F. Dimas Peña-Romera

Research

Publications:

1. "The revolving door between large audit firms and the PCAOB: Implications for future inspection reports and audit quality." (with Bradley E. Hendricks and Wayne R. Landsman ) . The Accounting Review. Forthcoming.

Presented at: University of Chicago (Booth); Cherry Blossom Conference (George Washington University); Stanford University; University of Georgia (Terry); Duke/UNC Fall Camp (Fuqua); Dopuch Conference (Washington Univ. St Louis); Lisbon Accounting Conference (Catolica/Nova).

Arizona State University,

Working Papers:

1. Networks of past syndicate collaborations and loan contract terms (Job Market Paper)

Abstract

I use measures of structural centrality from network theory to examine whether the location of a lead arranger in its network of past syndicate collaborations affects loan characteristics and outcomes. I hypothesize that more central lead arrangers have access to better information channels that help mitigate adverse selection and moral hazard concerns, and lead to improved financing terms. I find that lead centrality is an important factor in explaining both price and non-price loan terms. Loans granted by more central lead arrangers charge lower spreads than otherwise comparable loans granted by more peripheral arrangers. In addition, more central arrangers grant loans that are typically larger, have longer maturities, and have a lower incidence of restrictive covenants and collateral requirements than loans granted by peripheral arrangers, which suggests that price concessions are not merely substituting for more restrictive clauses elsewhere in the contract. To mitigate the potential for alternative explanations for the effect of lead centrality on spread, I conduct several cross-sectional tests to determine whether the effect is stronger when the value of the information obtained through the network of past collaborations is higher. I hypothesize that information obtained through networks of past collaborations is higher when the borrower is less transparent and harder to screen, and when the lead arranger is ex-ante less informed about the borrower. I find evidence consistent with each of these predictions. Finally, I find that controlling for observable risk characteristics, ex-post loan performance increases with the centrality of the lead, which is consistent with central leads having access to better information at origination.

Presented at: J. Michael Cook Doctoral Consortium (Deloitte University); University of North Carolina (Kenan-Flagler); Conference in memory of Nicholas Dopuch (Washington University in St Louis - Olin ) - Poster presenter ; AAA Rookie Camp (Miami);

3. The Value of Lending to Bellwether Firms by Institutional Investors (with Wayne R. Landsman and Donny Zhao)

Abstract

This study provides evidence that nonbank institutional investors that participate in loan syndicates value inside information obtained through lending agreements with bellwether borrowers. The private information nonbank institutional investors obtain from lending relationships with bellwether firms can help identify trading opportunities in other public market securities. Thus, we predict and find that institutional investors compensate bellwether firms by charging a lower loan spread. To mitigate the potential for alternative explanations for non-bank institutional lenders charging a lower loan spread to bellwether borrowers, we conduct several additional tests to determine whether the loan spread effect is stronger when the value of inside information from bellwether firms is likely to be higher: during periods of high market uncertainty, in the period after the enactment of Regulation Fair Disclosure (Reg FD) by the Securities and Exchange Commission, for loans with a high number of financial covenants, and for loans granted to firms with less transparent information environments. We find evidence consistent with each of these predictions. We also predict and find evidence that institutional investors use private information acquired during lending relationships with bellwether borrowers to trade in public securities. In particular, we find that in the quarter during which institutional investors lend to bellwether firms, they earn excess returns of 70 bps relative to institutional investors that do not lend to bellwether firms, and excess returns of 60 bps relative to quarters in which they do not lend to bellwether firms. Such returns translate to annualized incremental returns of approximately 2.4-2.8% for institutional lenders that lend to bellwether borrowers.

Based on first year summer paper.
Presented at: UNC (Kenan-Flagler); Georgetown (McDonough); London School of Economics (LSE); University of Graz; Penn State (Smeal); University of Oregon (Lundquist); Paderborn University.

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