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"My extensive professional experience in the banking sector has laid the foundation for my research interests, which focus on the role of information in the banking industry, particularly in how stakeholders acquire and utilize this information. My research primarily explores various aspects of information acquisition."
"My extensive professional experience in the banking sector has laid the foundation for my research interests, which focus on the role of information in the banking industry, particularly in how stakeholders acquire and utilize this information. My research primarily explores various aspects of information acquisition."
Working Papers
Working Papers
with Karthik Balakrishnan, and Manoj Devarala
with Karthik Balakrishnan, and Manoj Devarala
Abstract:
Abstract:
CECL framework requires banks to set aside provisions in line with their subjective views about the long-run future credit quality of their loans. Providing empirical evidence on whether and to what extent they do so is challenging because it is impossible to observe banks’ information at the time of deciding the provisions. This study proposes using banks’ contemporaneous real actions to corroborate banks’ decision to use information in provisions. Of all real actions, we argue and find evidence that deposit rates are a suitable proxy for banks’ information about long-term economic conditions and future charge-offs, as rates serve as a market-based price of capital and clearly reflects banks’ information. Though deposit rates exhibit stronger co-movement with provisions post-CECL adoption, banks do not fully incorporate all the information they have for setting deposit rates in estimating provisions. We propose a timeliness metric using deposit rates. Using this metric and employing spatial identification across U.S. states, we provide novel evidence that while adopting CECL in itself does not mitigate procyclicality banks that are timely can mitigate these effects. Thus, it is not only adoption but also implementation of CECL that collectively determines procyclicality.
CECL framework requires banks to set aside provisions in line with their subjective views about the long-run future credit quality of their loans. Providing empirical evidence on whether and to what extent they do so is challenging because it is impossible to observe banks’ information at the time of deciding the provisions. This study proposes using banks’ contemporaneous real actions to corroborate banks’ decision to use information in provisions. Of all real actions, we argue and find evidence that deposit rates are a suitable proxy for banks’ information about long-term economic conditions and future charge-offs, as rates serve as a market-based price of capital and clearly reflects banks’ information. Though deposit rates exhibit stronger co-movement with provisions post-CECL adoption, banks do not fully incorporate all the information they have for setting deposit rates in estimating provisions. We propose a timeliness metric using deposit rates. Using this metric and employing spatial identification across U.S. states, we provide novel evidence that while adopting CECL in itself does not mitigate procyclicality banks that are timely can mitigate these effects. Thus, it is not only adoption but also implementation of CECL that collectively determines procyclicality.
Job Market Paper
Job Market Paper
Abstract:
Abstract:
This paper investigates the information acquisition behavior of depositors, particularly whether they use SEC filings to actively monitor banks. It addresses the gap in existing literature by employing an innovative methodology using EDGAR log files and the ARIN database to track depositor searches, distinguishing them from other market participants. The study reveals that uninsured depositors actively monitor banks, with a significant positive correlation between uninsured depositor membership and SEC search levels, particularly for current and periodic reports. This monitoring is more pronounced in banks with lower ROE, in small and medium-sized banks, and in banks with a higher proportion of long-term time deposits. The study also finds that uninsured depositors increase information searches before a bank failure, while insured depositors show increased activity post-failure. Additionally, the study explores the impact of regulatory leniency on depositor monitoring and highlights the importance of search activity in moderating the relationship between bank transparency and deposit flows. This work contributes to the literature on depositor discipline, information acquisition, and responses to financial distress.
This paper investigates the information acquisition behavior of depositors, particularly whether they use SEC filings to actively monitor banks. It addresses the gap in existing literature by employing an innovative methodology using EDGAR log files and the ARIN database to track depositor searches, distinguishing them from other market participants. The study reveals that uninsured depositors actively monitor banks, with a significant positive correlation between uninsured depositor membership and SEC search levels, particularly for current and periodic reports. This monitoring is more pronounced in banks with lower ROE, in small and medium-sized banks, and in banks with a higher proportion of long-term time deposits. The study also finds that uninsured depositors increase information searches before a bank failure, while insured depositors show increased activity post-failure. Additionally, the study explores the impact of regulatory leniency on depositor monitoring and highlights the importance of search activity in moderating the relationship between bank transparency and deposit flows. This work contributes to the literature on depositor discipline, information acquisition, and responses to financial distress.
Solo-authored
Solo-authored
Abstract:
Abstract:
This paper studies the relationship between liquidity and risk-taking behavior. Using loan-level data of SBA 7(a) Guaranteed Lending Program from 2000 to 2018 and a liquidity inflow shock resulting from the unexpected discovery of fracking technology, I find evidence that bank branches that experience the positive liquidity shock increase their risk-taking, especially in banks with lower net interest income, higher insured deposits, and higher transactional deposits. Furthermore, the increase in risk-taking behavior is mainly a local phenomenon concentrated in liquidity-shock counties. Bank managers only partially priced the increased risk-taking, resulting in excessive loan default.
This paper studies the relationship between liquidity and risk-taking behavior. Using loan-level data of SBA 7(a) Guaranteed Lending Program from 2000 to 2018 and a liquidity inflow shock resulting from the unexpected discovery of fracking technology, I find evidence that bank branches that experience the positive liquidity shock increase their risk-taking, especially in banks with lower net interest income, higher insured deposits, and higher transactional deposits. Furthermore, the increase in risk-taking behavior is mainly a local phenomenon concentrated in liquidity-shock counties. Bank managers only partially priced the increased risk-taking, resulting in excessive loan default.
