Research Interests
Primary: Financial Intermediation, Industrial Organization
Secondary: Contracts, Entrepreneurship
Research Papers
(Kauffman Dissertation Fellowship; 2016 FMA Student Consortium; 2016 Kauffman Emerging Scholar Conference; 2017 Asian Meeting Econometric Society; 2017 Searle 8th Annual Conference on Internet Commerce; 2018 FMA Annual Meeting; 2018 UVa Darden Finance Brown-Bag; 2018 UVa IO/Theory Workshop)
I examine how lending platforms use their information advantage to deter adverse selection in their competition for creditworthy borrowers. Using data from peer-to-peer lending platforms and a platform entry event which exogenously induces platform competition for both borrowers and lenders, I find that the incumbent platform possesses an information advantage by incorporating information that cannot be leveraged by the entrant into borrower screening and loan pricing. I show that, with better knowledge about the borrowers' quality, the incumbent platform attenuates its own adverse selection by aggressively undercutting loan prices for creditworthy borrowers, leaving a less favorable borrower composition and thus exacerbating entrant's adverse selection. Lenders on the incumbent platform free ride on its information advantage, while to compensate for information disadvantage, those on the entrant demand higher ex ante loan prices.
(FIRS 2019 scheduled)
We study how investment bank complexity, based on factors such as the scale of proprietary trading and the development of complex financial products, induces conflicts of interest and the breakdown of trust between investment banks and their clients, damaging the relational contract at the heart of investment banking relationships. Banks’ ability to commit to relational contracts with their clients depends on internal governance mechanisms that align the interest of individual bankers with the financial well-being of their clients. We argue that the increasing complexity in investment banks weakens their internal governance and subsequently upsets their relationships with the clients. We estimate the causal effect between increasing bank complexity and the likelihood of a relationship being broken.
(2016 Midwest Economic Theory Conference)
I design a contracting mechanism to study how, in a typical principal-agent setting, a venture capitalist’s (the principal’s) private monitoring of the entrepreneur’s (an agent’s) effort exertion leads to higher effort from the agent and more efficient allocation of capital investments from the principal. The contract design extends the conventional “pay-for-performance” incentive by stipulating a punishment option which grants the entrepreneur a lower equity stake. It is incentive compatible for the venture capitalist to exercise the punishment only upon observing low effort, ensuring the optimal equilibrium path. I show that, compared with the “pay-for-performance” incentive scheme, monitoring lowers the incentive requirement to induce high effort, promising the venture capitalist a higher stipulated equity stake. Gaining higher marginal return on investments, the venture capitalist allocates the capital investments more efficiently, yielding a higher ex-ante project value.
We investigate investment banker human capital frictions as a determinant of security selection and issuance. For bank partners at the top 30 investment banks between 1960 and 1999, we measure early career experience with debt and equity issuance, and use quasi-exogenous banker retirements as an instrument for each bank's security-specific expertise. We find that an increase in a bank's supply of debt-specific expertise significantly increases the propensity and amount of debt issuance by the bank's clients. Our results suggest that human capital frictions in the investment banking industry constrain security selection and reduce issuance volumes.