Faculty Spotlight: Professor Joy Tong

Professor Joy Tong’s recently accepted paper in the Review of Financial Studies, a top-ranked finance journal and part of the FT50, titled "Health Care Costs and Corporate Investment," stands as a notable achievement in her career. Serving as the sole author, she is a pioneering figure, being the first to seamlessly explore the impact of the healthcare system on corporate policy.

JOY’S RESEARCH JOURNEY

Joy embarked on her research journey during her undergraduate studies at the University of Toronto, where she majored in mathematics and economics. In addition to her major, she pursued a minor in healthcare and life sciences due to her keen interests in these fields. Choosing to refine her expertise further, Joy pursued a graduate degree in business administration and finance at Duke University. Upon relocating from Canada to the United States, she observed noteworthy distinctions within the healthcare systems of the two nations. This experience inspired her to integrate her academic background and dive her research into the dynamics between the healthcare system and corporate policy.

THE IMPACT OF HEALTHCARE COSTS ON A FIRM

 One prominent aspect of the U.S. healthcare system lies in its considerable cost. The average price of a family plan (at the time the study was conducted) is essentially the full cost of a sedan automobile, standing at $24,000 UDS per year. A substantial financial investment. Significantly, most of the labor force in the U.S. obtains health insurance through their employers, who bear a significant portion of the associated costs and use it as a strategic tool for attracting and retaining employees, fostering employee loyalty for many companies. One challenge on the firm's side is the inability to shift these costs to employees. Doing so would result in numerous negative consequences affecting the company, including damage to its reputation and employee morale. Consequently, employers find themselves absorbing a substantial portion of the increasing healthcare expenses.

Joy's groundbreaking paper addresses a message previously overlooked in the literature: the profound impact of healthcare costs on a firm's corporate policy. This unexplored territory adds a critical dimension to the ongoing discourse, shedding light on the intricate relationship between healthcare expenditures and corporate decision-making within organizations.

McKinsey VS Walmart – Who is affected more?

In her research, Joy reveals that increases in healthcare costs create significant uncertainty for companies which as a result end up limiting their growth potential. This is because companies, in response to the escalating healthcare expenses, reduce their investments in capital expenditures and R&D.

One interesting finding Joy uncovered is that firms employing a higher proportion of high-skilled workers experience a more pronounced impact. This is because employees are usually required to contribute to healthcare costs through employee contribution if they opt in (e.g., an 80/20 split with the employer), and thus, lower-skilled employees, typically earning lower wages, are inclined to prioritize immediate cash over healthcare benefits. Thus, forgoing the health plan and choosing to allocate the funds to boost their monthly income: preferring liquid assets over insurance coverage. In addition, companies that have a higher portion of lower-skilled employees generally hire part-time employees who are ineligible for a comprehensive healthcare plan. On the contrary, companies with a higher number of high-skilled workers demonstrate increased enrollment in healthcare plans. This pattern can be attributed to the more favorable compensation packages typically offered to high-skilled employees, making healthcare coverage a more feasible and appealing option for them.

THE IMPLICATIONS FOR POLICYMAKERS

Joy's research carries significant policy implications, delivering a strong message to policymakers. It emphasizes the intricate connection between shifts in the health sector and their direct impact on corporations. Additionally, it highlights the vulnerability of smaller firms, especially those employing highly skilled workers and facing financial constraints. This underscores the need for targeted support. Joy suggests that implementing incentives or tax deductions could prove instrumental in assisting these financially constrained yet promising young high-growth firms.

Expressing a broader perspective, Joy emphasizes a keen desire to witness transformations in the U.S. healthcare system and its policies. Recognizing the strain it imposes on American businesses, her aspirations extend beyond research, advocating for systemic changes that could positively impact the corporate landscape and foster a healthier, more sustainable environment for U.S. enterprises.

ON A PERSONAL NOTE

Joy is currently engaged in several compelling projects that delve into critical aspects of healthcare and corporate dynamics. One upcoming project examines the role of U.S. brokers in the acquisition of health insurance by employers for their workforce. This research specifically investigates the impact of biased advising and incentive misalignment  between brokers and employers, shedding light on crucial considerations in the decision-making process.

Besides studying the interaction between the healthcare system and corporations, Joy also looks into topics such as innovation and entrepreneurship. She and her coauthors have published a paper titled Bankrupt Innovative Firms on Management Science, studying patent reallocation after bankruptcy in the US. She also has a working paper looking at how wildfires affect venture capitals’ investment pattern and VC-backed startups.