Michael Schwert


Assistant Professor of Finance
812 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210

schwert dot 6 at osu dot edu


Bank Capital and Lending RelationshipsJournal of Finance, forthcoming.

This paper investigates the mechanisms behind the matching of banks and firms in the loan market and the implications of this matching for lending relationships, bank capital, and the provision of credit. I find that bank-dependent firms borrow from well capitalized banks, while firms with access to the bond market borrow from banks with less capital. This matching of bank-dependent firms with stable banks smooths cyclicality in aggregate credit provision and mitigates the effects of bank shocks on the real economy.

Municipal Bond Liquidity and Default RiskJournal of Finance (2017), 72(4), 1683-1722.

This paper examines the pricing of municipal bonds. I use three distinct, complementary approaches to decompose municipal bond spreads into default and liquidity components, and find that default risk accounts for 74% to 84% of the average spread after adjusting for tax-exempt status. The first approach estimates the liquidity component using transaction data, the second measures the default component with credit default swap data, and the third is a quasi-natural experiment that estimates changes in default risk around pre-refunding events. The price of default risk is high given the rare incidence of municipal default and implies a high risk premium.

Working Papers

Systematic risk is an important determinant of corporate capital structure. A one standard deviation increase in asset beta corresponds to a decrease in leverage of 13%, controlling for total asset volatility. This evidence is consistent with recent dynamic capital structure models that relate financing decisions to macroeconomic factors and provides further impetus for exploring the impact of systematic risk on corporate decisions.

Work in Progress

How Often Do Firms Really Refinance? Evidence from Corporate Filings (with Arthur Korteweg and Ilya Strebulaev)

The Economics of PIPE Investing (with Jongha Lim and Michael Weisbach)

The Cost of Bank Debt