Jingxiong (Tony) Hu

Working Papers

Debt and Taxes: Revisited in Dynamics 

This paper analyzes optimal leverage dynamics with personal and corporate taxes and financial distress costs. Key to the analysis, the marginal tax benefit of debt depends on whether the debt is used for financing real investment or financial restructuring. The theory features continuous leverage adjustments and no security issuance costs. There are two local leverage targets for firms with leverage above or below a threshold. The model generates a leverage distribution that matches the data, including many zero-leverage firms. Policymakers can reduce distress costs without losing tax revenue by raising the personal tax rate and lowering the corporate tax rate. 

Conferences: WFA 2025 (scheduled), Asian Finance Theory Group 2024, NFA 2023, FMA 2023 (Semifinalist for best paper in corporate finance), Finance Theory Group summer school 2023

Dual Trading, Fee Competition, and Price Discovery at the Market Close  with Jiaheng Yu

We study how "dual traders," who trade based on the information of client orders, affect price discovery. Closing auctions have high transaction fees and large pricing errors due to growing demand for passive investments. Brokers of alternative trading venues charge lower transaction fees, guarantee execution at closing auctions' prices, and engage in dual trading. Using a quasi-experimental shock-the NYSE closing auction fee cut-we find that alternative venues reduced pricing errors in closing auctions. We explain the finding with a model in which dual traders mitigate the impact of market makers' overnight inventory costs on price efficiency. 

Conferences: FIRS 2025 (scheduled), EuroFA 2022, NFA 2022, FMA 2022 (Semifinalist for best paper in market microstructure), AsianFA 2022, Microstructure Exchange, Trans-Atlantic Doctoral Conference 2021, MFA 2020