"Credit supply and green investments"
with Antonio Accetturo, Michele Cascarano, Giorgia Barboni and Marco Tomasi
Earlier version: Bank of Italy Working Paper 1456 (2024)
Featured in VoxEU; SUERF
Abstract: Does an increase in credit supply affect firms' likelihood to invest in green technologies? To answer this question, we use text algorithms to extract information on green investments from the comments to the financial statements of Italian SMEs between 2015 and 2019. To identify the effect of credit supply, we use all loans disbursed by banks operating in Italy to construct a firm-specific time-varying instrument for credit availability. We find a large positive elasticity of green investments to credit supply. The effect is concentrated among firms with high availability of internal capital and in areas with higher preferences for environmental protection. Subsidies and market competition can spur green investments if combined with environmental awareness.
with Frédéric Boissay and Steven Ongena
Earlier versions: BIS Working paper No. 957; CEPR Discussion Paper No. DP16465
Featured in VoxEU
Abstract: Analyzing US data on corporate linkages, we investigate the transmission of monetary policy through intermediate goods markets. Our analysis uncovers three key insights. First, contractionary monetary conditions lead to production disruptions in financially constrained firms. Second, these disruptions extend to the suppliers and customers of such firms. Third, disruptions intensify when financially constrained firms purchase or sell specialized goods. These findings suggest that monetary tightening creates bottlenecks in supply chains, compelling firms to curtail production when they cannot substitute their constrained business partners. "Monetary policy bottlenecks" amplify the impact of monetary policy beyond the standard balance sheet channel of transmission.
"How does climate change affect firm sales? Identifying supply effects"
with Cláudia Custódio, Miguel Ferreira and Adrian Lam
Featured in: Financial Times, The European
BEST PAPER AWARD, Essex Finance Centre (EFiC) 2021 Conference
GASPERINI (BEST PAPER) AWARD, EFFAS, 2024
Abstract: We estimate the economic impact of climate change by exploiting variation in local temperature across suppliers of the same client. We find that suppliers experiencing a 1°C increase in average daily temperature decrease their sales by 2%. The effect is more pronounced among suppliers in manufacturing and heat-sensitive industries, which is consistent with lower labor productivity and supply when temperatures are higher. Financially constrained suppliers are more affected due to their lack of financial flexibility to adapt to changes in temperatures. We also find that episodes of extremely hot and cold weather lead to large drops in sales.
"Banking on deposit relationships: Implications for hold-up problems in the loan market"
with Jin Cao and Cédric Huylebroek
Earlier version: Norges Bank Working Paper 4/2024
Featured in: VoxEU
Video presentation by Cédric Huylebroeck
Abstract: Theory suggests that by lending to a firm, inside banks gain an informational advantage over non-lender outside banks. This informational gap hinders borrowers from switching lenders due to a winner’s curse faced by competing outside banks, leading to hold-up problems. In this paper, we show that firms can reduce this informational gap by forming deposit relationships with outside banks, thereby attenuating hold-up. Using unique data on the deposit and lending relationships of all firm-bank pairs in Norway, we find that having a deposit relationship with non-lender outside banks significantly increases a firm’s likelihood of switching lenders. Furthermore, firms that have a prior deposit relationship with new lenders obtain significantly better loan conditions upon switching. In line with informational hold-up theory, these effects are driven by reduced information asymmetries, not cross-selling. Our findings have important implications for open banking and hold-up problems in the loan market.
"Rewiring supply chains through uncoordinated carbon pricing policy"
with Emanuela Benincasa, Olimpia Carradori and Miguel Ferreira
Featured in: VoxEU
Abstract: We show that climate transition risks can significantly disrupt supply chain networks. Specifically, suppliers affected by the California cap-and-trade program are more likely to lose customer relationships and less likely to form new ones compared to their peers unaffected by the program. The effects are more pronounced among suppliers facing high competitive pressure and producing standardized inputs. Additionally, affected suppliers experience declines in revenues, assets, and profitability. This supply chain rewiring induced by uncoordinated climate policies is consistent with carbon leakage, as customers exposed to the program through production networks show an increase in their supply chain emission intensity.
"Cultural Bonds"
with Michele Cascarano, Francesco Stradi and Naciye Sekerci
(Draft available upon request)
Abstract: We show that households' investments in government bonds are influenced by their cultural origin. For identification, we analyze the holdings of government bonds by households of different cultural origins within a single bilingual jurisdiction, using the European sovereign debt crisis as a shock to the perception of government debt sustainability. We find distinct effects on government bond holdings between individuals of different cultural origin. These findings cannot be attributed to home bias, economic patriotism, moral suasion, socioeconomic factors, exposure to foreign cultures, or banks' distorted advice. Our results carry significant policy implications for monetary policy, financial stability, and sovereign debt issuance and management.
