Research

Working Papers

"Corporate Flight from Uncertainty and Business Dynamism", with Mircea Epure (UPF & BSE) - R&R at Management Science (Strategy)

Abstract: Institutional shocks can reshape regional business conditions by increasing uncertainty and altering the environment for incumbent firms and prospective entrepreneurs. We examine these issues in the context of the 2017 Catalan independence referendum, which triggered institutional uncertainty and induced many firms to relocate their corporate headquarters (HQ) to other Spanish regions. These relocations were economically salient, accounting for roughly one quarter of the total assets of Catalan firms. Using granular data on firms, HQ relocations, entrepreneurs, and regions, we document several empirical findings. Firms that relocated their HQs were systematically distinct from non-relocating firms and largely outperformed over the business cycle. The shock, together with the relocation of large firms’ HQs, reshaped the regional business environment, worsening conditions for both incumbent and new firms in Catalonia. Within Catalonia, however, areas from which large firms relocated their HQs experienced relatively higher new business entry rates, but lower new venture growth. These patterns were more concentrated in non-manufacturing industries and in areas from which more internationally oriented large firms relocated their HQs. They were also accompanied by compositional shifts consistent with necessity entrepreneurship and by weaker income and wage growth in tax filings.

"Market Power and Political Connections", with Yameng Fan (SAIF)

Abstract: Do politics drive market power in the United States? This paper examines how corporate political connections affect firm-level markups through a quasi-exogenous committee-level shock: the involuntary removal of U.S. House of Representatives members. We find that a 10% increase in political connections raises markups by 0.68 percentage points. The effects are present for policy-relevant and long-term connections. We further show that connected firms face lower variable input costs, stemming from favorable bill outcomes. We develop a general equilibrium model and show that the increase in political connections between 1993 and 2018 accounts for 12.4% of the rise in aggregate markups.

"Climate Risk Engagements", with Francois Derrien (HEC Paris), Alexandre Garel (Audencia) and Arthur Romec (TBS)

Abstract: We study climate risk engagements by one of the world’s largest institutional investors. They account for a substantial share of ESG engagements and target mostly firms with large carbon footprints and high exposure to transition risk. The recent ESG backlash has led to a reduction in climate risk engagements, notably in industries where climate issues are less financially material. Climate risk engagements are associated with greater voting support for management. Following engagement, targeted firms are more likely to adopt science-based climate targets and to disclose climate-related information. They also experience a modest reduction in emissions intensity.  Finally, when targeted firms fail to subsequently take climate actions, engagement is repeated and complemented by votes against directors.

"Defining Greenwashing", with Ariadna Dumitrescu (ESADE) and Javier Gil-Bazo (UPF & BSE)

Abstract: We define as a greenwasher a mutual fund that claims to pursue ESG goals, but whose claim is not supported by either portfolio holdings with above-average ESG ratings or by frequent voting support for ESG proposals (above the median support of all ESG funds). Using this definition, 29% of ESG funds in the US engaged in greenwashing during the 2016-2022 period. Greenwashers are more likely to underperform, tend to belong to larger and younger fund families, and are less frequently offered by signatories of the United Nations Principles for Responsible Investment. Investors, especially institutional investors, appear to discern true-ESG funds.