Work in Progress
Work in Progress
How does monetary policy affect bank depositor information acquisition?
How does monetary policy affect bank depositor information acquisition?
with Karthik Balakrishnan and K. Ramesh
with Karthik Balakrishnan and K. Ramesh
Abstract:
Abstract:
This paper investigates the evolution of regulatory and depositor information acquisition about banks in response to changes in interest rates. By utilizing SEC filings searches as a proxy for information acquisition, we explore whether regulatory efforts act as a substitute for depositor monitoring when the Fed Funds Rate rises. We delve into the underlying reasons, mechanisms, and extent of this substitution. This study sheds light on the dynamics of depositors' roles as disciplinarians and provides insights into the effectiveness of SEC filings in bank monitoring by regulators. Preliminary results indicate a trade-off between depositor and regulatory monitoring: as the Fed Funds Rate increases, depositor monitoring decreases while regulatory monitoring intensifies. This substitution effect is particularly pronounced in banks with lower asset quality and higher risk.
This paper investigates the evolution of regulatory and depositor information acquisition about banks in response to changes in interest rates. By utilizing SEC filings searches as a proxy for information acquisition, we explore whether regulatory efforts act as a substitute for depositor monitoring when the Fed Funds Rate rises. We delve into the underlying reasons, mechanisms, and extent of this substitution. This study sheds light on the dynamics of depositors' roles as disciplinarians and provides insights into the effectiveness of SEC filings in bank monitoring by regulators. Preliminary results indicate a trade-off between depositor and regulatory monitoring: as the Fed Funds Rate increases, depositor monitoring decreases while regulatory monitoring intensifies. This substitution effect is particularly pronounced in banks with lower asset quality and higher risk.
Publication in other areas
Publication in other areas
Effects of the adoption of management control practices on profitability: evidence from Latin America
Effects of the adoption of management control practices on profitability: evidence from Latin America
with Mauricio Melgarejo, Carlos Rodríguez (2021)
with Mauricio Melgarejo, Carlos Rodríguez (2021)
Spanish Journal of Finance and Accounting, 51:1, 1-20
Spanish Journal of Finance and Accounting, 51:1, 1-20
Abstract:
Abstract:
This paper studies the impact of the adoption of different management control practices (MCP) on the firms’ financial performance in Latin America. We use the perspective of the attention-based view theory to argue that firms adopting MCP that cover different areas are more likely to attain higher financial performance, as adopting a diverse set of control practices contributes to distributing managerial attention. Thus, relevant business areas are monitored more comprehensively. We compare the performance effect of seven MCP in three areas (monitoring, operations, and targets) alone and combined using a panel dataset on 57 Latin American firms from 1995 to 2016, finding support for our arguments. Moreover, we find that the firms’ strategy moderates the financial performance effect of the adoption of MCP.
This paper studies the impact of the adoption of different management control practices (MCP) on the firms’ financial performance in Latin America. We use the perspective of the attention-based view theory to argue that firms adopting MCP that cover different areas are more likely to attain higher financial performance, as adopting a diverse set of control practices contributes to distributing managerial attention. Thus, relevant business areas are monitored more comprehensively. We compare the performance effect of seven MCP in three areas (monitoring, operations, and targets) alone and combined using a panel dataset on 57 Latin American firms from 1995 to 2016, finding support for our arguments. Moreover, we find that the firms’ strategy moderates the financial performance effect of the adoption of MCP.
Central coordination and profitability in large Latin American business groups
Central coordination and profitability in large Latin American business groups
with Carlos Rodriguez (2020)
with Carlos Rodriguez (2020)
Journal of Business Research, 119, 599-609
Journal of Business Research, 119, 599-609
Abstract:
Abstract:
This study analyzes the profitability effects of central coordination in large business groups in Latin America. By adopting a configurational approach, we analyze the profitability implications from a core entity involvement in the areas of strategy definition, talent management, values and culture management, stakeholder management, corporate branding and corporate innovation. Using Fuzzy Set Qualitative Comparative Analyses on a sample of 17 of the largest business groups in Latin America, we contribute by identifying core entity’s configurations that are causally linked with business group high financial performance, measured as the highest average ROE between 2014 and 2017. Specifically, we find that business groups with the highest performance include strategy definition, talent management, values and culture management activities as part of their core entity coordination as necessary conditions. We also find that the relevance of the fourth role, stakeholder management, is linked to the macroeconomic conditions of the countries where affiliates operate
This study analyzes the profitability effects of central coordination in large business groups in Latin America. By adopting a configurational approach, we analyze the profitability implications from a core entity involvement in the areas of strategy definition, talent management, values and culture management, stakeholder management, corporate branding and corporate innovation. Using Fuzzy Set Qualitative Comparative Analyses on a sample of 17 of the largest business groups in Latin America, we contribute by identifying core entity’s configurations that are causally linked with business group high financial performance, measured as the highest average ROE between 2014 and 2017. Specifically, we find that business groups with the highest performance include strategy definition, talent management, values and culture management activities as part of their core entity coordination as necessary conditions. We also find that the relevance of the fourth role, stakeholder management, is linked to the macroeconomic conditions of the countries where affiliates operate
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