Working papers
Coordinating Dividend Taxes and capital regulation, (2025), with S. Federico and A. Modena.
Abstract: We study the impact of state-contingent dividend taxes (and bans) and capital regulation on a firm’s optimal strategy and value. In the model, the firm generates stochastic income under time-varying macroeconomic conditions. Its manager distributes dividends and issues costly equity to maximize shareholder value. We solve the manager’s stochastic control problem and derive the firm’s reserve distribution in closed form. Imposing dividend taxes (or bans) during crises generates a trade-off, as it encourages reserve accumulation in bad states but promotes payouts in good ones. Also, the policy undermines financial stability by reducing the firm’s value and its recapitalization incentives across states. Coordinating dividend taxes with counter-cyclical capital regulation can mitigate value losses and ameliorate the trade-off, but it also creates additional recapitalization disincentives.
Tax Evasion and the Productivity Distribution, (2025), with F. Menoncin and A. Modena. [R&R]
Abstract: We develop a heterogeneous-firm macroeconomic model to investigate how tax evasion affects the productivity distribution in general equilibrium. In our model, firms face leverage constraints and uninsurable productivity shocks. They allocate capital between production and bond investments and evade taxes to maximize their intertemporal utility. We find that tax evasion redistributes capital toward low-productivity firms, relaxing their leverage constraints. At the same time, it increases public debt, raising the cost of capital and crowding out firms at the margin. As a result of these forces, we show that (i) the negative correlation between the size of the shadow economy and aggregate productivity is driven by a decline in the average productivity of firms at the upper end of the distribution; and (ii) the productivity gains from reducing evasion are smaller in financially underdeveloped economies, where leverage constraints are stricter.
Leverage and Interest Rates, (2023), with G. Nicodano.
Abstract: We study the sensitivity of optimal leverage to the level of the risk-free interest rate. Our trade-off model implies a heterogeneous response depending on the presence of a sponsor backing company debt. A highly-leveraged, backed company optimally increases debt when interest rates fall, while a company without a sponsor reduces it despite having lower initial leverage. This heterogeneity implies divergent bankruptcy probability and recovery-upon-default, in the same interest rate scenarios, for the two company types. We also show that a lower risk-free rate reduces the sponsor's incentive to issue debt.
Optimal Firm's Dividend and Capital Structure for Mean Reverting Profitability, (2021), CESIfo Working Paper No. 9407, with F. Menoncin and P. Panteghini. [accepted at International Review of Economics and Finance]
Abstract: We model a risk-averse firm owner who maximizes the inter-temporal expected utility of firm's payout selecting dividends and leverage jointly. The optimal dynamic control problem features stochastic asset value and firm's profitability (return on assets). Motivated by the empirical evidence, we model profitability via a mean-reverting process. The problem has a quasi-explicit solution. When calibrating the model to actual US data, we show that the resulting optimal dividend is smooth and that leverage is on average stable over time. We highlight that such results are related to the strength of profitability's mean-reversion and that neither asymmetric information nor frictions are necessary to obtain these empirical stylized facts.
Recent publications (2019- )
Non-Standard Errors, (2024), Journal of Finance 79 (3), 2339-2390, with A. Menkveld et al..
Capital risk, fiscal policy and the distribution of wealth, (2024), Mathematics and Financial Economics , with A. Modena.
Spatial Natural Hedging: a general framework with application to the mortality of U.S. states, (2024), Scandinavian Actuarial Journal, with K. Cupido, P. Jevtic and K. Zhou.
An analysis of the Dutch-style pension plans proposed by UK policy-makers, (2022), Journal of Social Policy 51 (2), 325-345, with I. Owadally and R.Ram.
Geographical diversification and longevity risk mitigation in annuity portfolios, (2021), ASTIN Bulletin 51 (2), 375-410, with C. De Rosa and E. Luciano.
Optimal life-cycle labour supply, consumption, and investment: the role of longevity-linked assets, (2020), Journal of Banking and Finance 120, with F. Menoncin.
A trade-off theory of ownership and capital structure, (2019), Journal of Financial Economics 131, 715-735, with G. Nicodano.
Communities and regularities in the behavior of investment fund managers, (2019), Proceedings of the National Academy of Sciences of the United States of America 116 (14) 6569-6574, with A. Flori, F. Pammolli, S. Buldyrev and Eugene H. Stanley.
