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 in debt relief 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 households’ subsequent real investment and financial performance. Chapter 7 protection increases the probability of a debtor creating a new business, becoming a first-time homeowner, and 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 Entrepreneurial Activities? (with Jacelly Cespedes and Xing Huang)
How do cash windfalls affect the entrepreneurial activities of typical entrepreneurs in small firms? We use a novel setting that exploits the bonuses retailers earn when selling jackpot-winning lottery tickets. An additional $100,000 increases revenues by $36,561 and employment by 0.87. Large windfalls spur new business creation in non-retail industries, which is associated with the closedown of existing businesses. Consistent with wealth-effects and financial-constraints, the effects are stronger for owners without real properties or in low-income areas. Allowing non-linearities in the effects of cash windfalls, we further separate these two channels and document a pecking order in entrepreneurs' growing decisions.
Almost Famous: The Short- and Long-Term Effects of Wealth Shocks on Career Decisions (with Jacelly Cespedes and Zack Liu)
Media Coverage: National Affairs
Using a novel data set of career histories in the film industry, we study the effect of housing wealth shocks on the quality of jobs that individuals pursue. Homeowners facing greater local house price declines reduce their participation in high-quality projects, such as big-budget films and productions with award-winning talent, while increasing their involvement in low-quality films. Importantly, differences in local labor demand do not explain these results. Consistent with individuals relying on home equity extraction during job searches, these negative shocks have a greater impact on lower-equity and less-wealthy homeowners. These short-term wealth shocks also affect long-term career trajectories.
The Effect of Principal Reduction on Household Distress: Evidence from Mortgage Cramdown (with Jacelly Cespedes and Clemens Sialm)
Funded by NBER-HF Small Grants Program
Mortgage cramdown has been proposed as a mechanism to avoid mortgage foreclosures in times of crisis. In this restructuring, the underwater portion of the mortgage is treated as unsecured debt and can be discharged during Chapter 13 bankruptcy. To quantify the ex-post effects of bankruptcy discharge in cramdown courts, we use a new dataset of district courts that allowed mortgage cramdown over the period from 1989 to 1993. We take advantage of the random assignment of cases to judges who exhibit significant differences in leniency. We find that a successful bankruptcy filing in cramdown courts reduces the five-year foreclosure rate by 29 percentage points and reduces the number of moves post-bankruptcy. Principal write-downs explain the vast majority of the reduction in foreclosure rates.
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.