Vijay Yerramilli
John H. Duncan Associate Professor of Finance
C. T. Bauer College of Business
University of Houston

Contact information:
240D, Melcher Hall
University of Houston
Houston, TX 77584
Phone: (713) 743-2516
Fax: (713) 743-4789

SSRN page:

Vita: Click here


"Optimal Capital Structure and Investment with Real Options and Endogenous Debt Costs" (with Praveen Kumar)
Review of Financial Studies, 2018, Vol. 31, pp. 3452--3490

"Uncertainty, Capital Investment, and Risk Management" (with Hitesh Doshi and Praveen Kumar)
Management Science, 2018, Vol. 64, pp. 5769--5786
(Here's the Internet Appendix)

"Debt Maturity Structure and Credit Quality" (with Radhakrishnan Gopalan and Fenghua Song)
Journal of Financial and Quantitative Analysis, 2014, Vol. 49, pp. 817--842

"Market Efficiency, Managerial Compensation, and Real Efficiency" (with Rajdeep Singh)
Journal of Corporate Finance, 2014, Vol. 29, pp. 561--578

"Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies" (with Andrew Ellul)
Journal of Finance, 2013, Vol. 68 (5), pp. 1757--1803
(Here's the Internet Appendix)

"Moral Hazard, Hold-up, and the Optimal Allocation of Control Rights"
RAND Journal of Economics, 2011, Vol. 42 (4), pp. 705--728

"Does poor performance damage the reputation of financial intermediaries? Evidence from the loan syndication market"
(with Radhakrishnan Gopalan and Vikram Nanda)
Journal of Finance, 2011, Vol. 66 (6), pp. 2083--2120

"Why do Firms Form New Banking Relationships?" (with Radhakrishnan Gopalan and Gregory F. Udell)
Journal of Financial and Quantitative Analysis, 2011, Vol. 46 (5), pp. 1335--1365

"Entrepreneurial Finance: Banks versus Venture Capital" (with Andrew Winton)
Journal of Financial Economics, 2008, Vol. 88 (1), pp. 51--79

"The effect of decimalization on the components of the bid-ask spread" (with Scott Gibson and Rajdeep Singh)
Journal of Financial Intermediation, 2003, Vol. 12, pp. 121--148

Completed Working Papers:

"Do Sunk Costs Affect Prices in the Housing Market?" (with Dimuthu Ratnadiwakara)
Abstract: We use a unique feature of California's property tax system to empirically identify the causal effect of selling homeowners' past property tax payments on their choice of listing price. Although past property taxes are sunk costs, we find that they have a significant positive effect on the sellers' choice of listing price, which is inconsistent with rational models of decision making. This effect is stronger when sellers expect to sell at a loss relative to their purchase price, and for properties whose value is harder to assess. The effect of property taxes on listing price is mostly transmitted to the selling price, which is consistent with the idea that buyers use listing prices as anchors to assess property values. Overall, our results suggest that sunk costs affect prices in the housing market.

"Reference Prices, Relative Misvaluation, and the Timing of M&A Announcements" (with Sangwon Lee)
Abstract: The bidder's relative value with respect to the target (RV) and its 52-week reference values affect who bids for whom, the timing of deal announcement, offer terms, and the likelihood of deal completion. Deals that are announced when the RV is near its 52-week high feature more stock payment, higher offer premium relative to the target's pre-announcement price but a larger discount relative to the target's 52-week high price, result in more negative announcement returns for the bidding firm in both the short and long run, and are less likely to be completed. Yet, bidders in such deals also experience large and positive abnormal returns over the period from private initiation of discussions with the target to twelve months after announcement. Our results suggest that bidders use past values of RV as reference points to assess relative misvaluation and to strategically choose announcement timing.

"Outside Directors at Early-Stage Startups" (with Buvaneshwaran Venugopal)
Abstract: We use unique hand-collected data to understand why early-stage startups appoint outside directors, the type of outside directors they appoint, and the consequent effects on their future performance. Early-stage startups with better performance and less severe agency conflicts with their investors are more likely to appoint outside directors. An individual is more likely to be appointed to this role if he has invested in that startup, shares a past professional connection with the startup's founder or investors, has past entrepreneurial or board experience, and whose experience complements that of the founder. A start-up is more likely to attract future directors and future investors that share a past professional connection with the early-stage outside director. Early-stage startups with outside directors raise larger amounts in later-stage rounds, are more likely to attract VC funding, file more patents, and are more likely to exit successfully, especially through IPOs than similar startups without outside directors. Interestingly, startups whose early-stage investors serve as directors take longer to exit, are more likely to exit via acquisition rather than IPO, and file fewer patents than similar startups with non-investor directors.

"Lender Moral Hazard and Reputation in Originate-to-Distribute Markets" (with Andrew Winton)
Abstract: In a dynamic model of originate-to-distribute lending, we examine whether reputation concerns can incentivize a bank to monitor loans it has sold. Investors believe that banks with fewer recent loan defaults are more likely to monitor ("have higher reputation"). In equilibrium, banks monitor more and retain a smaller loan fraction when their reputations are high. Monitoring is harder to sustain in periods with uncommonly large spikes in loan demand ("booms"), especially for low-reputation banks, which are more likely to accommodate boom demand and forgo monitoring. Increased likelihood of facing a rival with reputation concerns also weakens monitoring incentives.

Other Links:

Bauer M.S. in Finance Program

The Finance Department

C. T. Bauer College of Business