"Firm Size, Capital Investment and Debt Financing over Industry Business Cycles" (with Praveen Kumar)
Forthcoming, Journal of Financial and Quantitative Analysis

"Reference Prices, Relative Values, and the Timing of M\&A Announcements" (with Sangwon Lee)
Journal of Corporate Finance, 2022, Vol. 76

"Do Sunk Costs Affect Prices in the Housing Market?" (with Dimuthu Ratnadiwakara)
Management Science, 2022, Vol. 68, pp. 9061--9081

"Seed-Stage Success and Growth of Angel Co-investment Networks" (with Buvaneshwaran Venugopal)
Review of Corporate Finance Studies, 2022, Vol. 11, pp. 169--210
(Here's the Internet Appendix)

"Monitoring in Originate-to-Distribute Lending: Reputation versus Skin in the Game" (with Andrew Winton)
Review of Financial Studies, 2021, Vol. 34, pp. 5886--5932
(Here's the Internet Appendix)

"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

"Pollution Risk and Business Activity" (with George Zhe Tian and Buvaneshwaran Venugopal)
Abstract: We use major toxic chemical spills as shocks to the pollution risk of their local neighborhoods and examine the consequent effects on local small businesses. A key finding is that pollution shocks contribute to increases in business concentration in their local economy because of their disproportionate adverse effects on smaller establishments compared to larger establishments. Specifically, in every sector, establishments in the smallest size quartile experience large reduction in sales, modest reduction in employment, and significant increase in likelihood of exit following exposure to major spills, whereas those in the largest size quartile experience increase in sales and employment. Business exposed to major spills obtain lower amounts through Small Business Administration (SBA) loans, and consistent with tightening of supply of credit, these loans have lower SBA guarantees and feature higher interest rates. Counties exposed to major spills experience decline in aggregate sales, increase in establishment exits, and increase in the number of bankruptcies among small businesses. There is a significant and persistent migration of population and income away from counties that experience major toxic spills, which may explain the persistent adverse effects on local small businesses.

"Effect of Bank Mergers on the Price and Availability of Mortgage Credit" (with Dimuthu Ratnadiwakara)
Abstract: Banks which gain larger local market shares through acquisitions charge higher interest rates on high-risk mortgages after the acquisition. Acquiring banks also increase approval rates for conventional mortgage applications, decrease approval rates for relatively riskier FHA mortgage applications, and decrease approval rates for Black and Hispanic applicants for both conventional and FHA mortgage applications in the post-acquisition period. Overall, our results indicate that the effect of bank mergers on the price and availability of mortgage credit vary by borrower risk, income, and race; and that bank merges may worsen mortgage credit access for borrowers in under-served communities.

"Executive Fiduciary Duties and Workplace Safety" (with Sichen Shen and Hong Zou)
Abstract: Does enhanced legal accountability of non-director executives improve workplace safety? We exploit an exogenous increase in executive legal accountability triggered by Delaware Supreme Court's 2009 "Gantler ruling" to address this question. In a difference-in-differences framework, we show that the workplace injury rate of establishments of Delaware-incorporated firms decreases significantly following the Gantler ruling relative to similar establishments of non-Delaware-incorporated firms. This effect is stronger in firms that have adopted enterprise risk management or have higher labor union membership before the Gantler ruling, but is attenuated by financial constraints or non-director executives' performance-based compensation. Moreover, the reduction in workplace injuries brought about by the Gantler ruling benefits shareholders by leading to higher factor-adjusted stock returns. This study adds to the limited research on the efficacy of corporate operational risk management and non-director executive accountability.

Trade Policy Uncertainty and Shareholder Returns in Mergers and Acquisitions" (with Praveen Kumar and George Zhe Tian)
Abstract: We use a change in US trade policy, which eliminated potential tariff increases on Chinese imports, to examine the effect of resolution of trade policy uncertainty on merger and acquisition (M&A) activity and shareholder value of acquiring and target firms. After this policy change, industries with greater resolution of tariff uncertainty experience higher within-industry and cross-industry M&A activity, and acquiring firms in these industries experience higher announcement returns, but there is no corresponding effect on target announcement returns. Acquirer shareholder wealth effects are stronger for R&D-intensive acquirers; in transactions involving publicly-traded targets, especially for less profitable and high-leverage targets; and for cross-industry acquisitions, especially those in which the target is in a less competitive and less fluid product market than the acquirer. The effects on acquirer shareholder wealth indicate that elimination of trade policy uncertainty and increase in import competition raise the bargaining power of acquirers relative to targets.

"EBITDA Add-backs in Debt Contracting: A Step Too Far?" (with Miguel Faria-e-Castro, Radhakrishnan Gopalan, Avantika Pal, and Juan M. Sanchez)
Abstract: Financial covenants in syndicated loan agreements often rely on definitions of EBITDA that deviate from the GAAP definition. We document the increased usage of non-GAAP addbacks to EBITDA in recent times. Using the 2013 Interagency Guidance on Leveraged Lending, which we argue led to an exogenous increase in non-GAAP EBITDA addbacks, we show that these addbacks increase the likelihood of loan delinquency and default, and also increase the likelihood of the borrower experiencing a ratings downgrade. Greater use of non-GAAP EBITDA addbacks also makes it more likely that lead arrangers lower their loan share exposures through secondary market sales. Our results highlight that covenants based on customized measures of EBITDA hurt loan performance by worsening lead arrangers' incentives to monitor borrowers and by hampering their ability to take timely corrective actions.

"Non-Executive Directors at Early-Stage Startups" (with Buvaneshwaran Venugopal)
Abstract: We document substantial variation across startups in whether and when they appoint non-executive directors, and the type of directors they appoint. The startup-director match depends on professional connections and individual experience profiles. Early-stage investors are more likely to serve as non-executive directors when there is a local scarcity of directors. Non-executive directors leverage their professional connections to attract new investors, directors, top executives, and potential acquirers for startups. Overall, presence of an early-stage non-executive director is associated with better funding outcomes and higher probability of exit through IPO, although presence of an investor-director makes exit via acquisition more likely.

Bauer M.S. in Finance Program

The Finance Department

C. T. Bauer College of Business