Yuxin Luo

Welcome!

I am a Ph.D. candidate in Finance at Boston University (BU). My research interests are Corporate Finance, Capital Structure, ESG (Environmental, Social, and Governance). I am on the 2025-2026 job market.

Job Market Paper

Sustainability-linked Loans and Financial Performance

Using a sample of bank loans, I find that firms borrowing sustainability-linked loans (SLLs) experience credit rating upgrades and higher post-borrowing equity returns relative to firms borrowing conventional loans. Channel tests then indicate that these effects arise primarily through reduced financing costs channels. To rationalize the findings, I develop a model in which firms choose between SLLs and conventional loans: SLLs offer lower coupons conditional on meeting sustainability targets but incur borrowing/verification and compliance costs. The model shows that the financing-cost reduction alone is sufficient to generate the observed credit improvements and equity outperformance.

Presented at: AFA 2026 PhD Poster (scheduled), BU Brownbag

Working Papers

Maturity Overhang: Evidence from M&A

with Zhiyao Chen, Dirk Hackbarth, and Jarrad Harford

In the context of mergers and acquisitions, this paper analyzes a maturity overhang problem that is due to shorter debt maturities creating higher rollover risk. Using bond transaction data, we develop a market-based measure of rollover risk and find that i) rollover risk dampens merger activities at the firm and aggregate levels; ii) acquirers facing higher rollover risk are more sensitive to changes in cash reserves and prefer equity as a payment method over cash; and iii) positive market reactions to cash payment are observed only when firms have low rollover risk. To shed light on our empirical findings, we study a dynamic investment model that underscores the importance of precautionary savings and rollover risk for maturity overhang.

Presented at: AFA, MFA, FIRS, CICF, Asian FA, SFS Cavalcade AP, Spring Finance Workshop, Xiamen University, BU Brownbag

Capital Structure and Environmental Risk

with Dirk Hackbarth

We build a model in which firms incur additional costs to maintain their ESG status, and this status can potentially attract more investors. That is, firms face the trade-off between the increased distress risk and the added demand for their stocks from ESG-focused investors. In this setting, the impact of ESG ratings on the cost of equity can be positive or negative. Notably, ESG status can increase the cost of equity for firms with high ESG maintenance costs and high leverage. Furthermore, the net effect of ESG ratings on the cost of equity also depends on the market demand for ESG-focused stocks. Finally, our model suggests firms that benefit from their ESG rating use their lower cost of equity to issue more equity. In a large sample of US firms during the 2002–2022 period, we find evidence consistent with the heterogeneous impacts of ESG rating on both the cost of equity and equity issuance.

Presented at: BU Brownbag

Inflexibility and Leverage (R&R at Management Science)

with Lifeng Gu and Dirk Hackbarth

Firms’ inflexibility to adjust their scale persistently explains capital structure variations in a comprehensive sample and randomly-selected sub-samples. Higher inflexibility leads to lower financial leverage, potentially due to higher default risk and lower value of tax shields. Contraction inflexibility determines leverage more than expansion inflexibility. Moreover, inflexibility explains financial leverage on top of operating leverage variability and cash flow variability. Interestingly, the substitution effect between financial and operating leverage is much weaker among flexible firms. In addition, inflexible firms increase leverage more than flexible firms following a positive credit supply shock. Analyses employing instrumental variables estimation confirm our main finding.

Teaching

Instructor, Boston University

FE 449: Corporate Financial Management (Undergrad), 2025

Teaching Assistant, Boston University

FE 449: Corporate Financial Management (Undergrad), 2022 – 2024