Edward Shore

Research

Publications

Corporate Social Responsibility, with Harrison Hong. Annual Review of Financial Economics, November 2023, Vol. 15, 327-350. Link.

Is shareholder interest in corporate social responsibility driven by pecuniary motives (abnormal rates of return) or non-pecuniary ones (willingness to sacrifice returns to address various firm externalities)? To answer this question, we categorize the literature into seven tests: (1) costs of capital, (2) performance of portfolios, (3) ownership by types of institutions, (4) surveys and experiments, (5) managerial motives, (6) shareholder proposals, and (7) firm inclusion in responsibility indices. These tests and the most recent proposals data predominantly indicate that shareholders are driven by non-pecuniary motives. To stimulate further research on welfare implications for global warming, we assess whether estimates of the returns shareholders are willing to sacrifice (or, ‘greeniums'), along with the increasing amounts of assets pledged to firms that become sustainable, are consistent with the growth of aggregate investments in the decarbonization sector.

Working Papers

Living up to Analyst Expectations. (Job Market Paper) Link.

I show, via a combination of theory and empirical evidence, that managers face incentives to manipulate earnings in response to forecasts even when the risk of missing the forecast is low. Using shifts in analyst composition effected by brokerage mergers as a source of exogenous variation, I establish a one-to-one response of firm earnings to analyst forecasts that operates regardless of the distance between the forecast and earnings. The results in this paper challenge the traditional view that earnings manipulation is only motivated by the risk of narrowly missing expectations, suggesting a broader sensitivity of earnings to analyst signals.

How Great is Transition Risk?, with Harrison Hong and Jeffrey Kubik, NBER Working Paper, Link.

Renewable portfolio standards (RPS), a widely-used climate policy mandating that utilities switch from fossil fuels to renewables, increases the volatility of affected firms' asset-value distribution. Our approach to quantifying transition risk combines reduced-form estimates from a new within-jurisdiction identification strategy with structural methods. RPS reduces the emissions of affected firms but not their profitability due to a pass through of higher renewable costs to consumers. Nonetheless, bond markets charge these firms larger credit spreads because the transition raises the variability of their electricity prices, resulting in higher asset volatility. Higher asset volatility in turn reduces affected firms' investment in total electricity capacity, and lowers welfare.

‘Did You Catch the Game Last Night?' Peer Group Effects in Sell-Side Analyst Forecasts, with Lukas Fischer. Link.

Evidence suggests that peer groups have significant implications for economic decision-making, yet ambiguity remains on the precise mechanism of these effects. In particular, it is often unclear whether peer effects are driven by the sharing of information or the local diffusion of sentiment. In this paper, we identify a source of peer group influence that is plausibly orthogonal to information provision yet nonetheless affects economic decision-making. Using novel data on equity analyst education, merged with earnings-per-share forecasts, we identify a source of exogenous variation in analyst forecasts: the shock to an analyst of their undergraduate college football team winning the NCAA Championship Game. We first find that analysts' forecasts respond positively to the analysts' undergrad school's football team winning the NCAA final. We then find that the sentiment shock of `winning' spreads within an analyst's brokerage, positively influencing the forecasts of their colleagues. We find that brokerages where the degree of this diffusion is greater have lower female representation in their analyst teams, as well as lower ESG scores.

Work in Progress

Doing well by doing… good? The Efficacy of the Equator Principles, with Ricardo Pommer.

Do corporate social responsibility initiatives designed to limit environmental damage actually reduce that damage? Using the setting of the ‘Equator Principles', a major industry-led project for setting environmental standards in project financing, we attempt to answer this question. By constructing a novel database of geo-located construction projects in the United States between 1995 and 2020, we test whether the adoption of the ‘Equator Principles' had a meaningful impact on PM 2.5 emissions (a key pollution measure related to human health) during construction. (Results to come soon)

Teaching

Corporate Finance, Summer 2022, Columbia University

I taught a self-designed corporate finance class as a summer instructor at Columbia University. You can find my evaluation here. Below are the syllabus and notes for the class.

Syllabus

Time Value of Money
Net Present Value
Expectations

Risk and Return
Valuing Stocks
CAPM

Risk and the Cost of Capital
Corporate Financing
Agency

The Efficiency of Markets

Teaching Awards

Wueller Teaching Award, Best Master’s level TA, Runner-up 2022, Columbia University

Wueller Teaching Award, Best PhD level TA, Winner 2020, Columbia University

Wueller Teaching Award, Best Master’s level TA, Runner-up 2020, Columbia University