"Weathering the Storm: The Effects of Natural Disasters on Households under Full Insurance"
with Caroline Espegren, Sigurd Galaasen and Mathis Mæhlum
(Draft available upon request)
Abstract: We estimate the economic effects of natural disasters using comprehensive Norwegian administrative data on household income, wealth, consumption, housing transactions, and relocations. The existence of universal and full insurance coverage against direct damages from natural disasters in Norway allows us to obtain clean estimates of the indirect effects of the disasters. Our findings show that natural disasters have an indirect negative and persistent effect on labor income and consumption driven by economic damages to local firms. Affected households compensate for their loss in income by increasing self employment. Housing wealth, housing purchase transactions, and debt levels fall for homeowners. Moreover, non-homeowners become more likely to relocate after a disaster.
"Interest rate sensitivity of climate investments"
with Solveig Erlandsen and Thea Kolasa
(In progress)
"AI investment and climate policy"
with Adam Feher and Roxana Mihet
(In progress)
"Lending to small businesses: The value of soft information"
Abstract: We examine whether banks use soft information in their lending decisions. To overcome the problem of soft information measurement, we analyze whether publicly available variables that are correlated with the borrowers' credit quality are more significant in explaining the lending decisions of banks that have no soft information. We find that the power of these variables to predict credit outcomes is lower whenever the bank has access to soft information. The results indicate the importance of soft information in small business lending, and are robust to several measures of soft information availability, and to a potentially endogenous relationship between soft information and credit quality.
"Supplier certification and trade credit"
Abstract: We find evidence that input suppliers provide credit quality certification to their borrowers. Banks are more likely to lend to firms that have been granted trade credit by their suppliers and to firms that pay higher proportions of their trade credit debts on time. This ‘certification’ role of trade credit is most apparent when banks are relatively uninformed about their potential creditors, and when firms are relatively more opaque. We address causality using instruments that are motivated by theories and empirical regularities of the corporate use of trade credit. Results are robust to potentially endogenous relationships between the use of trade and bank credit.
"Indirect costs of financial distress" (with Cláudia Custódio and Miguel Ferreira)
Review of Finance 27:6 (2023), p. 2233–2270 Slides
"Managers’ cultural origin and corporate response to an economic shock" (with Mascia Bedendo and Linus Siming)
Journal of Corporate Finance 80 (2023), 102412
"The role of culture in firm-bank matching" (with Antonio Accetturo, Giorgia Barboni and Michele Cascarano)
Journal of Financial Intermediation 53 (2023), 101018
"Cultural preferences and firm financial choices" (with Mascia Bedendo and Linus Siming)
Journal of Financial and Quantitative Analysis 55:3 (2020), pp. 897-930.
Featured in UZH News (in English and in German) and in Ökonomenstimme (in German)]
Best Pitch Award (Behavioral Finance), FMA Lisbon, 2017
"Firms as liquidity providers: Evidence from the 2007-2008 financial crisis" (with Judit Montoriol-Garriga)
Journal of Financial Economics 109 (2013), pp. 272-291
CaixaBank Prize, Best Corporate Finance Paper, XIX Meeting of the Spanish Finance Association, 2011
Featured in Nada es Gratis (in Spanish)
"Does asset encumbrance affect bank risk? Evidence from covered bonds" (with Giacomo Nocera and Stefano Gatti)
Journal of Banking and Finance 146 (2023), 106705.
"Trade credit use as firms approach default" (with Judit Montoriol-Garriga)
Journal of Money, Credit and Banking 52:5 (2020), pp. 1199-1229.
Best Conference Paper, XXII Meeting of the Spanish Finance Association
"Financial distress and competitors' investment"
Journal of Corporate Finance, 51 (2018), pp. 182-209
"Experience and brokerage in asset markets: Evidence from art auctions" (with Brunella Bruno and Giacomo Nocera)
Financial Management 47 (2018), pp. 833-864
Best Poster, 9th CEPR Swiss Winter Conference for Financial Intermediation
"Contracts and returns in PE investments" (with S. Caselli and F. Ippolito)
Journal of Financial Intermediation 22 (2013), pp. 201-217.
"Come sarebbe l'Italia con 1,000 imprese quotate?" (with Manuela Geranio)
Economia & Management 3 (2013), pp. 95-115.
Best Paper Award, Economia & Management, 2013
Financial Markets and Portfolio Management 27 (4) (2013); pp. 431-433.
"Trade credit and its role in entrepreneurial finance” (with Vicente Cuñat). In: Cumming, D. (Ed.), 2012,
Oxford Handbook of Entrepreneurial Finance, Oxford University Press; New York, pp. 526-557.