Essays on finance, technology, and labor

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Zeng, Linghang
Chava, Sudheer
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This dissertation consists of three essays on finance, technology, and labor. In the first essay, using an anonymized employer-employee matched payroll dataset of 70 million workers, I examine the effect of venture capital (VC) investment flows on large local incumbent firms. I find that a VC investment of $1,000 per capita nearly doubles the wage growth for high-skilled workers in that region, while there is no effect for low-skilled workers. This wage effect is particularly strong in regions with inelastic short-term labor supply, and regions with lower enforceability of non-compete agreements. To mitigate concerns about time-varying shocks at the industry-region level, I exploit within-industry-state and within-firm variation, conduct occupation-level analysis, and utilize variation in VC funding. Further, I find that incumbent firms experience lower growth of high-skilled employment and a higher departure rate among patent inventors. Incumbent firms also cut R&D and generate lower-quality innovation. Overall, my results highlight that VC investment inflows, through competition for talent, can have distributional effects on workers and adverse consequences for some local incumbent firms. In the second essay, using an employer-employee payroll dataset for approximately 2.6 million retail workers, we find that the staggered rollout of a major e-commerce retailer's fulfillment centers (FCs) has a negative effect on the income of retail workers in geographically proximate counties. Wages of hourly workers, especially part-time hourly workers, decrease significantly. There is a decrease in credit scores and an increase in delinquency for retail workers with higher prior credit utilization. Evidence from 3.2 million retail stores shows that geographically proximate stores experience a reduction in sales, number of employees and there is a decrease in entry and an increase in exit for small and young stores. Our robustness tests show that prevailing local economic conditions are unlikely to drive our results. Our results highlight the extent to which a dramatic increase in e-commerce retail sales can have adverse consequences for some of the workers at traditional brick-and-mortar stores. In the third essay, we show that, between 2009 and 2013, Theflyonthewall.com (FLY) leaks 58% of recommendation revisions with a median delay of 27 minutes relative to the I/B/E/S announcement time. FLY improves price discovery, but leaked recommendations hamper the ability of brokers to offer price improvement on trades routed through them. Three major brokers sued FLY and using key court dates, we show significant wealth and real effects to the brokerage industry. Overall, the speed with which analyst recommendations are disseminated has led to more rapid price discovery at the expense of a decline in the scope of the sell-side research industry.
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