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 (Dec 2020): Click here


"Monitoring in Originate-to-Distribute Lending: Reputation versus Skin in the Game" (with Andrew Winton)
Forthcoming, Review of Financial Studies
(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

Completed Working Papers:

"Effect of Bank Mergers on the Price and Availability of Mortgage Credit" (with Dimuthu Ratnadiwakara)
Abstract: We examine the effect of bank mergers on the price and availability of credit in the residential mortgage market. We find that, compared to non-acquiring banks in the same local market, acquiring banks that gain large market shares charge significantly higher interest rates but also lend larger amounts on non-agency mortgages in the years following the acquisition, and these effects vary significantly across prime, Alt-A and subprime loans. The corresponding effects for mortgages sold to Fannie Mae and Freddie Mac are economically insignificant. Acquiring banks also increase approval rates for conventional mortgage applications but this effect is weaker for low-income, black and Hispanic applicants; and decrease approval rates for FHA mortgage applications, especially for low-income and non-white applicants.

"Industry vs. Aggregate Shocks: Effects on Corporate Investment and Financial Policies" (with Praveen Kumar)
Abstract: We analyze the effects of industry-specific and aggregate shocks on firm-level investment and financing under financial frictions using business cycle measures derived from the regime-switching approach. We find that firms' investment and financing policies are generally more sensitive to their industry cycle than the aggregate cycle, although these differential responses to industry and aggregate cycles vary significantly by firms' size and credit quality. Strikingly, the cyclical sensitivity of capital investment with respect to industry shocks is greater for large firms compared to small firms, in contrast to the well-known greater cyclical sensitivity of small firms' investment to aggregate cycles. These findings are consistent with a dynamic model of investment and financing with collateral constraints that incorporates both persistent industry and aggregate shocks, and allows for differential sensitivity of the riskless rate and collateral constraints to aggregate and industry shocks.

"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.

"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.

"Seed-Stage Success and Growth of Angel Networks" (with Buvaneshwaran Venugopal)
Abstract: Using unique hand-collected data, we show that syndication is widespread in the angel investment market, even among seed-stage startups. Individual angels that demonstrate seed-stage success experience an increase in the quantity, quality, and geographic spread of their co-investment connections relative to unsuccessful peers, and are rewarded with more deal flow. These results are stronger for less-established angels and when the seed-stage success indicates skill rather than luck. Success also begets more success, making it more likely that the angel's other portfolio companies receive follow-on financing, especially from VC firms.
(Here's the Internet Appendix)

"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.

Other Links:

Bauer M.S. in Finance Program

The Finance Department

C. T. Bauer College of Business