Reseach Interests

investor behavior, portfolio choice, sustainable finance, labor finance

Working Papers

The sustainability preferences of Individual and Institutional Investors (draft available upon request)

(with M. Groen-Xu)

*previously: Investors in Green Bonds 

Many individuals delegate their investment decisions to professional asset managers that may have very different preferences. We study the differences in sustainability preferences between individual and institutional investors using the universe of holdings in bonds traded in Norway 2010-20. Our data includes many individuals as well as financial investors --fewer but with larger stakes. We identify sustainability investors as those that choose Green bonds over similar non-green bonds by the same issuers and compare them to those that choose the latter over the former. 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. We show that financial investors in Green bonds do not behave this way, but individual investors do: they hold riskier portfolios with higher volatility and more defaults. Our results suggest that individual Green bond investors have non-pecuniary green preferences, but are not representative for the majority of sustainable investment in the market. 

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.

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.

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''.

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

Human capital acquisition in VC-backed companies (draft available soon)

(with F. Core and S. Wang)

Direct stock investing

(with D. Jenter and D. Zhang)

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

(with S. Wang and L. Zhong)

Permanent working papers

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.