Jacelly Cespedes

Assistant Professor of Finance

University of Minnesota

Carlson School of Management

Published and Accepted Papers

The Effect of Principal Reduction on Household Distress: Evidence from Mortgage Cramdown (with Carlos Parra and Clemens Sialm) (Accepted at the RFS)

• • Selected Presentations: WFA, ABFER Annual Conference, Virtual Real Estate Seminar, CEPR Workshop on Household Finance, New York Fed/NYU Stern Conference on Financial Intermediation, FIRS 

Featured in​ Columbia Law School’s Blue Sky Blog, Forbes

Funded by NBER-HF Small Grants Program

Mortgage cramdown enabled bankruptcy judges to discharge the underwater portion of a mortgage in a Chapter 13 bankruptcy until the Supreme Court disallowed this practice in 1993. We investigate the impact of mortgage cramdown on household distress exploiting the random assignment of cases to judges. We find that cramdown reduced the three-year foreclosure rate by between 15 and 20 percentage points. Our results suggest that large principal reductions considerably reduce homeowners’ distress through a reduction of debt overhang.

The Effects of House Prices and Home Equity Extraction on Career Outcomes (with Zack Liu and Carlos Parra) (Accepted at the RCFS)

• Selected Presentations: Finance in the Cloud I, European Meeting of the Labor and Finance Group, UTD Finance Conference, CEPR Household Finance Seminar Series

This paper investigates the effects of housing wealth shocks on workers' career decisions and long-term career outcomes. Using a novel data set of career histories in the film industry, we find that homeowners facing greater house price declines reduce participation in high-quality projects but increase involvement in low-quality films. Conversely, renters are not affected by these shocks. Consistent with individuals using home equity during job searches, these shocks have a greater impact on homeowners with lower equity and those that extracted home equity during the housing boom. Moreover, house price declines from the housing crisis affect long-term career paths.

Working Papers

NEW! Financial Technologies, Labor Markets, and Wage Inequality: Evidence from Instant Payment Systems (with Carlos Burga, Carlos Parra, Bernardo Ricca) 

A longstanding debate questions whether technological change widens wage gaps by benefiting skilled labor. We show that financial technologies—specifically, instant payment systems—can instead reduce wage inequality. Using comprehensive data on the universe of employees in Brazil, we study the nationwide rollout of Pix, an instant payment platform introduced in late 2020. Our empirical strategy is a triple difference design that exploits variation in pre-existing mobile penetration across municipalities, the differential benefits of Pix for cash-intensive versus non-cash-intensive sectors, and the timing of Pix's rollout. A one-standard-deviation increase in mobile penetration leads to a 1.5 percent wage increase in cash-intensive sectors relative to non-cash-intensive sectors following Pix's introduction. These wage gains concentrate among workers with lower levels of education, reducing the college wage premium by 1 percentage point. Further evidence suggests that increased small-business labor demand, amplified by local labor market frictions, drives these findings. By alleviating payment frictions that disproportionately affect small, cash-intensive businesses, instant payment systems enhance labor demand in sectors reliant on low-skilled workers, showing that financial technologies can shape distributional outcomes differently from skill-biased technologies. 

More Money, More Options? The Effect of Cash Windfalls on Entrepreneurial Activities in Small Businesses (with Xing Huang and Carlos Parra) (Revise & Resubmit RFS)

• • Selected Presentations: NBER SI Entrepreneurship, Northeastern Finance Conference, NYU Conference on Household Finance, FIRS, Showcasing Women in Finance 

Using a novel setting in which retailers receive bonuses when selling jackpot winning lottery tickets, we show that large windfalls lead to both existing business expansion and new business creation. New ventures are larger and have high survival rates; they tend to emerge in nonretail industries, substituting for existing business expansion. We also show that high-quality owners who are financially constrained respond the most to cash windfalls. Our findings contrast with the prevailing view that small businesses lack the desire to grow and highlight that financial frictions not only impede growth but also limit industry choices for constrained entrepreneurs.

Strategically Staying Small: Regulatory Avoidance and the CRA (with Jordan Nickerson and Carlos Parra)

• Selected Presentations: WFA, FIRS, Consumer Financial Protection Bureau Research Conference, FDIC,  Villanova Webinars in Financial Intermediation, ABFER Annual Conference, FRBC LMI/Minority Housing Workshop,  HEC Paris Banking in the Age of Challenges.

