Research

Publications

In this paper, we consider conditional measures of lead-lag relationships between aggregate growth and industry-level cash-flow growth in the US. Our results show that firms in leading industries pay an average annualized return 3.6% higher than that of firms in lagging industries. Using both time series and cross-sectional tests, we estimate an annual pure timing premium ranging from 1.2% to 1.7%. This finding can be rationalized in a model in which (a) agents price growth news shocks, and (b) leading industries provide valuable resolution of uncertainty about the growth prospects of lagging industries. 


Using the exclusion of business development companies (BDCs) from stock indexes, this paper studies the effectiveness of market discipline in the direct lending space.  Amid share sell-offs by institutional investors, a drop in BDCs' valuations limits their ability to raise new equity capital.  Following this funding shock,  BDCs do not adjust their capital structure while reducing the risk exposure of their portfolios.  We document a greater reduction in risk for BDCs subject to stronger market discipline from their debtholders. BDCs pass through the capital shock to their portfolio firms by reducing their investment intensity. 


The reduction in credit supply from traditional lenders following the 2007-2008 Financial Crisis contributed to a surge in direct lending and, in particular,  investments by business development companies (BDCs).  Using a novel hand-collected dataset, we provide the first systematic analysis of the BDC sector.  We exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing.  Relying on the synthetic control method,  we further document that firms' access to BDC funding has stimulated economic growth and innovation. 

Working papers

Using syndicated loan data, I document a premium for the exposure of nonfinancial firms to risks of financial intermediation. Firms that borrow from high-leverage financial intermediaries have on average 4% higher returns than firms with low-leverage lenders. This premium cannot be attributed to differences in firm characteristics. Instead, it stems from the underdiversified lender syndicate structure and elevated firm's refinancing intensity, materializing through inability to favorably renegotiate lending terms and obtain additional financing. Exploiting the dispersion in leverage of financial intermediaries extending credit, I propose a macroeconomic indicator that captures changes in lending standards and forecasts industrial production and unemployment.