Research

I study how financial frictions affect product market decisions. As products have different production cycles and generate cash flow at different maturities, firms may adjust product mix to alleviate financing constraints. I use the wine sector as laboratory because product decisions can be identified and linked to cash flow maturity, and exploit a banking regulation which impacted on credit availability. I find that credit-constrained firms adjust product mix in response to the shock, shifting from long to shorter cash flow maturity products. My results suggest the impact of financing constraints on product markets are exacerbated with longer, less-flexible, production cycles.

This paper studies the impact of an MBA-style course in finance for executives of medium and large enterprises on firm policies and performance through a randomized controlled trial (RCT) in Mozambique. Using both survey and accounting data, we find that executives change firm financial policies in response to the treatment. A reduction in working capital generates an increase in cash that is used to finance long-term investments. Those changes improve the performance of the treated firms. Overall, our results suggest that relatively small and low-cost interventions help firms to mitigate financial constraints and potentially affect economic development.

Online materials: here.

This paper estimates the effect of violent political conflicts on inventory investment. We analyze monthly inventory purchases of 431 clients of a multinational beverage supplier in Mozambique in response to conflicts occurring within a 10km radius. Firms respond to violent political conflicts by decreasing purchases by as much as 19%. Small firms experience a stronger decline of up to 33% compared to large firms. On the extensive margin, small firms are more likely than large firms not to make a purchase on a month that follows a conflict, and also more likely to terminate the relationship with the supplier. We find consistent evidence of heterogeneous effects across firm size using annual survey data on manufacturing firms. Small firms are disproportionately affected by political violence, which might exacerbate already existing differences to large firms in developing countries.

This paper studies whether informational frictions prevent firms from accessing government support measures using an encouragement based randomized controlled trial. We focus on two COVID-19 relief programs for firms in Portugal. These programs provide (i) wage support for workers who are kept on payroll and (ii) lines of credit backed by government guarantees. We randomly assign firms to a treatment providing either simplified information regarding the program or a combination of information and step-by-step application support. We find a significant treatment effect of simple information provision to firms on take up for the wage support program, but not for lines of credit. Our results constitute direct evidence that information frictions can act as a meaningful barrier to comprehensive distribution of firm-level support measures.