"The Trade-off Theory of Corporate Capital Structure" with Hengjie Ai and Murray Frank.
Oxford Research Encyclopedia of Economics and Finance, forthcoming.
"Listing Gaps, Merger Waves, and the Privatization of American of Equity Finance," with Gabriele Lattanzio and William Megginson. [Online Appendix] [Columbia Law School Blue Sky blog] (Major update coming soon!)
Abstract: The US listing gap---an abnormal decline in the number of stock market listings relative to other countries---is often interpreted as a warning sign for the US public equity markets. We show that, over the same period that the US listing gap expands, the US economy has experienced abnormally high aggregate stock market valuations, merger activity, and private equity (PE) investments. We investigate the relations among these dimensions and document a transition in the US equity financing model. Our revised estimation shows that the US listing gap is created in two distinct waves, the timing of which suggests a negative role for the regulation of listed firms. The US listing gap is virtually fully explained by the rise of mergers and acquisitions activity, as the leading factor, and PE investments since the mid-1990s. Finally, we document that this phenomenon is emerging in other developed economies, with a few years of delay.
Abstract: Using a new measure of labor mobility instrumented by state-level shocks, I find that an increase in worker mobility negatively affects firms' average leverage and investment rates, but only in firms that rely on high-skill workers. I develop a dynamic model that provides an economic mechanism to rationalize these findings. In the model, firms make investment and financing decisions, hire labor with different levels of skill and mobility, and set wages through bargaining. Skilled workers with high mobility receive high-value outside job offers more frequently. Firms that rely on this type of labor operate with low leverage in anticipation of the outside offer shocks, in order to retain their workforce against those shocks. The differences in investment are generated both by the capital-labor complementarity and by the differences in financing policies, which affect the cost of capital. I estimate the model to quantify the effect of changes in labor mobility on different aspects of firms' decisions. Counterfactual analyses imply that policies that exogenously change workers' ability to move among firms have a sizable impact on the leverage, investment, hiring, and wages of high-skill firms. My results highlight the importance of considering this channel in evaluating the economic impact of policies that change workers' mobility.
Abstract: Tests using American data from 1970 to 2015 support the behavioral hypothesis that firms Cater to investor whims. We show that the standard tests cannot distinguish between the behavioral interpretation, and a rational model in which the firm optimally chooses investment, equity issuance, and dividends; while investors optimally choose consumption, equity, and bank account deposits. The rational model shows the importance of two-way financial flows between investors and firms that are generally ignored in the literature. Using booms, sentiment, and behavioral mispricing measures, we construct new tests of behavioral Catering Theory. In all cases that theory is rejected.
American University, Kogod School of Business.
Business Finance (UG): Fall 2018, Spring 2020.
University of Minnesota, Carlson School of Management.
Finance Fundamentals (UG): Fall 2015; Spring 2016.
Received Excellence in Teaching Award, Carlson School of Management, 2016.
Received John Willard Herrick Memorial Teaching Award, Finance Department, 2016.