Working Papers
Working Papers
Presented at: IIMFRC; CAFM
In countries with weak institutions, sellers face challenges in assuring buyers of product quality. Using hundreds of audio-recorded trade negotiations in Afghanistan, we document that sellers often invoke God to address this problem. Such verbal commitments are more prevalent when product quality is difficult to verify ex ante and when sellers lack a fixed location, limiting the role of reputation as a commitment device. We posit that these commitments operate as a signaling device, as making false claims under divine invocation is believed to entail cosmic costs. Findings from two field experiments corroborate this interpretation: goods sold under such invocations are of higher quality, and their use significantly increases sales. These effects are stronger when the mechanism is more salient, for example, when sellers exhibit outward signs of religiosity. Our findings indicate that verbal commitments can serve as credible signals, challenging the view that they are merely cheap talk.
Presented at: Tulane University
Despite evidence that households respond to corporate social irresponsibility, it remains unclear whether these responses reflect household ESG preferences or scandal-induced information updates about product quality. We develop an empirical strategy to disentangle these mechanisms, using housing markets as a laboratory. Our strategy is grounded in a theoretical framework that delivers contrasting predictions for rents and transaction prices under ESG preferences versus information-based explanations. Exploiting unique institutional features of Korean apartments, we document evidence of household ESG preferences in real estate transactions. Our findings indicate that ESG preferences extend to high-stakes decisions, where material benefits are presumed to dominate.
Revise and Resubmit at Review of Economics and Statistics
In democracies, politicians are often required to disclose their asset holdings and wealth, allowing voters to detect and sanction corrupt practices. Using value assessments covering all land parcels in South Korea and leveraging discontinuities in close election outcomes, we find that properties owned by politicians are significantly underassessed. Further analyses suggest that, beyond lowering tax liabilities, an important motive for underassessment is to obscure private returns to public office. Politicians who report lower wealth accumulation while in office tend to perform better in subsequent elections. Our findings highlight a limitation of asset disclosures, a key component of anti-corruption policy worldwide.
Presented at: USC FOM Conference; EFA
This paper shows how financing frictions can significantly amplify and prolong the effect of economic shocks to exports (e.g., shocks to export demand or tariff shocks). We propose a new financial multiplier effect leading to this effect, whereby changes in firms’ exports affect their balance sheet conditions, which then shape firms’ ability to finance new export transactions. Using customs data for Brazil, we first document a central prediction from this mechanism: shocks to economic conditions in certain export destinations lead to strong and persistent positive effects on the level of firms’ exports to other existing destinations (positive within-firm spillover). We develop an identification strategy to refine this evidence, and both isolate and estimate the magnitude of the multiplier we propose. We then build a structural model of this mechanism, calibrate it using detailed data on the cost and financial structure of firms, and use it to simulate the effects we study. We find that the multiplier effect we propose can explain our empirical results both quantitatively and qualitatively. Using this calibrated model (and our empirical results), we quantify the role of funding frictions in amplifying and prolonging the effect of economic shocks to exports.
Does the format of information influence how markets process it? In theory, transformations of existing information, such as discretization into ratings, should not alter beliefs. Yet under cognitive constraints, discretized information can distort perceptions even when it conveys no new information. Using a betting market, we develop a novel test that cleanly distinguishes these competing views by isolating the cognitive channel from coordination, regulatory, and outcome-driven explanations, a challenge unaddressed in prior research. We find that discretization induces misperception, particularly under low economic stakes or high reliance on heuristics. Our findings have implications for how regulators and intermediaries disclose information.
Runner-up for the Engelbert Dockner Memorial Prize for the Best Paper by Young Researchers, EFA 2024
Presented at: EFA; KUBS-KAIST Virtual Finance Seminar; MFA; Tulane University; Korea Development Institute; Nova SBE; Korea Institute of Finance; CUHK; AFA PhD Student Poster Session; AFBC; FMA Doctoral Student Consortium; Nova Finance PhD Countdown
A central goal of bankruptcy law is to mitigate creditor coordination problems and facilitate restructuring. I show that reforms targeting this goal can generate adverse consequences: by making renegotiation easier, they weaken borrowers' incentives to repay, thereby limiting debt financing ex ante. Exploiting a unique bankruptcy reform in Korea that changed how creditors make collective decisions, I document the importance of this channel. My findings suggest that while coordination problems increase the costs of financial distress ex post, they also enhance borrowers' commitment to repayment ex ante. Thus, reforms mitigating these problems can undermine firms' ability to commit and borrow.
Presented at: EasternFA; FMA
I study how anti-tunneling regulations shape internal markets within business groups. Because regulators often struggle to distinguish tunneling from legitimate transactions, business groups may preemptively avoid even value-enhancing intragroup transactions. Using hand-collected, pair-level data from Korean business groups and exploiting within-firm variation in transaction values, I provide evidence of this cautious behavior, particularly when suspicions of tunneling are difficult to dispel. These patterns intensify following a reform that increased regulatory costs. My findings suggest that while anti-tunneling regulations are essential for well-functioning financial markets, they may inadvertently undermine internal resource allocation, a key source of value creation within business groups.