Working Papers

Title: Consumer Defaults and Hospital Revenue Recovery Regulations  (with Elena Loutskina)

 Abstract: We study whether revenue-recovery regulations embedded in nonprofit hospitals’ Community Benefit Requirements (CBRs) protect consumers. Using state laws that extend financial-assistance, billing, and collection restrictions to all hospitals, we test whether narrower ownership-based regulatory wedge affects excess consumer defaults associated with for-profit hospital exposure. This excess default attenuates, especially in financially vulnerable communities and states with stronger CBRs. Hospital-level analysis offers a corresponding attenuation in the uncompensated-care gap between nonprofits and for-profits. The results indicate that CBR revenue-recovery provisions bind and limit the transmission of healthcare costs into consumer financial distress.


Title: Hospital Community Benefit Requirements and Consumer Financial Health (with Elena Loutskina)

 Abstract: We examine whether Community Benefit Requirements (CBRs) attached to nonprofit hospitals’ tax-exempt status improve consumer financial health. Leveraging geographic variation in nonprofit hospital exposure and state-level CBR legislation, we find that greater nonprofit hospital exposure is associated with lower consumer defaults and collection accounts, particularly in states with stronger CBR regulations and for financially vulnerable consumers. Companion hospital-level evidence suggests that these effects arise because nonprofit hospitals provide more charitable care, extend payment periods, and pursue less aggressive debt collection. CBRs effectively act as a consumer protection policy transferring resources from hospitals to households and reducing financial distress.


Title:  Hidden Medical Debt and Consumer Access to Credit (with Elena Loutskina)

Abstract: Credit bureaus face significant frictions in collecting consumer medical debt liabilities data, which spurred an intense ongoing policy debate. Leveraging novel healthcare costs proxies based on Medicare spending data, we evaluate the impact of hidden medical liabilities on consumer credit scoring and access to credit. We document that the traditional creditworthiness measures underestimate the ex-post default for consumers residing in higher healthcare costs markets. Consumers in high-healthcare-cost CBSAs are 36.2% more likely to default than those in low-healthcare-cost CBSAs. These effects are more pronounced among higher risk consumers, those with low credit scores and high DTIs. Lenders internalize these biases and impose higher mortgage rejection rates in high-healthcare-cost CBSAs, particularly for riskier applicants. These effects intensify following a policy shift that partially removed medical liabilities from credit reports without affecting consumer balance sheets. Our findings suggest that limiting the flow of medical liabilities data undermines the predictive accuracy of standard credit metrics, impairs the information value of credit bureau outputs, and leads to less efficient credit allocation.


Title: Do Equity Markets Respond to CoCo Dilution? (with Linda Allen and Andrea Golfari)

Abstract: We examine whether equity markets respond to contingent dilution embedded in contingent convertible bonds (CoCo). Using hand-collected terms for 757 CoCos issued globally, we estimate wealth transfers between shareholders and bondholders at trigger and classify issues as dilutive or nondilutive. Dilutive issuance generates significantly negative abnormal returns, whereas nondilutive does not. The negative response is stronger near conversion triggers, consistent with adverse-selection costs. Under elevated uncertainty, however, this response attenuates or reverses, especially for banks near regulatory distribution-restriction thresholds. Overall, the findings highlight the state-dependent, countervailing roles of adverse selection and agency costs in equity-market responses to CoCo issuance. 


Title: Zombies in the Syndicated Bank Loan Market: Credit Lines versus Term Loans

Abstract: I document evidence of a potential pitfall of syndicated bank lending that emerges from the aggressive exercise of lines of credit by nonviable zombie firms. Consistent with a nuanced version of Hu and Varas (Journal of Finance 2021) theory, privately informed relationship banks enable zombie firms to build a facade of creditworthiness by allowing aggressive usage of credit lines and restricting amendments that would otherwise signal technical default.  After the reputation-building stage, banks exit these loans by shifting credit risk to non-bank participants in term syndicated bank loans, rather than publicly traded bonds, with the exception of the COVID-19 pandemic period.


*: Upcoming presentations

‡: Presented by co-author