Published Papers

Exploiting Growth Opportunities: The Role of Internal Labor Markets (with Chiara Fumagalli, Francis Kramarz, Giovanni Pica). Forthcoming, Review of Economic Studies

We investigate how Internal Labor Markets (ILMs) allow business groups to accommodate positive shocks calling for labour adjustments in their units, thus curbing search and training costs. In response to the exit of large competitors, group units faced with profitable growth opportunities swiftly draw on the human capital available elsewhere within the organization. Access to the ILM allows group members to outperform firms that cannot rely upon the same adjustment channel.

Venture Capital Meets Contract Theory: Risky Claims or Formal Control?, Review of Finance, 2014

I model the joint allocation of control and cash-flow rights in venture capital deals. When the need for VC advice and support calls for a high-powered outside claim, the entrepreneur should optimally retain control in order to avoid undue interference. Hence, I predict that more high-powered claims should be associated with fewer control rights. This challenges the idea that control should always be attached to equity-like claims and is in line with contractual terms used in venture capital, corporate venturing, and partnerships between biotech start-ups and large corporations.

The Deep Pocket Effect of Internal Capital Markets (with X. Boutin, C. Fumagalli, N. Serrano-Velarde, G. Pica) Journal of Financial Economics, 2013

We provide evidence that incumbent and entrant firms’ access to business group deep pockets affects entry and exit patterns in product markets. Overall, our findings suggest that internal capital markets operate within corporate groups and shape the product market behavior of affiliated firms by mitigating financial constraints.

Corporate Social Responsibility and Managerial Entrenchment (with G. Cespa), Journal of Economics and Management Strategy, 2007

One of the few theory papers in the finance-CSR literature. When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. In a model of CSR and managerial entrenchment, we show that managerial turnover and firm value are increased when explicit stakeholder protection is introduced, as they deprive incumbent CEOs of activists' support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement.

The Strategic Impact of Resource Flexibility in Business Groups (with C. Fumagalli), RAND Journal of Economics, 2005

We show that in business groups with efficient internal capital markets, resources may be channelled to either more or less profitable units. Depending on the amount of internal resources, a group may exit a market in response to increased competition, or rather channel funds to the subsidiary operating in that market. This has important implications for the strategic impact of group membership. Affiliation to a monopolistic subsidiary can make a cash-rich stand-alone firm more vulnerable to entry deterrence. Conversely, a cash-poor firm becomes less sensitive to its financial constraints upon affiliation to a group, and thus less vulnerable to entry deterrence.

Anticompetitive Financial Contracting: The Design of Financial Claims (with Lucy White), Journal of Finance, 2003

A model where entry deterrence takes place through a financial, rather than product market channel, by affecting the credit market behavior of investors towards entrant firms. To deter entry, the claims held on incumbent firms should be sufficiently risky, that is, equity-like. The anticompetitive effect of equity-like claims is more marked the less competitive the credit market - so credit market competition spurs product market competition.

Corporate Financing and Product Market Competition: An Overview, Giornale degli Economisti e Annali di Economia, 1999

A survey of the literature on corporate finance and competition, embedding several papers within a model a la Holmstrom-Tirole (1997). Useful for teaching PhD students.