Research

Published and forthcoming papers

Trust in Finance and Consumer FinTech Adoption with Deniz Okat (HKUST) and Vesa Pursiainen (St. Gallen) - (Download from SSRN) 

Pre-registration and data  (Experiment 2)

Forthcoming at Review of Corporate Finance Studies

We study the impact of trust in finance on consumer adoption of various fintech products using a household survey and several experiments. 

Presentations at conferences: Elsevier Finance Conference 2023, IBEFA Summer 2023, New Zealand Finance Meeting 2022, FMA Europe 2022, Advances in Field Experiments 2022, Boulder Conference on Consumer Financial Decision Making 2022, Paris December Finance Meeting 2021, Baltic Economic Conference 2021, Renmin University Workshop, FMA 2021, AEA 2021, 2nd Conference on Behavioral Research in Finance, Governance, and Accounting

Seminars: Aalto University, Erasmus RSM Finance Research Lunch

Business Outlook and Financing Alternatives of Finnish Entrepreneurs During the COVID-19 Crisis

with Vesa Pursiainen (St. Gallen) and Sami Torstila (Aalto)  (Download) 

Nordic Journal of Business 2021, Vol. 70, No. 1.

This paper reports findings from a survey of 1,008 Finnish small-and-medium-sized enterprises (SMEs) on their business outlook and financing alternatives during the COVID-19 crisis as of June 2020. Sales have dropped by an average of 25%. The decline in revenues is generally uncorrelated with the number of coronavirus cases in a municipality, except in the hospitality industry and the arts, entertainment and recreation industry. 54% of respondents have applied for public subsidies, while only 16% have applied for a new loan from the bank. Across the cross-section of firms, firms reporting a larger loss of revenues and with a more precarious financial position at the end of 2019 (high debt and/or low cash) were more likely to apply for both direct grants as well as loans.

Working Papers

Entrepreneur Debt Aversion and Financing Decisions: Evidence from COVID-19 Support Programs 

 with Vesa Pursiainen (St. Gallen) and Sami Torstila (Aalto) (Download from SSRN)

Conditionally accepted ("Minor revision") at Management Science

We find that a manager's negative personal attitude towards debt - debt aversion - affects the financial policies of their firms and their take-up of debt-based COVID-19 rescue packages. We conduct a large-scale survey of managers (mainly entrepreneurs) and link it to their companies’ registry-based financial information. Managers of SMEs are generally uncomfortable with taking on debt. After controlling for a range of observable traits, more debt-averse managers use less debt: firms run by highly debt averse managers are about 9 %-points less likely to use debt (compared to baseline debt usage of just under 50%). These firms are also almost 25% less likely to use government-guaranteed debt during the COVID-19 crisis. We conduct an experiment randomizing the framing of hypothetical COVID-19 support policies as debt or grants. Framing policies as debt rather than other forms of support significantly decreases interest, even when the financial terms are identical. 

Conferences: CICF 2023, FMA Asia-Pacific 2022, Endless Summer Conference 2022, Barcelona GSE Summer Forum 2022, Boulder Conference on Consumer Financial Decision Making 2022, MFA 2022, HEC Entrepreneurship Workshop 2021, DGF 2021, BFGA 2021, SFM 2020

Seminars: Benelux Corporate Finance Network, Erasmus RSM Finance Research Lunch

Extrapolation and Real Investment (The paper formerly known as It's Always Sunny in Finland) (Download from SSRN)

I provide causal evidence that managers extrapolate from past growth when making corporate investment decisions, even when past growth is uninformative about future growth. Using rainfall as an instrumental variable for cash flow shocks to firms that are weather sensitive, I find that companies increase investment 43% relative to mean yearly investment following a one-standard-deviation drop in summer rainfall, even though the drop is transitory. Traditional explanations, such as loosening of credit constraints or agency problems, do not fully explain the result. The years following the cash flow shock feature an abnormally high number of companies closing down. 

