Working papers
"The economic effect of IFRS 9 on lending decisions: Evidence from loan-level data" (with Antonio Arfè, Marco Maria Mattei, and Matteo Merlo), 2023
"Green-ovation and technological obsolescence" (with D. Tojeiro-Rivero), 2023
"Green collateral" (with K. Sonnawalla), 2024
Journal publications
"Shared auditors in private lending" (with K. Soonawalla), Journal of Accounting, Auditing and Finance (Early view, 2023)
We examine whether borrowers who share the same auditor with a syndicate lender (i.e., shared auditors) have improved access to the syndicate loan market. We predict and find evidence that shared auditors reduce information asymmetries between lenders and borrowers, as well as between lenders in a syndicate. We also find that borrowers who share auditors with lenders obtain better price and non-price terms compared to those without. Our empirical evidence also suggests that, when borrowers and lenders share auditors, syndicates are less concentrated and more diverse, consistent with the prediction that shared auditors provide informational benefits on the syndicate market. Loan facilities with shared auditors are also more likely to be renegotiated with more favorable terms for borrowers. Taken together, our findings suggest that shared auditors contribute to the efficient functioning of the debt market by reducing the information asymmetries in debt contracting.
"The real effects of analyst research quality: Evidence from the adoption of the Broker Protocol", Australian Accounting Review, 2023 (Link)
I provide empirical evidence that labour market frictions have an adverse effect on the quality of analyst research. Using the staggered, voluntary adoption of the Protocol for Broker Recruiting (Protocol) since 2004, I show that, without non-compete agreements, financial analysts produce more accurate forecasts and exert greater efforts in updating their research more frequently. Consistent with the notion that information asymmetry in the capital market are lower in the post-Protocol period, I provide empirical evidence and argue that the research coverage by Protocol members enables managers to access capital and extend their investment opportunities. My findings suggest that analyst coverage by Protocol members has a favourable effect on investment in innovative projects, production capacity and acquisitions.
"Enhancing bank transparency: Financial reporting quality, fraudulent peers and social capital" (with M. Mattei), Accounting and Finance, 2023 (Link)
This study examines the role of social norms in financial markets by relating bank transparency to social capital. Using comprehensive data on commercial banks, we provide empirical evidence that high social capital contributes to more transparent financial reporting, thereby enabling more precise risk assessments and promoting financial stability. We find that the effect of social capital is more pronounced when commercial banks are more complex and disclosure incentives of bank managers are strong. Our results suggest that more opaque reporting by peers explains lower transparency but financial misreporting is less contagious when social capital is high. Our study suggests that social capital can effectively improve reporting transparency when other mechanisms are not effective, thus securing financial system stability.
"Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity" (with K. Soonawalla), Accounting and Finance, 2020 (Link)
We suggest that the level of information opaqueness determines the propensity of publicly listed firms to have debt financing from only a few debt types (i.e., debt specialisation). Using accruals quality as a proxy for information opaqueness, we find that the degree of debt specialisation is lower for firms with high-quality accruals. This result is consistent with the notion that information collection and monitoring costs are higher for firms that have higher informational opacity, explaining the tendency towards debt specialisation. Using S&P 500 membership as an exogenous event driving institutional ownership changes, we further document that debt specialisation is decreasing in accruals quality when institutional investors are expected to have an influence.
"Do product market threats affect analyst forecast precision?" (with M. Mattei), Review of Accounting Studies, 2017 (Link)
We examine how product market threats influence the precision of analyst forecasts. Greater competitive threats may make forecasting more difficult by increasing the uncertainty regarding future cash flows and by influencing the quality of financial disclosure. Using a firm-specific measure of product market threats (i.e., fluidity), we find that analysts are more likely to be less precise forecasting earnings for highly fluid firms and that the lack of precision is not fully explained by performance volatility. Using significant changes in tariff rates as a quasi-natural experiment, we find that analyst forecast precision is significantly lower following tariff reductions.
"Investor-legislators: Tax holiday for politically connected firms", British Accounting Review, 2017 (Link)
Best publication award, British Accounting Review (2017)
We examine whether political connections in the U.S. Congress affect voting patterns with respect to the American Jobs Creation Act of 2004 (AJCA). Using the financial disclosure statements of members of the U.S. Congress, we define political connections as equity-based ties between lawmakers and business groups, which capture the deliberate decision of lawmakers to establish a relationship by investing personal wealth in firm equity. We find that politicians are more likely to hold equity in firms receiving benefits under the AJCA (i.e., firms with high repatriation tax costs). PACs have larger contributions to House members who purchase equity in repatriating firms immediately prior to the AJCA vote. The results suggest that PACs of repatriating firms strategically target House representatives to increase political support for the tax holiday.
"Debt maturity and tax avoidance", European Accounting Review, 2017 (Link)
This study proposes and empirically tests the argument that creditors are likely to extend debt with a shorter maturity to tax-avoiding firms so that they can frequently re-evaluate tax-related risk in debt contracting. Using effective tax rates and uncertain tax benefits as a proxy for tax avoidance, I find that tax-avoiding firms have a larger proportion of short-maturity debt compared to other firms. The empirical findings further show that firms with unsustainable tax positions and with subsidiaries in tax-haven countries are more likely to employ short-maturity debt. Collectively, the empirical findings suggest that frequent debt renegotiations increase the exposure of tax-avoiding firms to credit supply shocks, contributing to their higher demand for cash.
"Firm geographic dispersion and financial analysts’ forecasts" (with M. Mattei), Journal of Banking and Finance, 2016 (Link)
Using a text-based measure of geographic dispersion that captures the economic ties between a firm and its geographically distributed economic interests, this study provides evidence that financial analysts issue less accurate, more dispersed and more biased earnings forecasts for geographically dispersed firms. We find that the geographic dispersion across the U.S. is less likely to affect forecast precision when a firm has economic activities in states with highly correlated local shocks. Consistent with the information asymmetry argument, we find that geographically dispersed firms have less comparable and more discretionary managed earnings, have less extensive than industry competitors segment information, are more likely to restate sale segment information, and issue annual and quarterly filings with a delay.
"S&P 500 index addition, liquidity management and Tobin's Q", Accounting and Finance, 2016 (Link)
This study examines the revision in cash holdings and the market valuation of investment opportunities of 475 firms added to the Standard & Poor's 500 (S&P 500) stock market index from 1980 to 2010. We find that newly indexed firms have evolved to significantly lower cash balances, which we partially explain by the decreasing growth opportunities following index inclusion. Consistent with index inclusion loosening financial constraints, we document a larger decrease in cash for index inclusions in sectors with high financial dependence.
"Long-term price effect of S&P 500 addition and earnings quality", Financial Analysts Journal, 2008 (Link)
When a company is added to the S&P 500 Index, it receives a positive price response. Several explanations for this effect have been suggested, but empirical findings do not provide a conclusive cause. The inclusion of a company in the index may strengthen managerial incentives to provide high-quality disclosures of financial data. This study is an examination of the earnings quality of S&P 500 companies before and after their addition to the index. It finds that discretionary accruals significantly decrease after companies are added to the index, which greatly improves earnings quality. This change in earnings quality provides a possible explanation for the price response to the S&P 500 addition.