Assistant Professor of Finance
Catholic University of Chile (PUC-Chile)
Avenida Vicuña Mackenna 4860
Corporate Finance, Household Finance, Financial intermediation
I empirically analyze how banks reallocate capital across lending markets following funding shocks. I exploit a new source of quasi-experimental variation in bank funding from lottery winners. Exposure to jackpot shocks leads to a significant increase in both deposits and lending at the bank level. Funds are transmitted across markets, but allocations are five times greater in the state in which the shock occurs. Features of banking regulation (Section 109) negatively affect fund mobility and loan performance. These results suggest that state boundaries matter for capital mobility in part because of regulatory distortions.
Chapter 7 bankruptcy, the main debt relief program for U.S. households, provides more than $150 billion each year, yet its impact on consumers remains unclear. Using unique hand-collected data from individual bankruptcy petitions, I employ a regression discontinuity design to estimate Chapter 7’s effect on subsequent household real investment and financial performance. Chapter 7 protection increases the probability of a debtor (1) creating a new business, (2) becoming a first-time homeowner, and (3) avoiding home foreclosure. Although Chapter 7 protects people in a variety of ways, for example, by stopping creditor harassment, the above findings arise because of debt relief.
The 'Jackpot' Question: How Do Cash Windfalls Affect Small Business Growth? (with Jacelly Cespedes and Xing Huang)
We study how cash windfalls affect small business growth and the entrepreneurial activities of existing entrepreneurs. We use a new source of variation in cash flows by exploiting the bonus that retailers earn when selling winning jackpot lottery tickets. Cash windfalls have positive effects on both external growth (i.e., new business creation in non-retail industries) and internal growth (i.e., increases in revenue and employment). These effects are stronger when owners reside in low-income ZIP codes or do not own real estate assets. Finally, contrary to prior findings for non-entrepreneurs, we find that cash windfalls do not lead to financial distress on entrepreneurs or their businesses. Overall, our findings show that, following windfalls, small business owners favor internal and external growth, and for some entrepreneurs, the existing business seems to be a gateway to other ventures.
Almost Famous: How Wealth Shocks Impact Career Choices (with Jacelly Cespedes and Zack Liu)
We study the short- and long-term career effects of shocks to household balance sheets using a novel dataset of workers in the film industry in the wake of the Great Recession. We find that individuals within the same county and occupation who lost more housing wealth reduce their participation in films with other high-profile talents (individuals that have won prestigious awards), films that are positively rated, and films that are likely to win awards, but they increase involvement in small productions. We control for local labor demand shocks by comparing homeowners to renters. These wealth losses also have adverse long-term consequences on the probability of leading roles, individuals' popularity, and film quality. Overall, our results suggest that wealth shocks distort non-salaried workers' labor decisions due to liquidity concerns and impact individuals' career paths.
We assess the magnitude and mechanisms of workers’ productivity spillovers by estimating the peer effects among those working in the same occupation across firms using the setting of security analysts. The empirical design exploits one feature of social networks: the existence of partially overlapping peer groups. This refers to analysts who cover similar industries but not exactly the same group of industries, which generates peers of peers (excluded peers). This allows the identification of both peer characteristics and peer outcome effects. In addition, to deal with common group shocks, the exogenous characteristics of excluded peers are used as instruments. We find strong evidence of spillovers in terms of peer outcomes and characteristics. In particular, peer accuracy is positively related to analyst accuracy, while the number of industries followed by analysts' peers negatively impacts accuracy. In terms of the potential mechanisms that account for the spillover effects, we find that the effects are stronger when analysts see their peers performing well and that besides imitation, knowledge spillovers also help explain the results.