Presentations at conferences:  Midwest Finance Association, Southwestern Finance Association, Wellington Finance Summit, Corporate Finance Day, Oxford Finance Job Market Workshop, FIRS 2018 Job Market Candidate Session, Whitebox Advisors Conference at Yale 2018, SGF 2018,  AFA PhD Poster Session 2018, Nordic Finance Network 2017 

Seminars: Lancaster University, VU Amsterdam, Oxford University, University of Kentucky, SAIF (Shanghai), Erasmus University (RSM), Aalto University, Swedish House of Finance, HKUST

Agency Problems in Young Firms 

with Deniz Okat (HKUST)

Previous work on whether cash holdings lead to manager-shareholder agency problems has generally focused on large and mature firms with low growth opportunities and less effective monitoring systems. This raises the question of whether, and to what extent, young firms are subject to the same kinds of problems. We document a relationship between cash holdings and agency problems in recently IPOed firms by using the exercise of the overallotment (greenshoe) option as a quasi-random cash infusion to some firms. Firms receiving cash windfalls are more likely to make acquisitions and these acquisitions are more likely to be value destroying. Moreover, the CEOs of these firms receive direct pecuniary benefits in the form of higher executive compensation. We run several tests to account for the potential endogeneity of the overallotment option with respect to investment, such as controlling for two-month returns after the IPO and a placebo test with secondary IPOs.

Presentations at conferences: AEA 2019, Finnish Graduate School of Finance 2018, HEC Paris PhD Workshop 2018

Seminars: Aalto University, Swedish House of Finance

The Role of Statistical Literacy in Risk Perceptions and Behavior During the COVID-19 Pandemic

with Daniel Metzger (Erasmus) and Vesa Pursiainen (St. Gallen) (Download from SSRN)

We study the role of statistical literacy in interpreting COVID-19-related information, assessments of infection risk, and compliance with mobility restrictions. Using a large-scale panel survey of about 4,000 Dutch households, we find that more statistically literate people adjust their risk estimates more strongly to the actual infection risk, measured by the current number of confirmed COVID-19 cases in their home province. They are also generally more likely to socially distance, less concerned about their own infection risk, and more concerned about infecting others, especially vulnerable populations such as the elderly. We also find that more statistically literate people generally consider a flu shot more important, potentially suggesting a more positive attitude toward vaccines.

Seminars: Erasmus RSM Finance Research Lunch

Decomposing Partisan Bias: Evidence from Entrepreneur-Politicians

with Deniz Okat (HKUST)

Entrepreneurs invest more when their preferred political party has a larger share of seats in government. Using data on Finnish entrepreneurs’ economic and social ideologies and their party preferences, we show that this increase is driven by alignment on economic ideology with the government. We then exploit the Finns Party’s departure from government as a shock which altered government composition but not economic ideology or policy. Finns Party supporters did not invest less after the party left government. Our findings suggest that ideological similarity is a more important driver of partisan optimism than “blind party loyalty.

Presentations at conferences: China International Conference in Finance 2024, Asian Finance Association 2024, European Political Science Association 2024, American Finance Association 2024, IEB Workshop on Political Economy 2023, Boulder Conference on Consumer Financial Decision Making 2023

Seminars: EDHEC Lille, Aalto University, Erasmus University

Perfect Pitch: Entrepreneurial Appearance and Early-stage Investment 

with Elina Koivisto (Aalto - Dept of Marketing) - Draft available upon request

Presentations at conferences: American Marketing Association, ESMT Berlin Entrepreneurial Financial Management Conference 2018, Boulder Conference on Consumer Financial Decision Making 2018 Poster Session, Finnish Graduate School of Finance 2017

Seminars: Aalto University

Work-in-progress

Mobile banking and Attitudes Towards Formal Finance with George Mugabe (Kepler), Deniz Okat (HKUST) and Vesa Pursiainen (St. Gallen) - Pre-registrations (Project 1 and Project 2)

We study the impact of being introduced to one financial product on attitudes towards other financial products and risk. We conduct an RCT in which we induce people to open and use mobile money-linked bank accounts (entirely mobile) and track people's attitudes towards other financial products. 

Presentations at conferences: WeFiDev Conference 2024, ERSA Conference on Financial Technology for Development 2023, Advances in Field Experiments 2023

Presentations at seminars: Erasmus Research Days, WeFiDev seminar & Erasmus University (idea-stage presentations)