Working Papers
"Government Arrears and Corporate Policies: Lessons from a Natural Experiment" with Jose María Abad, Vicente Cuñat and Rafael Zambrana.
Submitted
We study how late payment affects corporate policies by analyzing a government program that unexpectedly repaid public procurement arrears. Our identification strategy compares firms in the program with similar firms that were accidentally excluded. The repayment of arrears leads to heterogeneous corporate responses: financially constrained firms adjust their real operations by increasing investment and repaying suppliers, while financially unconstrained firms modify their financial structure by repaying debt. All firms increase cash reserves, either to restore depleted funds or to safeguard against the risk of late payment. The accumulation of arrears also damages procurement relationships, which do not recover after repayment.
"Supply Chain Disruptions: The Propagation and Economic Costs of ESG Shocks" with Erfan Ghofrani and Carolina Villegas-Sanchez.
Submitted
This paper examines how negative environmental or social (E&S) news about suppliers affects downstream firms’ supply chain configurations and real economic outcomes. Using a novel dataset combining supply-chain links and ESG incident data, we find that ESG negative news shocks significantly increase the likelihood of supplier termination, particularly when inputs are generic and easily replaced. However, when inputs are highly specific, firms often retain ESG-implicated suppliers, even under reputational pressure. We also document an asymmetric response: firms are more likely to drop domestic suppliers than foreign ones following ESG incidents, highlighting the role of switching costs and input specificity. Using a difference-in-differences and instrumental variables strategy, we show that ESG-induced terminations raise operating costs for customers by 4.4%, reduce markups by 6.7%, and lower productivity by 3.6%. These effects are concentrated in cases involving foreign or specialized inputs, underscoring the operational vulnerabilities ESG risks pose across global supply networks.
"Blaming Your Predecessor: Government Turnover and External Financial Assistance" with Jose María Abad, Felipe Carozzi and Andrés Gago.
R&R Journal of the European Economic Association
We study the political incentives shaping governments' decisions to seek assistance from a lender of last resort. We propose that re-elected incumbents are more reluctant than newly elected governments to request assistance, as this action reveals negative information about their past performance. First, we provide cross-country descriptive evidence that a change in office is associated with a larger probability of receiving financial assistance from the IMF. Next, we analyze the decisions made by 3,000 Spanish municipalities following a credit shock during the Great Recession. Regression-discontinuity estimates show that newly elected executives are significantly more likely than re-elected incumbents to publicly agree on a financing program with the national government. Analyses of press coverage, news content using ChatGPT and politicians' survey responses indicate that re-elected incumbents avoid requesting a public bailout to protect their image, despite it being financially suboptimal. This shows how electoral incentives can prevent optimal policy adoption.
"What drives corporate ESG? Disentangling the importance of investors, managers, and firms" with Antonino Emanuele Rizzo and Mohammed Zakriya.
R&R Journal of Financial Intermediation
Best Paper Award in the 31st Spanish Finance Forum.
We study the relative importance of investor, manager, and firm heterogeneities on firms' Environmental, Social, and Governance (ESG) policies. We find that investor fixed effects explain most of the variation in ESG policies. The improvement in the model fit from adding investor effects is particularly strong for the environmental dimension. Additional analyses show stronger empirical support for an underlying channel based on investor influence over ESG policies rather than investor selection of high ESG firms. We document significant associations between investor effects and both subsequent voting decisions on ESG proposals and the likelihood that firms are involved in ESG misconducts.
"LLMs outperform outsourced human coders on complex textual analysis" with Andrés Gago, Ramiro H. Gálvez and Nicolás Harari.
R&R Scientific Reports
This paper evaluates the effectiveness of large language models (LLMs) in extracting complex information from text data. Using a corpus of Spanish news articles, we compare the performance of various LLMs with that of outsourced human coders on five natural language processing tasks, ranging from named entity recognition to identifying nuanced political criticism in news articles. We find that LLMs consistently outperform outsourced human coders, especially in tasks requiring deep contextual understanding. These findings suggest that current LLM technology provides researchers without programming expertise a cost-effective alternative for sophisticated text analysis.
Journal Publications
"How do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery" with Miguel Ferreira, Daniel Wolfenzon and Rafael Zambrana.
Journal of Financial and Quantitative Analysis, Volume 60, Issue 5, August 2025.
We show cash windfalls affect the real economy by spurring entrepreneurship. We identify these effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find higher start-up entry, job creation, and self-employment in winning provinces. Consistent with a financial constraints channel, results are strongest in sectors relying on external finance and provinces with limited credit access. Newly created firms are larger, more profitable, and survive longer. For incumbent firms, however, growth and profitability do not respond to lottery awards, but wages increase due to tighter labor markets.
"The systemic governance influence of expectation documents: evidence from a universal owner" with Ruth Aguilera, Javier Capape and Vicente Cuñat.
The Review of Corporate Finance Studies, Volume 14, Issue 2, May 2025.
We examine expectation documents’ effectiveness as an activism tool. We use the unforeseen release by the Norwegian sovereign wealth fund of a corporate governance expectation document as a natural experiment. We introduce a novel, three-way analytical decomposition of the firms, the fund, and their joint response to this document. Firms’ governance practices adapt to the fund’s new portfolio-wide governance preferences, with heterogeneous responses across ownership and firm characteristics. The fund’s investment policies also change, even at the expense of financial returns. Overall, our research demonstrates the potential effectiveness of expectation documents as an emerging low-cost activism tool for universal investors.
"Do foreign stocks substitute for international diversification?" with Jose Manuel Campa, Rodolfo G. Campos and Mohammed Zakriya.
European Financial Management Journal, 1191-1223, November 2020.
Using a novel broad sample of foreign securities available for trade in 42 countries, we characterize the rise in importance of foreign stocks and its implications for return diversification across industries and countries over three decades (1980-2009). We document a substantial increase in the number and the market value of stocks that are available for trade in markets outside of their home country (foreign stocks). The rise of foreign stocks in many markets has allowed investors to increase their international diversification from home by investing in these stocks. We find that the increased number of foreign securities has led to the increase in the importance of industry effects relative to country effects. Thus, we conclude that investment in a portfolio that includes foreign securities is an effective way to substitute for international diversification strategies.