Research

"Debt Contract Enforcement and Product Innovation: Evidence from a Legal Reform in India" with Rahul Singh and Chetan Subramanian  Oxford Business Law Blog, Ideas for India. 

(forthcoming, The Journal of Law and Economics)

SSRN link

Due to a legal challenge, there was a staggered introduction of fast track debt recovery tribunals (DRTs) across the states of India in the 1990s. Exploiting this plausibly exogenous variation in the efficiency of debt contract enforcement and using information on product lines produced by the manufacturing firms, we study the causal effect of debt contract enforcement on product growth. We find that DRTs account for over 15% of the observed increase in firms' product scope. DRTs also have a positive impact on firm level Total Factor Productivity (TFP) and allocative efficiency within industries.

"R&D Tax Credits and Price Competition: Evidence from India" with Rahul Singh Ideas for India. 

We provide novel causal evidence that R&D tax credits increase firm level R&D spending and induce a large decline in prices in industries targeted by the reform in India. The relative increase in R&D spending in treated industries is driven by eligible firms while there is no significant effect on ineligible firms, and these effects are stronger for financially constrained firms. Further, the policy also leads to a significant decline in prices for both eligible and ineligible firms, and is primarily driven by a decline in markup, conditional on cost, as opposed to the passthrough of cost savings to prices. The policy also results in increased physical efficiency and a lower marginal costs for both the eligible and the ineligible firms. We provide compelling evidence that our results are not biased due to pre-existing linear trends, omitted variables, and staggered treatment of industries. 

"Receivables Auctioning, Financier Competition, and Firm Growth: Evidence from a Digital Platform" with Nirupama Kulkarni, Rahul Singh and Chetan Subramanian

Small firms often face extended working capital cycles due to delayed payments from large buyers. We study an innovative platform that addresses this friction through an auction-based mechanism for financing trade receivables, enabling SMEs to convert receivables into cash more quickly. Using detailed transaction-level data, we find that active participation on the platform leads to a differential reduction in the cost of receivables financing, driven by increased competition among financiers. Further, MSMEs on the platform differentially experience shorter receivables cycles and improved performance compared to non-participating firms. In addition, we document positive spillover effects on the performance of connected buyer firms. These effects are pronounced among lower-rated buyers and MSMEs linked with them. We provide empirical evidence that increased financier competition is the primary mechanism driving these effects, ruling out alternative explanations.