RESEARCH

HEC Paris; FRB System Banking Conference 2023 (scheduled); 15th PERC Symposium UNC (scheduled); 12th Tau Finance Conference (scheduled); Copenhagen Business School (scheduled) ; Paris December Conference (scheduled)

Two recent capital market trends are (i) the rise of private equity (PE) and leveraged buyouts (LBOs), and (ii) the growing participation of non-bank financial intermediaries in credit markets. Can private equity fuel non-bank lending? In this paper, we find that PE-backed loans are associated with lower active bank monitoring, lower loan shares retained by the lead arranger, and more loan sales to non-bank financial intermediaries (e.g., CLOs). Importantly, a loan’s PE backing allows banks to retain less skin-in-the game and to sell greater loan shares after origination. With the rise of PE financing, information production in private markets shifts from banks toward PE investors.

“Out of Sight, Out of Mind?” Banks’ Private Information, Distance, and Relationship Length - with S. Claessens and S. Ongena

Swiss Finance Institute Research Paper No. 23-01

European Economic Association Annual meetings, Hitotsubashi University, Federal Reserve Board (scheduled)

What is in banks’ private information about borrowers, and how does it form over time? In this paper, we identify two key dimensions of private information embedded in banks' evaluation of borrowers: incongruity, banks’ assessment of firm risk relative to one based on observables, and unfavorability, a worse assessment. We show that Incongruity and unfavorability have significant implications on corporate loan terms.

Resilience of Bank Lending to Nonbanks - with J. Krainer and F. Vaghefi

IBEFA summer conference San Diego, European Economic Association Annual meetings, Financial System Conference 2023 (scheduled)

Nonbank sector, including fintech firms, has experienced significant growth lately, and a major driving force behind this growth has been financing from banks. The increase in bank funding to nonbanks raises policy concerns because of the inherent fragility at the nonbanks due to their lack of access to low-cost deposits and vulnerability to the runs. Is funding from banks a reliable source for nonbanks? And does bank regulation push risk to the shadows? This paper finds that bank lending to nonbanks is resilient, even in times of distress. Interestingly, nonbanks relying on bank funding continued lending to the economy and avoided loan sales during times of stress, indicating their reliability as financial intermediaries.

A Tale of Two Institutions? Credit Union Expansion and Local Banking Segmentation - with T. Zhang

Federal Reserve System Committee Meeting on Banking, Federal Reserve Board, University of Wyoming

In the U.S., credit unions are often a pivotal competitor to regional banks. In this paper, we ask the question: can competition from credit unions help improve consumer welfare? This paper provides comprehensive, multi-dimensional evidence that ranges from credit supply to loan fees and charges and shows that consumer credit markets become more segmented geographically after a NCUA's regulatory reform, which ultimately improves lending outcomes in the local and underserved community.

Under Review and More

Knowledge Protection and Strategic Alliances

Management Science, R&R - with I. Hansan, J. Kong, D. Liu, and B. Qiu

Semi-finalist Best Paper Award, Finance Management Association Annual Meetings

Is a Friend in Need a Friend Indeed? How Relationship Borrowers Fare during the COVID-19 Crisis.

with A. Berger, C. Bouwman, L. Norden, R. Roman, and G. Udell

FIRS conference Vancouver, Outstanding Paper Award, Southern Finance Association Annual Meetings

Featured in Forbes, "How Banks Shunned Their Special Customers During the Covid-19 Crisis", 2020-12.

Stress Test Failures and Corporate Mergers and Acquisitions - with B. Qiu

Best Paper Award, Finance Management Association Asia Annual Meetings

Credit Rating and Corporate Lending, the Role of Bank Capital - with S. Claessens and A. Law

Bank for International Settlements Working Paper Series, 747