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.
More Cash Flows, More Options? The Effect of Cash Windfalls on Small Firms (with Jacelly Cespedes and Xing Huang)
This paper studies the effect of shocks to firms’ internal resources on business success and on owners’ economic behaviors. We use a new source of variation in cash flows by exploiting the bonus that retailers earn when selling jackpot-winning lottery tickets. Increases in the retailer’s internal resources reduce the probability the company will survive. The evidence is not consistent with deteriorating credit behavior or owner retirement but instead suggests that small business owners who receive large cash windfalls are more likely to start new businesses in non-retail industries. This effect becomes stronger when owners reside in low-income ZIP codes or do not own real estate assets. Finally, the amount of the bonus has a positive impact on revenues and number of employees for those retailers that remain open. Overall, our results suggest that small business owners may face financial constraints in their attempts to grow both internally and externally, which may result in both resource and talent misallocation.
Almost Famous: How Do Wealth Shocks Impact Career Choices? (with Jacelly Cespedes and Zack Liu)
We study the effect of shocks to household balance sheets on employment choices and their long-term effects. Using a novel dataset of workers in the film industry, we estimate the impact of changes in housing wealth following the housing crisis on homeowners within the same occupation and county. We also account for local labor demand shocks by comparing homeowners to renters. We find that individuals who experience a housing wealth decline reduce participation in films with other high-profile talents (individuals that have won prestigious awards), in high-budget productions, that are positively rated, that are likely to win awards, and increase involvement in small films. These shocks have negative long-term consequences on individuals' popularity and the probability of leading roles. 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.