Ph.D., Duke University
B.S., University of Pennsylvania
Areas of Expertise
Paul Borochin is an Assistant Professor of Finance at the University of Connecticut. He received his Ph.D. in Finance from the Fuqua School at Duke University and his B.S. in Finance and Statistics from the Wharton School at the University of Pennsylvania.
His research focuses on applications of asset pricing theory to corporate events and policies, with sub-specializations in mergers & acquisitions, corporate governance, and information asymmetry.
He teaches a graduate seminar in asset pricing theory and undergraduate courses in corporate finance.
Published and Forthcoming Papers
- Borochin, Paul, and Jie Yang (2016). The Effects of Institutional Investor Objectives on Firm Valuation and Governance. Journal of Financial Economics forthcoming.
- Borochin, Paul, and Jie Yang (2016). Options, Equity Risks, and the Value of Capital Structure Adjustments. Journal of Corporate Finance 42.
- Borochin, Paul, and Joseph Golec (2016). Using Options to Measure the Full Value-Effect of an Event: Application to Obamacare. Journal of Financial Economics 120.
- Borochin, Paul, John Glascock, Ran Lu-Andrews and Jie Yang (2016). Using Option Market Liquidity to Predict REIT Leverage Changes. Journal of Real Estate Finance and Economics forthcoming.
- Bird, Robert, Paul Borochin and John Knopf (2015). The Role of the Chief Legal Officer in Corporate Governance. Lead Article, Journal of Corporate Finance 34.
- Borochin, Paul (2014). When Does a Merger Create Value? Using Option Prices to Elicit Market Beliefs. Financial Management 43.
Recent Working Papers
- Borochin, Paul, Jim Cicon, Jared DeLisle and McKay Price, The Effects of Conference Call Content on Market Perceptions of Value Uncertainty and Firm Risk. AAII Outstanding Paper in Institutions and Markets, Eastern Finance Association 2016. Under review at Management Science.
Abstract: Quarterly earnings conference calls convey fundamental information as well as manager and analyst opinion about the firm. This study examines how the market’s uncertainty regarding firm valuation is affected by the abnormal content of earnings conference calls. Using textual analysis of all publicly available conference call transcripts, we find that measures of abnormally negative conference call tones are positively related to measures of firm value uncertainty from the equity options market. Overall, value uncertainty is more sensitive to analyst tones than management tones, consistent with analysts’ role as information intermediaries and active shareholder monitoring. Additionally, abnormal differences between analyst and manager tones in the conference call discussion section are strongly associated with increases in value uncertainty.
- Borochin, Paul, and John Knopf, Do Managers Seek Control and Entrenchment? Semifinalist for the Best Paper Award in Corporate Finance, Financial Management Association 2016.
Abstract: At the IPO date, thrifts have a uniquely diffuse ownership structure and regulatory environment. This allows us to perform a natural experiment to test whether managers seek to entrench themselves. We find strong evidence that managers seek the level of ownership commonly associated with entrenchment (20% to 30%). Also, managers exploit the regulatory environment, by increasing ownership during the five years of takeover protection. This suggests that takeover fears are a strong driver of insider ownership. Finally, we find that managers issue less equity, make shares less liquid and maintain higher debt ratios to support their pursuit of entrenchment.
- Borochin, Paul, and Weihua Cu, Alternative Corporate Governance: Domestic Media Coverage of Mergers and Acquisitions in China. Revise and resubmit at Journal of Banking and Finance.
Abstract: A text analysis of domestic Chinese newspaper articles on 797 proposed mergers shows that media in developing countries are quantifiably susceptible to pressure: media coverage is more favorable for deals consistent with government objectives and involving powerful local firms. However, we also find that media tone can affect the outcome of proposed M&A deals by informing the market. We identify this effect using the exogenous shock to market-driven governance from the Split-Share Structure Reform in 2007. Negative tone during negotiation coverage also predicts long-term performance for the bidder. Despite biased coverage, domestic media in developing countries can function as an alternative channel for corporate governance.
- Borochin, Paul, and Yanhui Zhao, Variation of Implied Volatility and Return Predictability.
Abstract: The standard deviations of the implied volatility levels, implied volatility innovations, and the volatility premium from put options have significant predictive power for underlying returns. The return predictability is not explained by that previously documented for the levels of these three variables, or size, book-to-market, stock and option liquidity, and common risk factor models. We find support for interpreting the standard deviation of the three variables as a forward-looking proxy of heterogeneous beliefs. The realized return relationship we observe is consistent with the Miller (1977) theoretical result that divergence of investor opinions leads to lower expected returns.
- Borochin, Paul, and Stephen Rush, Identifying and Pricing Adverse Selection Risk with VPIN.
Abstract: We perform the first large-sample estimation of the Volume Synchronized Probability of Informed Trading (VPIN) measure on the NYSE TAQ universe, enabling us to test the validity of VPIN with high statistical power and to do traditional asset pricing tests of informed trading. Informed trading measured by VPIN is priced, and is not explained by firm characteristics such as volume, volatility, or liquidity, supporting the validity of the measure. Additionally, we create a novel signed version of VPIN to identify the direction of informed trades. A portfolio long low-VPIN stocks and short high-VPIN ones delivers a monthly five-factor alpha of .18%, which rises to .29% when using signed VPIN. A trading strategy following this signed VPIN factor delivers an annualized five-factor BHAR of 11.45%. We further document a reversal in stock performance in portfolio sorts on signed VPIN, the incorporation of which into a trading strategy improves performance to an annualized BHAR of 17.34%.
- Borochin, Paul, Chinmoy Ghosh, and Di Huang, Target Information Asymmetry and Takeover Strategy: Insights from a New Perspective. Revise and resubmit at European Financial Management.
Abstract: We examine the relation between information asymmetry and firm value using M&A as the identification strategy. Due to the due diligence and intense scrutiny of the target firm around M&A announcements, acquisitions are significant shocks to a target’s information asymmetry. We find that M&A announcement-period wealth gains are significantly related to target’s information asymmetry, and that opaque firms are more likely to be targets, and less likely to experience deal withdrawals. Furthermore, we find that the party with high information asymmetry is in a weaker position when negotiating the deal. Finally, we document that target information asymmetry influences method of payment, and the likelihood of diversifying deals.
Other working papers on SSRN.