My research interests include empirical and structural corporate finance, product markets, innovation and capital structure.
I'll be joining HEC Montréal in the summer of 2021.
Product Market Strategy and Corporate Policies (with Boris Nikolov) [under revision]
Revise and Resubmit at the Journal of Financial Economics
How does product life cycle affect investment and financing? To answer this question, we structurally estimate a dynamic model where the firm chooses product portfolio characteristics that influence cash flow dynamics and shape corporate policies. In the model, the firm trades off higher profitability of newer products versus product introduction costs. Using disaggregated product-level data, we find that the product dimension is critical in quantitatively explaining cash flow dynamics, investment and financing, and has materially important valuation effects. In particular, we show that product introductions and capital investment act as complements and that product dynamics induce stronger precautionary savings motives. Our estimates reveal that the product life cycle effect is more pronounced for firms with smaller product portfolios, supplying less unique products, and competing more intensely.
Revise and Resubmit at the Review of Financial Studies
Recent empirical studies show that innovative firms heavily rely on debt financing. Debt overhang implies that debt hampers investment by incumbents. We show that a second effect of debt is that it stimulates entry of new firms and, therefore, innovation. Using a Schumpeterian growth model in which firms' dynamic R&D and financing choices are endogenously determined, we demonstrate that this second effect always dominates, so that debt fosters innovation and growth at the aggregate level. Our paper shows that debt financing has large effects on firm turnover and industry structure. It also predicts substantial intra-industry variation in leverage and innovation.
Fundamental Risk and Capital Structure [PDF]
I develop a dynamic capital structure model to examine how the nature of risk affects debt policy. In the model, the firm's fundamental risk, captured by its cash flow process, consists of transitory and persistent parts with markedly different dynamics. The model explains the observed dispersion in the risk-leverage relationship. Firms with similar total volatility adopt distinctive debt policies when the composition of their risk differs and issue less debt when their cash flows are more persistent to preserve debt capacity needed to fund investment. The model also provides rationale why the observable dispersion in cash flow persistence is low, which is at odds with the large degree of heterogeneity in other firm characteristics, as well as why persistence and leverage are weakly related in the data.