My Research

Financial Integration and Credit Democratization: Linking Banking Deregulation to Economic Growth  (with Alexander W. Butler, Edwin Hu, and Morad Zekhnini)

We use a matching method that constructs synthetic counterfactual states to identify the channels that link bank deregulation to financial integration, and thereby to economic growth. We document a positive, but conditional, effect of financial integration on economic growth. We explore the heterogeneous effects of financial integration across states depending on the capital mobility in each state. Our results reveal a correlation between financial integration and subsequent banking sector changes related to an expansion in loan recipients. We show that financial integration democratizes lending and spurs economic growth. 

Finance in the new US economy: Local finance and service job growth in the post-industrial economy

I examine whether local bank finance facilitated the transition to a service-based economy in the United States.  I identify a causal role for local finance in service job creation. I use county-level changes to alcohol laws as demand shocks to service employers across a subsample of U.S. counties.  Counties with more local finance experience more service job creation. This leads to labor market transitions that reflect shifts in the broader economy.  Information asymmetry and collateral constraints connect local finance to service sector employment.  The findings identify a unique role for local finance in the evolution to a post-industrial service-based economy.   

Selection Bias in Mutual Fund Fire Sales

Trading pressure following mutual fund outflows generates a potentially powerful quasi-experimental setting in which stock price variation is orthogonal to firm characteristics.  To exclude information-based trading, strategies using this variation incorporate an assumption that managers sell firms in proportion to portfolio weights.  I show that this assumption drives selection bias in price fluctuations.  It inflates price impacts for poorly performing, illiquid firms with lower growth –- firms that managers systematically avoid selling.  Results drawn using these prices are twice the magnitude of unbiased results.  Extensive selection bias precludes potential fixes.  Numerous recent studies exploiting this variation should be re-evaluated.


Half Banked: The Real Effects of Financial Exclusion on Firms (with Nathan Seegert)

We investigate the economic value of cash management. In the legal marijuana industry, where only half of businesses have access to cash management services from a financial institution, we examine dispensary profitability using administrative and survey data.  Our results show that businesses with cash management charge higher retail prices (8.3%), pay lower wholesale prices (7.3%), and have higher sales volume (19%).  Together these advantages create a 40% increase in profitability.  These results support our model in which reputational capital and administrative costs drive profitability regardless of whether national banks, credit unions, or Fintech provide the cash management functions.

Risk Management and Capital-Labor Allocation (with Jennifer Ifft and Margaret Jodlowski), 2023

This paper assesses the impact of risk management on within-firm factor input allocation. We combine externally-imposed regulatory thresholds for identification with firm-level data on labor use and capital investment, which include labor use across tasks and worker types and task-specific characteristics of fixed capital. Risk management spurs managers to reduce labor hours supplied by supplementary workers and reallocate labor efficiently, in part by increasing their own labor hours and investing in labor-saving capital. Firms use current spending to fund these capital investments; leverage does not increase. In sum, insurance markets can affect firms' capital-labor allocation independently of capital markets and in the absence of credit constraints.  

Identifying the Real Effects of the M&A Market on Target Firms (with David De Angelis and Gustavo Grullon), 2023

This paper provides causal evidence of the effects of the M&A market on target firms' corporate policies.  Using antitrust regulatory thresholds to directly link the probability of a takeover to the size of the firm, we find evidence that firms intentionally reduce their size to elicit a takeover bid.  They do so by limiting asset growth and increasing their payouts when they have excess cash.  The treatment effect is stronger among firms with greater control over their market value and  incentives to cash out via a merger.  Our results reveal that antitrust exemptions can create perverse incentives that limit growth. 

New Papers and In Progress

Hedging Political Uncertainty through Shifting Plant-level Investment (with Candace Jens and Morad Zekhnini), 2023

Political Uncertainty and Asset Tangibility (with Candace Jens and Morad Zekhnini), 2023

Banking deregulation and minority entrepreneurship (with John Edwards and Yang Wang), 2020