Alex Xi He

Assistant Professor of Finance

University of Maryland

Research interests: corporate finance, labor and finance, innovation, financial intermediation




4411 Van Munching Hall

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742


1. "A Theory of Intermediated Investment with Hyperbolic Discounting Investors." With Feng Gao and Ping He, Journal of Economic Theory, 2018.

Abstract: Financial intermediaries may reduce welfare losses caused by hyperbolic discounting investors, who may liquidate their investment prematurely when the liquidation cost is low. In a competitive equilibrium, sophisticated investors are offered contracts with perfect commitment, and first best results are achieved; naïve investors are attracted by contracts that offer seemingly attractive returns in the long run but introduce discontinuous penalties for early withdrawal. If the investor types are private information, naïve investors withdraw early and cross-subsidize sophisticated investors. When a secondary market for long-term contracts opens for trading, financial intermediaries are compelled to offer contracts that have more flexible withdrawal options with linear schemes, and the welfare of naïve investors is improved. Arbitrage-free linear contracts allow for a unique term structure for interest rates that includes a premium for naïveté. Solvency requirements may limit competition for contracts and result in positive profits; banks that have capital are able to compete more aggressively, which improves investor welfare.

Working Papers

1. "Mergers and Managers: Manager-Specific Wage Premiums and Rent Extraction in M&As." With Daniel le Maire. December 2021. Revise and Resubmit, Journal of Financial Economics.

Abstract: This paper shows that some managers systematically pay higher wages to rank-and-file workers, and firms managed by these managers are targets of M&As. We use a manager-firm-worker matched dataset covering the entire population of Denmark from 1995 to 2011 to identify manager fixed styles in wage-setting from both worker and manager movements across firms. We find substantial heterogeneity among managers in wage-setting styles, which are persistent over time and can be predicted by managers' ex-ante personal characteristics. Firms with high wage premiums due to generous managers are more likely to be acquired. Following acquisitions, the target firms are more likely to replace their high-paying managers and reduce workers' wages, which accounts for a large part of shareholder gains in M&As. These results suggest that the market for corporate control selects managers who pay lower wages and redistributes wealth from workers to shareholders.

Abstract: This paper studies the causal effect of liquidity constraints on individual labor market outcomes by exploiting a mortgage reform in Denmark in 1992, which for the first time allowed homeowners to borrow against housing equity for non-housing purposes. We find that following the reform, liquidity-constrained homeowners extracted housing equity, increased debt levels, and had higher earnings growth and lower employment rates. In contrast, the reform had small and opposite effects on the earnings and employment rates of homeowners with high liquid asset holdings. The option to borrow against housing equity enables liquidity-constrained individuals to move to high-wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches and potentially increase earnings and output in the longer run.

Abstract: We study the use and economic impact of artificial intelligence (AI) technologies among U.S. firms. We propose a new measure of firm-level AI investments, using a unique combination of detailed worker resume and job postings datasets. Our measure reveals a stark increase in AI investments across sectors in the last decade. AI-investing firms see higher growth in sales, employment, and market valuations. We use a novel identification strategy, instrumenting firm-level AI investments with firms' ex-ante exposure, based on alumni networks, to the supply of AI-skilled labor from universities historically strong in AI research. The positive growth effect of AI comes primarily through increased product innovation, reflected in trademarks, product patents, and updates to product portfolios. AI-powered growth concentrates among the ex-ante largest firms, leading to higher industry concentration and reinforcing winner-take-most dynamics. Our results highlight that new technologies can contribute to growth through product innovation.

Abstract: Universities are an important source of new knowledge. U.S. universities have traditionally relied on federal government funding, but since 2000 the federal share has declined while the private industry share has increased. This paper offers the first causal comparison of federal and private university research funding, focusing on patenting and researcher career outcomes. We begin with unique data on grants from 22 universities, which include individual-level payments for everyone employed on all grants for each university-year. We combine this with patent and Census data, including national IRS W-2 histories. We instrument for an individual’s source of funding with government-wide R&D expenditure shocks within a narrow field of study. These funding supply changes yield a set of compliers who are pushed away from federal funding and into private funding. We find that a higher share of federal funding causes fewer but more general patents, much more high-tech entrepreneurship, a higher likelihood of remaining employed in academia, and a lower likelihood of joining an incumbent firm. Increasing the private share of funding has opposite effects for most outcomes. It appears that private funding leads to greater appropriation of intellectual property by incumbent firms.

Abstract: We use a directed search model to develop estimation procedures for the identification of worker and firm rankings from labor market data. These methods allow for a general specification of production complementarities and the possibility that higher ranked workers are not more productive in all firms. We also offer conditions for a positive/negative assortative matching that incorporate the possibility of a stochastic job ladder with on-the-job search. Numerical simulations relate the implications of the model to the implications of fixed effect regressions and give further insights into the performance of our estimation procedures. Finally, we evaluate evidence for Denmark using our methods and we show that workers are highly sorted and that higher type workers are less productive than lower type workers while employed in lower type jobs.

Work in Progress

1. "Eclipse of Rent-Sharing: The Effects of Managerial Business Education on Wages and the Labor Share in the US and Denmark." With Daron Acemoglu and Daniel le Maire. December 2021.

Abstract: This paper provides evidence from the US and Denmark that managers with a business degree (“business managers”) reduce wages of their employees. Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment or employment growth thereafter. Using manager retirements and deaths and an IV strategy based on the diffusion of the practice of appointing business managers within industry, region and size quartile cells, we provide additional evidence that these are causal effects. We establish that the proximate cause of these (relative) wage effects are changes in rent-sharing practices following the appointment of business managers. Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, while business managers do not. But consistent with our first set of results, these managers do not show any greater ability to increase sales or profits in response to exporting opportunities. Finally, we use the influence of role models on college major choice to instrument the decision to enroll in a business degree in Denmark and show that our estimates correspond to causal effects of practices and values acquired in business education — rather than the differential selection into business education of individuals unlikely to share rents with workers.