Zhan Li

Job Market Candidate

Department of Economics
W. P. Carey School of Business
Arizona Strate University

    Office:CPCOM 425A
    Mailing Address:
    Main Campus
    PO BOX 879801
    Tempe, AZ 85287-9801

    Phone: 480-965-6880
    Fax: 480-965-0748
    Email: Zhan.Li@asu.edu

Research Interests

Corporate Governance and Financial Market


A Unique “T+1 Trading Rule” in China: Theory and Evidence , 2012, with Ming Guo and Zhiyong Tu, Journal of Banking and Finance 36, 575–583.

Working Papers

Boards of Directors and the Market for CEOs, 2014, Job Market Paper.

ABSTRACT: We consider a CEO labor market in which a board in each firm hires, monitors and compensates the CEO. In such market, corporate governance is driven by the scarcity of CEO talent. Larger firms have worse corporate governance than smaller firms when CEO talent becomes scarcer. Positive assortative matching between firm size and CEO talent can be distorted when board in- dependence, board ownership or board reputational concerns are lower than a threshold. Such distortion results in a lower economic efficiency, lower total firm profits and higher total CEO com- pensation. Our results suggest board independence is more important than previously recognized due to its effect on allocation efficiency besides shareholder protection. Our analysis draws pol- icy implications on Sarbanes-Oxley Act and empirical predictions on CEO compensation, corporate governance and equilibrium sorting pattern.

Director’s Reputation Incentive, Corporate Governance and CEO Labor Market, 2012, Accepted at 2013 Middle West Finance Association Annual Meeting.

ABSTRACT: This paper examines how board’s reputation incentive and corporate governance affect managerial compensation and firm profit in a two-sided matching market. We find that the allocation is distorted from positive assortative matching. In equilibrium, a firm earns lower profit, matches with a more talented manager if the director is more concerned with her reputation, firm has weaker governance, the director’s ability is less known or the product market is more volatile. When compared with positive assortative matching, each manager is overpaid and each firm earns less profit even there is only one weakly governed firm. This is caused by the externality of weak corporate governance which induces every firm to overpay their managers when competing for scarce managerial talent.

Positive Feedback Trading, Short Sale Constraints, and IPO Underpricing: Theory and Empirical Evidence, 2014, with Ming Guo, coming soon.

ABSTRACT: This paper develops a dynamic trading model to explore the impact of positive feed- back trading on IPO underpricing in the presence of short-sale constraints. When positive feedback trading is strong, the speculator adopts a three-stage strategy: bids in the offering lottery to obtain cheap stakes; purchases stocks in the aftermarket to drive up the price; sells his stakes obtained from the offering when positive feedback traders are induced to buy, leading to a higher price. This model shows the aftermarket price can be overpriced even though the IPO price is at the fair value. The predictions of the model are supported by a sample of Chinese IPOs.

Work in Progress

The Bright Side of Busy Directors
Board Composition and Firm Performance: From the Perspective of Board Voting, with Zhenhua Wu

Research Statement

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Teaching Experience

Teaching Assistant

Business Statistics (400 students): Fall 2014
Microeconomic Principles (300-1000 students): Fall 2010, Fall 2011, Spring 2012, Spring 2013, Fall 2013
Macroeconomic Principles (300-1000 students): Spring 2010, 2011, Spring 2012, Spring 2014

Job duties: Hold office hours, design exam questions, hold review sessions and labs, etc.

Grading Assistant

Economics of Healthcare, Spring 2014
Intermediate Microeconomic Theory, Fall 2009, Fall 2012
Game Theory and Economic Behavior, Fall 2012
Industrial Organization and Competition Policy, Fall 2009

Teaching Statement

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