity and information asymmetry levels.


Dr. Park on Faculty Web

Finance Group at Auburn

Harbert College of Business

Auburn University