Welcome to my website!
My name is Deheng Xu, and I am a Ph.D. candidate in Finance at the McCombs School of Business, University of Texas at Austin. I am on the 2024–2025 job market and am available for interviews.
My research interests focus on Financial Intermediation, Real Estate, Private Equity & Venture Capital
You can find my CV here.
Email: deheng.xu@utexas.edu
Working Paper
Interest Rates, Banks’ Market Power, and Their Asset Maturity (Job Market Paper)
Abstract: Banks invest short-term deposits in long-term assets, with asset maturities tending to increase when risk-free rates decline. To explain this behavior, I develop a model where capital regulations incentivize banks to stabilize their cash flows. In this model, because bank profits from deposits increase with risk-free rates, they hold long-term assets, whose profits, net of funding costs, decrease as risk-free rates increase. When risk-free rates are lower, the interest rate sensitivity of deposit profits is higher, implying that the optimal asset maturity is longer. Consistent with the model, I empirically find that the interest rate sensitivity of deposit profits is higher when risk-free rates are lower. In addition, I find that this effect is stronger for banks with higher deposit market power, and that these banks increased their asset maturity more following the interest rate reductions induced by the COVID-19 pandemic.
The Effect of Bank Consolidation on Small Business Lending and Investment: Evidence from the US Homebuilding Industry, with Sheridan Titman, and Yiyuan Zhang. (draft available upon request)
Abstract: This paper studies the effect of bank consolidation on small business lending and investment by leveraging data on the construction and financing activities of nearly 10,000 U.S. homebuilders. We find that 61.5% of these small firms borrow from a single bank throughout the seven-year sample period, and these lending relationships are sometimes disrupted when the firm’s lender is acquired. Using a staggered difference-in-differences approach, we compare homebuilders who previously borrowed from a bank that was acquired in a given year with those whose banking relationships were not affected by an acquisition. We find that the homebuilders affected by a bank acquisition borrow less and build fewer houses on average than their unaffected counterparts.
Selected Work in Progress
Bank Consolidation and the Rising Industry Concentration: Evidence from Homebuilding Industry, with Boyang Bai and Yiyuan Zhang
Lender Proximity to Venture Capitalists and Startup Debt Financing, with David Xiaoyu Xu