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 Small Business Growth? (with Jacelly Cespedes and Xing Huang)
Among the typical entrepreneurs in small firms, how do cash windfalls affect their entrepreneurial activities? What financial consequences exist for entrepreneurs and their businesses? We use hand-collected data in a novel setting that exploits the bonus that retailers earn when selling jackpot-winning lottery tickets. Cash windfalls have positive effects on the internal growth of the existing business. In particular, an additional $100,000 increases revenues by $36,561 and the number of employees by 0.87. Surprisingly, we find that the bonus also leads to new business creation in non-retail industries, which is associated with the closedown of existing businesses. Contrary to prior findings for non-entrepreneurs, cash windfalls do not lead to financial distress on entrepreneurs or their businesses. Both the internal growth and new business creation become stronger when owners own no real estate assets or reside in low-income ZIP codes. These findings, along with evidence of non-linear effects on entrepreneurial activity, are consistent with both financial constraints and wealth effects channels.
Almost Famous: How Wealth Shocks Impact Career Choices (with Jacelly Cespedes and Zack Liu)
Media Coverage: National Affairs
We examine how wealth losses impact the type and quantity of jobs individuals pursue, and the short- and long-term consequences of these shocks on career trajectories. Using a novel dataset, we compare film industry workers in the same county and occupation but with different exposure to local house price changes. Homeowners who experience greater losses reduce their participation in films with award-winning cast and crew, films that are positively rated, and films that win awards, but they increase involvement in small productions. These losses also have adverse long-term consequences on the probability of landing leading roles, individuals' popularity, and film quality. Renters are not affected by these shocks indicating that local labor demand changes do not explain these results. Our findings suggest that during the Great Recession, several individuals could not use housing wealth as a safety net, which in turn impacted their 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.