Working Papers

The Role of Bankers in the U.S. Syndicated Loan Market [Download]

I construct a novel dataset of individual bankers in the U.S. syndicated loan market to analyze the impact of bankers for the largest, most transparent borrowers. I exploit within-firm variation in personal relationship strength from banker turnover and find that stronger relationships lead to significantly lower interest rates. Relationship loans are associated with fewer bankruptcies and fewer favorable modifications in renegotiations. Lower rates therefore derive from increased lending efficiency, rather than nepotism. While personal relationships generally increase credit availability, during the financial crisis these relationships locked in borrowers with affected banks. Bankers also exhibit time-invariant preferences for specific loan characteristics.

Conferences presented: SFS Cavalcade 2017, 2017 Telfer Annual Conference on Accounting and Finance, Colorado Finance Summit (Job Market Session) , SFI Workshop in Finance 2016, DGF 2016, FMA 2016 (PhD Session), NFA 2016 (PhD Session), Federal Reserve Board of Governors, Emory University (Goizueta), University of Rochester (Simon), University of British Columbia (Sauder), Georgetown University (McDonough), McGill University (Desautels), University of Toronto (Rotman), Penn State (Smeal), Bocconi, INSEAD, University of New South Wales, Arizona State (Carey), Michigan State (Broad), Carnegie Mellon (Tepper)

Do Courts Matter for Firm Value? Evidence from the U.S. Court System [Download]

with Stefano Colonnello

We estimate the impact of U.S. state court characteristics on firm value by exploiting a U.S. Supreme Court ruling that exogenously changed firms' exposure to different courts. We find that increased exposure to more business-friendly courts is associated with positive announcement returns. We find no such association for objective court quality. We confirm that this U.S. Supreme Court ruling impacted firm value through the legal environment channel. We show that this ruling reduced the ability of affected firms to remove cases from certain state courts, and we show that announcement returns are stronger for firms that have high litigation exposure.

Conferences presented: SFS Cavalcade 2016, DGF 2016, NFA 2016, ALEA 2016, EFMA 2016, EUROFIDAI 2016

How Do Investors and Firms React to an Unexpected Currency Appreciation Shock? [Download]

with Matthias Efing, Rüdiger Fahlenbrach and Philipp Krüger

We examine the impact of a large, sudden, and unexpected home currency appreciation shock on the valuation and behavior of corporations in a developed economy. The Swiss National Bank surprisingly repealed a minimum exchange rate of 1.2 Swiss francs per Euro on January 15, 2015, triggering a one day appreciation of 15 percent. The market value of Swiss firms, in particular exporters, fell substantially on the event day. The appreciation also caused a substantial decrease in sales among currency exposed firms in the following 6 months. Firms stabilized sales by making price concessions which compressed margins and return on assets for the years to follow. They also reduced investment by an economically large 8.3 percentage points.

Conferences presented: FMA 2016, SGF 2016, DGF 2016

The Causal Impact of Distance on Bank Lending [Download]

with Cornelius Schmidt and Aksel Mjøs

We exploit exogenous shocks to the distance between corporate borrowers and banks to analyze the role of distance in commercial bank lending. We find that a reduction in travel time due to improved infrastructure increases the likelihood of initiating a new borrowing relationship, evidence that lower distance creates a surplus from lower transaction costs. In existing lending relationships, however, banks capture a fraction of this surplus by increasing interest rates. Larger changes in distance are associated with stronger effects and banks with higher market power capture a larger fraction of the surplus.

Conferences presented: EFA 2016, DGF 2015

Information Intermediaries: How Commercial Bankers Facilitate Inter-firm Alliances [Download]

with Marc Frattaroli

We investigate how bankers use private information to facilitate strategic alliances between borrowers. Firms that have borrowed from the same banker in the past are significantly more likely to enter an alliance, and the same is true for firms borrowing from different bankers that have co-syndicated loans previously. We find that bankers can facilitate strategic alliances even across banks. Consistent with bankers overcoming informational frictions, their ability to facilitate alliances decreases with network distance, and is stronger for opaque borrowers. We exploit quasi-exogenous variation in firms' banker networks from interstate bank branching deregulation to show that this relationship is causal.

Conferences presented: SFI Research Days 2018

Work in Progress

Gaming the Legal System: The Finance Aspects of Forum Shopping

with Stefano Colonnello

Covenant Specialization

with Rustam Abuzov and Roberto Steri