Reseach Interests

investor behavior, portfolio choice, sustainable finance, labor finance

Working Papers

The Sustainability Preferences of Individual and Institutional Investors (SSRN)

(with M. Groen-Xu)

*previously: Investors in Green Bonds 

Many investors delegate their investment decisions to professional asset managers who may have very different preferences on non-pecuniary benefits. We compare the sustainability preferences of institutional investors to other investors, using the universe of holdings in bonds traded in Norway in the years 2010-20. We identify sustainability investors as those who choose Green Bonds over similar non-green bonds by the same issuers. Although Green Bonds only constitute a small fraction of portfolios, their investors exhibit a distinct investment strategy. In theory, the utility derived from green preferences allows investors to take on more financial risk. Indeed, individual investors hold riskier portfolios with higher volatility and more defaults, although financial investors do not. Our results suggest that individual Green Bond investors have non-pecuniary green preferences but are not representative of the majority of sustainable investment in the market. 

Human capital acquisition in VC-backed companies (SSRN)

(with F. Core and S. Wang)

This study explores the role of human capital in start-ups around the time of their first venture capital (VC) financing deals. We document significant gender and racial disparities in employment, with women and minorities underrepresented. Our findings reveal that VC-backed firms experience substantial employment growth post-funding, resulting in increased workforce diversity. It does not imply changes in hiring strategies but rather a notable shift toward lower seniority positions and supporting job categories. Additionally, there is a tendency to hire individuals with previous VC-backed experience or those new to the workforce. This study highlights the evolution of employment structures and diversity within start-ups.

Restructuring outcomes under cross-security debt ownership (preliminary draft)

(with M. Groen-Xu)

Lending to distressed firms is a concentrated market with very few players. The presence of the same group of creditors in multiple assets creates incentives for inter-security bargaining. Using a novel dataset of the universe of holdings and transactions in Norwegian bonds, we document large overlaps in ownership between senior and junior defaulting bonds of the same issuer, as well as between different issuers of defaulting bonds. Within firm, overlap stakes are significantly related to a better recovery process, especially for junior debtholders. The same applies to overlaps by investors in multiple defaults in different issuers. Our results suggest that common lenders negotiate across securities and change restructuring outcomes.

Direct stock investing (preliminary draft)

(with D. Zhang)

We study patterns of direct and indirect stockholdings across age, cohort, and time, using full population data from Norway’s administrative tax records over 2003-2015. While overall equity market participation and aggregate equity holdings have remained stable, we identify distinct and diverging trends in direct and indirect stockholdings. We document that households have increasingly shifted away from direct equity investments and that this decline can be partially attributed to cohort effects. Younger cohorts are less inclined to participate directly in the equity markets. This trend is mainly driven by the extensive margin, with lower participation rates in the direct stockholdings among younger cohorts, rather than differences in exposure conditional on participation. The effect is also pronounced among investors who hold both stocks and funds, implying that households are more likely to exit direct stock investment entirely rather than integrate mutual funds into their portfolios.

The Gender Gap in Savings of Entrepreneurs (preliminary draft)

(with R. Almeida and M. Groen-Xu)

We investigate the gender differences in saving rates of entrepreneurial households. We use microdata from households in the UK, where entrepreneurship is high relative to most developed countries.  We show female entrepreneurs have higher saving rates than male entrepreneurs and workers from both genders. We find empirical evidence that this relation arises from  female entrepreneurs saving more one year before becoming business owners. We also show that lower socioeconomic status is associated with higher saving rates of self-employed women. In addition, we find that the risk of owning a business is a relevant factor as the presence of a business partner removes the gender gap. We then examine the implications of the gap. Female entrepreneurs are on average richer than female workers. Despite more savings, female entrepreneurs are poorer than male ones. Household dynamics showing that female entrepreneurs are more likely to transfer money within the household compared to male entrepreneurs is one potential reason for their compromised ability to grow personal wealth.

The role of local banking in timing of investment. (Latest version)

(with K. Kalisiak)

We show that access to local financing affects firms' investment timing decisions. Firms in areas with better-developed local banking sectors respond earlier to future improvement in investment opportunities. They start new investments at the time the improvement is announced. Other firms catch up only after the improvement and associated cash flows are realized. We exploit variation caused by infrastructure development in the oil industry that exogenously affects firms in only one region and use nearby regions as control. The event creates a gap between announcement and realization dates in which credit demand increases, but credit supply stays unchanged. This specific structure highlights the role of financial constraints and eliminates the problem of reverse causality.

Work in progress

The impact of uncertainty on labour reallocation and firm employment decisions.

(with S. Wang and L. Zhong)

On wealth inequality and unlisted equity holdings.

(with V. Balasubramaniam and D. Zhang)

Permanent working papers

Strategic overbidding in procurement auctions? (Latest version)

I find evidence that cash constrained firms compromise long-term profitability to improve their short-term liquidity. I document that constrained firms overbid in government procurement when market conditions deteriorate. New contracts improve short-term cash flows, but result in lower long-term profits. I provide an unbiased estimate of the drop in performance of winners following an award by measuring performance relative to companies which placed second in the auction. I show that financial constraints predict aggressive bidding, that firms overbid less in auctions that require larger deposits, and that winning long-term contracts causes a short-term increase and subsequent decline in profitability. My results offer a non-behavioural explanation for the ``winner's curse''.

Firm behaviour after R&D breakthroughs.

(draft available upon request)

I examine firm behaviour after major R&D breakthroughs. I use the example of pharmaceutical companies that carry out last-stage clinical trials for new oncology drugs. "Success" is defined as Food and Drug Administration approval to market new drugs. I argue that this alternative innovation measure is superior to commonly used patents and citations. Companies that obtain approval increase capital expenditure. However, there is no change to their research and development expenses, cash holdings, or short-term investments. This supports the hypothesis that innovative firms follow long-term strategies, and finalizing drug development, even though infrequent, does not radically change their behaviour.