Featured in​ Columbia Law School’s Blue Sky Blog

Using the introduction of an asset-based two-tiered evaluation scheme in the 1995 CRA reform, we examine the consequences of regulatory avoidance. Banks respond by strategically bunching below the \$250M threshold. In a difference-in-differences design, bunching banks reduce asset/loan growth and increase loan rejection rates in low-to-moderate-income areas, a void left unfilled. Regulatory avoidance produces real effects: areas with greater exposure to bunching banks experience a decline in small establishment shares and independent innovation. Our results highlight banks' willingness to incur costs to avoid regulations, negatively impacting CRA's intended beneficiaries and undercutting the policy's aim to be a credit access leveler.

Branching Out Inequality: The Impact of Credit Equality Policies in the Non-Bank Era  (with Erica Jiang, Carlos Parra, and Jinyuan Zhang) 

• • Selected Presentations:   AFA 2025, NBER Corporate Finance Spring Meeting, New York Fed / NYU Stern Conference on Financial Intermediation, Federal Reserve Bank - Minneapolis,  Federal Reserve Bank - Philadelphia Mortgage Market Conference , CFPB Research Conference, UNC Conference on Market-Based Solutions For Reducing Wealth Inequality, USC, BYU, HEC-McGill Winter Finance Conference, Federal Reserve Bank - Boston,   Federal Reserve Bank - Kansas City

We show that the Community Reinvestment Act (CRA), a major policy aimed at reducing geographic inequality in credit access, can paradoxically widen disparities across regions while enhancing credit equality within certain regions. Banks strategically withdraw branches from lower-income areas to avoid CRA requirements—a response amplified by the expansion of non-bank lenders. We identify banks with higher CRA violation costs using a regression discontinuity design around the CRA eligibility threshold and show these banks retract more branches following non-bank expansion. These branch closures reduce small business lending, financial inclusion, and local economic activity in low-income areas, worsening regional economic disparities.

Heterogeneous Sensitivities to Interest Rate Changes: Evidence from FinTech Loans

WFA-CFAR Award in Honor of Professor Stuart I. Greenbaum

• • Selected Presentations: EFA, FIRS, Colorado Finance Summit (Ph.D. Session), Corporate Finance Conference at Washington University in St. Louis (Ph.D. Poster Session)

I analyze borrowers' credit contract decisions to investigate whether these choices can be used for screening purposes. In the setting, the interest rate jumps at specific loan amount thresholds, which create incentives for bunching below the cutoffs. I find substantial heterogeneity in sensitivities to interest rate jumps. Evidence supports borrower sophistication as the main explanation for this heterogeneity. Furthermore, borrowers who fail to bunch below the thresholds are 18% more likely to default and 24% less likely to receive funding from institutional lenders. Findings suggest that borrowers' suboptimal credit decisions can be used to reduce information asymmetries in credit markets.

The ex-ante effects of bankruptcy provisions on small firms (with  Richard T. Thakor and Keer Yang)

This paper examines the effect of legal bankruptcy protection on small businesses. Using granular agricultural microdata, we use a regression discontinuity design to exploit farm eligibility for a unique bankruptcy code for farms known as Chapter 12. We find that farmers that qualify for this protection take on additional debt, but do not face a higher cost of debt, consistent with Chapter 12 eligibility increasing the demand for debt. Exploring a variety of outcomes, we find that farms with enhanced bankruptcy protection make relatively more investments, and are more productive across various measures. This translates to greater farm production, sales, and profitability. Overall, our results suggest that the enhanced bankruptcy protection improves ex ante outcomes and is efficiency-enhancing. We also show that the bankruptcy protection has a positive spillover on farmer household consumption.

Peer Effects Across Firms: Evidence from Security Analysts  (with Carlos Parra) 

• • Selected Presentations: Annual Meeting of the Society of Labor Economics

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 the peers' characteristics and the peers' 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 analysts’ 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.

Working in Progress

Small Business Boundaries

• Funded by NBER-HF Small Grants Program