Working Papers

Internal Markets and M&As Efficiency Gains: Evidence from Bank Branch-level Data (with Bernardo Ricca) 

We study the restructuring process that follows an M&A operation in an important industry -- the financial sector. We leverage rich branch-level data on labor force characteristics and financial information, including branches' income statement and balance sheet information. Consolidated conglomerates use enhanced internal labor and capital markets to reallocate resources within the organization. Labor and internal funds are reallocated to acquirer branches. Restructuring enhances profitability at both acquirer and target branches, even after accounting for market power gains. Improved lending provision and deposit collection drive profitability gains at acquirer branches, while cost cutting is the profitability driver at target branches.  Finally, in line with our hypothesis that the reallocation of internal markets drives these productivity improvements, we show that these effects are more prominent in municipalities where the consolidated bank had larger local internal labor markets at the time of the consolidation. 


International Lending Channel, Bank Heterogeneity and Capital Inflows (Mis)Allocation (with Silvia Marchesi)

This paper explores the role of banks' heterogeneity in international lending and its impacts on capital inflows allocation across firms by exploiting the inclusion of South Africa into the Citi Group's World Government Bond Index (WGBI). Using bank-level data, we provide evidence that banks holding sovereign bonds before the inclusion increase credit supply to non-financial firms after the shock. Moreover, less capitalized banks drive these effects. Using firm-level data in South Africa, we then show that credit is allocated to less financially constrained and less productive firms. We find no evidence of a significant improvement in real outcomes after the increase of credit supply to those firms. Our paper adds to the literature by analyzing the interplay between banks' heterogeneity, capital inflows shocks and capital misallocation. We shed some light on why the international lending channel on both firms and the economy can, in certain instances, be rather limited.


Unleashing International Trade through Financial Integration: Evidence from a Cross-Border Payment System (with Gustavo S. Cortes and Vinicios P. Sant'Anna)

Leveraging administrative firm-level data on the universe of South African exporters between 2010--2019, we document that cross-border payment integration catalyzes international trade by as much as standard tariff reductions. Using the staggered implementation of a Real-Time Gross Settlement (RTGS) system across 14 Southern African Development Community countries that facilitated cross-border payments among participating countries, we document that payment integration increases bilateral trade by about 34% within member countries. This economically significant effect is comparable to a reduction of 8.3 to 12.1 percentage points in tariffs. Crucially, we find no negative spillovers to non-participant trade partners after the system's implementation. Effects on bilateral trade are only present for partners with low financial connections to South Africa through their bank branch network, destinations with domestic RTGS systems, and firms with high levels of financial dependence. Aggregate country-partner data further suggests the system leads to higher bilateral country trade volumes.


Banks' Physical Footprint, Digital Payment Technologies and Fintech Growth (with Bernardo Ricca and José Renato Ornelas)  - ANPEC-FEBRABAN Prize for the best paper in banking

 Coverage: World Bank, BBC Brasil (in portuguese)

Do physical bank branches moderate the diffusion of digital payment technologies? Does the diffusion of these technologies enable fintechs to expand? To answer these questions, we leverage unexpected bank heists that use explosives and render branches temporarily inoperable.  We show that these attacks are not associated with local crime trends and that they deplete the branches’ cash inventory, disrupting their capacity to supply cash services. We show that this disruption leads to persistent increases in digital payments usage and that a smaller cash dependence boosts digital institutions’ growth not only in payment but also in credit markets.