Contact Information 321 19th Avenue South, 3-135 Minneapolis, MN 55455 cespe013@umn.edu Research Interests Corporate Finance, Household Finance, Financial Intermediation, FinTech |
- 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 the credit contract decisions made by borrowers and whether borrower choices can be used for screening. 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.The ''Jackpot'' Question: How Do Cash Windfalls Affect Entrepreneurial Activities? (with Xing Huang and Carlos Parra)
- Selected Presentations: NBER SI Entrepreneurship, Northeastern Finance Conference, NYU Conference on Household Finance, FIRS, Showcasing Women in Finance
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.
- Selected Presentations: Finance in the Cloud I, European Meeting of the Labor and Finance Group, UTD Finance Conference, CEPR Household Finance Seminar Series
The Effect of Principal Reduction on Household Distress: Evidence from Mortgage Cramdown (with Carlos Parra and Clemens Sialm)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.
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.
- 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.