Working Papers

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

 Abstract: This paper explores whether hospital Community Benefit Requirements (CBRs) improve consumer financial health. Federal and state CBR statutes condition nonprofit hospitals' tax-exempt status on charitable and subsidized care, conservative billing, and collection practices, yet do not constrain for-profit hospitals. Leveraging this institutional asymmetry, we show that consumers in ZIP codes with greater nonprofit hospital presence exhibit significantly lower default rates and collection accounts. These effects are more pronounced in states with more stringent CBR regulations and in more financially vulnerable (low-credit-score and low-income) ZIP codes. Hospital-level analysis suggests three CBR-induced channels of wealth transfer from hospitals to consumers: nonprofit hospitals provide more charitable care, have higher accounts receivable balances, consistent with extended billing cycles, and write off more bad debt, consistent with less aggressive collection practices. Overall, the results suggest that CBRs act as a consumer protection regulation.


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: Contingent Dilution and CoCo Pecking Order (with Linda Allen and Andrea Golfari)

Abstract: Originally designed as an equity-diluting disciplinary mechanism, contingent convertible bonds (CoCos) evolved to permit nondilutive principal write-downs. Using a novel measure of CoCo dilution and a comprehensive hand-collected dataset covering 27 countries, we find that banks prefer less information-sensitive, nondilutive (debt-like) structures consistent with pecking order theory. Incentive-compatible (equity-like) dilutive CoCos have negative abnormal announcement returns that switch to positive returns during periods of heightened aggregate uncertainty; i.e., agency-cost considerations reverse the pecking order. The equity and CoCo bonds of banks with dilutive CoCos perform more favorably when aggregate uncertainty is elevated, and are consistent with reduced systemic risk. 


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