Working Papers

Bailout Policies when Banks Compete with Switching Costs [SSRN, Online Appendix], with  Marianne Verdier

We analyze the effects of bailout policies on borrower surplus in a two-period Hotelling model of competition with switching costs and poaching. Before the second period of competition, banks may sometimes fail or face capacity constraints because of random shocks and uncertain bailouts. If borrowers are myopic, banks reduce the first-period interest rates according to their bailout expectations. We show that banks may reduce the first-period interest rates even more when borrowers anticipate a bank failure in the second period, whereas they may sometimes add a mark-up to the first-period interest rates if borrowers expect the market to remain stable. Higher bailout expectations have a different impact on the interest rates in markets with high and low switching costs. We derive the bailout policy that maximizes borrower surplus and show that it may sometimes be time-inconsistent.

Branch Closures and Access to Credit: Do Severed Relationships Harm Borrowers? [upon request]

This paper studies whether borrowers are harmed by a closure of their bank’s branch, using a combination of matching and difference-indifference to control for endogenous variation in credit allocation. We document two main results. First, borrowers from closed branches experience an increase of around 6% in their amount of credit, two years after the closure. Second, this increase is not driven by bank supply, as borrowers are able to regain access to credit both from their previous bank and from other banks. Borrowers experience an increase in their amount of credit only when local branch density is high enough, suggesting that branch closures enable them to take advantage of local competition among branches.

Cyber Security and Cloud Outsourcing of Payments [SSRN], with Marianne Verdier

We study the incentives of competing banks to outsource their payment services to a cloud-based common infrastructure, managed by a private third-party provider (TPP). The TPP provider stores depositors' information in the cloud and offers compatibility services, but is exposed to cyber risk. If the market is unregulated, without cyber risk, banks outsource excessively to the TPP compared to the first-best because network effects soften competition for deposits. However, we show that cyber risk and the costs of security may reduce banks' incentives to join the third-party infrastructure, which may result in an inefficiently low level of interoperability of their payment systems. We examine how the liability regime for cyber incidents may improve the players' investment in security. We show that increasing the TPP's liability towards depositors has a higher impact on payment system security than increasing its liability towards banks. We discuss how several regulatory options impact the security and compatibility of banks' payment systems: the supervision of outsourcing agreements, a shared responsibility model, the public provision of payment services.

Published articles

Le financement des projets entrepreneuriaux disruptifs [Journal version, in French], with Valérie Fernandez, Thomas Houy & Nicole Venegas 

Comment les investisseurs en capital-risque traitent-ils les projets entrepreneuriaux dits « disruptifs » ? L’article instruit la question à partir d’une série d’entretiens réalisés auprès d’acteurs de plusieurs fonds d’investissement. Cette recherche est l’occasion d’avancer trois résultats. Premièrement, les investisseurs ne semblent pas s’accorder sur la signification de « disruption ». Deuxièmement, ils évaluent les projets disruptifs au moyen de méthodes quasiment équivalentes à celles mises en œuvre pour juger de la pertinence de projets plus classiques. Troisièmement, les projets disruptifs financés donnent souvent lieu à des modalités d’investissement atypiques. 

Books

L’industrie du futur : une compétition mondiale [Book, in French], dir. Thibaut Bidet-Mayer (contribution)