Working Papers:

Real Effects of Centralized Markets: Evidence from Steel Futures

[2019 AFA Annual Meetings]

I study the real effects of centralized derivative markets. Exploiting the staggered arrival of futures contracts for different steel products, I find that prices in the physical product market decrease along with producers' profits. Further, news pointing to the introduction of the futures decrease producer stock prices. Finally, price dispersion in the product market decreases and producers' market shares become more sensitive to production cost. Overall, these results point to the centralized futures market fostering competition and improving efficiency in the product market.

The Downstream Impact of Upstream Tariffs: Evidence from Investment Decisions in Supply Chains, with Clemens Otto

[Best Paper Award 15th Paris December Finance Meeting 2017]

[2018 WFA Annual Meetings, 2020 SFS Cavalcade North America]

We study the impact of upstream tariffs on downstream investment in US manufacturing firms. Exploiting tariff reductions following multinational trade agreements (GSP, GATT, NAFTA) in a difference-in-differences framework, we estimate that a 10% decrease of upstream tariffs entails an increase in downstream investment by 4% to 6%. We also find that lower upstream tariffs are followed by higher downstream output, employment, and total factor productivity. Extending the analysis beyond import tariffs, we use the sudden increase in Chinese import penetration in an instrumental variable estimation and show that higher import competition upstream leads to higher investment downstream.

Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program, with Jean-Noël Barrot, Julien Sauvagnat and Boris Vallée

[2019 NBER Corporate Finance Meetings, 2021 SFS Cavalcade North America, 2021 WFA Annual Meetings, 2021 EFA Annual Meetings]

We document the impact on worker employment trajectories of a countercyclical loan guarantee program aiming at mitigating financing frictions for SMEs. Our identification strategy exploits plausibly exogenous heterogeneity in policy generosity between French regions, interacted with a geographical regression discontinuity design. We show that the guarantees result in a significantly higher likelihood of being employed over the seven years following the intervention, which translates into significantly higher cumulated earnings. The program benefits disproportionately high wage, male and younger workers, due to both differences in retention decisions by the initial employer and differences in labor market frictions for these populations. We estimate the gross cost to preserve a job(-year) to be around €3,200, and a negative net cost when we include the savings on unemployment benefits.

Sovereign Debt and Equity Returns in Face of Disaster, with Felix Gerding and Florian Nagler

We study the role of sovereign debt for equity returns in the Covid-19 pandemic. Using individual stock-level data of more than 25,000 firms in more than 80 countries, we exploit variation in debt-to-GDP in narrowly defined industries and geographical regions. Following the outbreak of the pandemic, cumulative returns and cumulative CAPM-adjusted abnormal returns are lower in countries with higher debt-to-GDP ratios. Variation in debt-to-GDP explains around 23% of the average stock price decline in the initial phase of the pandemic. While corporate default risk rises, we find little evidence that debt-to-GDP captures uncertainty across countries. As the pandemic evolves, we further show that abnormal returns drop more in response to the same growth in infections among high- compared to low-debt-to-GDP countries. Our results are robust to a host of firm- and country-level controls, including sovereign credit ratings. Overall, sovereign debt is a key determinant of equity risk in the face of disaster.

Corporate Taxation and Carbon Emissions, with Luigi Iovino and Julien Sauvagnat

We study the connection between corporate taxation and carbon emissions in the US. Counter to optimal taxation of negative externalities, we find that dirty firms pay lower profit taxes. This relationship is driven by dirty firms benefiting disproportionately more from the tax shield of debt, due to their higher leverage. In addition, we find that the higher leverage of dirty firms is explained by their higher asset tangibility. Consistent with this mechanism, we document that the negative relation between carbon emissions and taxes weakens after the corporate tax reform of 2018, which lowered the federal statutory corporate tax rate and the associated tax shield of debt. Finally, we embed our estimates into a general equilibrium framework and show that eliminating the tax-advantage of debt reduces carbon emissions by about 4.2%, while aggregate output falls by roughly 2.4%.