Job Market Paper - “Does Asset Durability Impede Financing? An Empirical Assessment”
Abstract: Does asset durability limit firms’ ability to obtain external financing when they are financially constrained? Using the depreciation rate to measure asset durability, I find financing frictions can affect firm investment through the asset durability channel. Specifically, asset durability increases external financing costs for financially constrained firms, but the effect is ambiguous for unconstrained firms. Additionally, I find when firms endogenously choose asset durability, more (less) financially constrained firms invest in less (more) durable capital. These results provide mixed support to the idea that the durability of an asset impedes financing.
“Macroeconomic Determinants of Corporate Credit Spreads: Evidence from Canada”
Abstract: How important are macroeconomic factors relative to financial factors in explaining the variation corporate credit spreads in the Canadian bond market? The answer to this question is of great significance in managing the risk associated with fixed-income securities and also in preventing the negative consequences that widening of spread has on real activity. I find that although the macroeconomic determinants both in their levels and volatilities have significant effects on credit spread, their contribution in explaining the variations in spreads is actually quite small. Much of the variation in spreads are attributed to the unobserved bond-specific heterogeneity, which reaffirms the existence of a - credit spread puzzle.
"Transmission of Monetary Policy through Asset Durability Channel "
Abstract: In this paper, I attempt to show the heterogeneous response of firms with different asset durability to monetary policy. I find, firms with more durable assets are more responsive to monetary policy compared to the firms with less durable assets. For financially constrained firms, this difference is more prominent. Additionally, the aggregate decline in sales is largely driven by less durable assets using firms while inventory decline is dominated by the more durable assets using firms. The findings highlight the role of asset durability in the transmission of monetary policy.