Access to Credit and Labor Mobility
(with Janghoon Shon)
Exploiting a government credit program in Korea that sharply expanded credit access to some individuals but not others, we analyze the effect of credit market frictions on labor mobility and wages. Individuals eligible for credit were 43% more likely to switch jobs relative to those who were not eligible. The higher switching rates and subsequent wage improvements in response to improved access to credit suggest that credit frictions impede labor mobility. Furthermore, individuals take greater risks when they have more credit; they exhibit a higher propensity to switch to employers in a different industry and move to different occupations at a higher rate. The fact that wages increased on average for these workers implies that removing credit frictions is important for labor mobility and quality of job matches.
(with Joshua Madsen and Wei Wang)
Exploiting a setting in which lead counsel lawyers are selected before the random assignment of bankruptcy judges, we examine if past interactions between lead counsel lawyers and judges influence corporate bankruptcy outcomes. Debtors' counsel who are familiar with the judge speed up the bankruptcy process - connected cases resolve 16% faster compared to otherwise similar cases with no connections. The most effective connections arise through previous clerkships and in-court interactions, and the effects concentrate in cases with smaller legal teams where connected lawyers have more influence. We find no evidence that connections lead to judge favoritism or pro-debtor biases. The results suggest that lawyers use knowledge of judges' judicial discretion to improve the efficiency of court processes.
Index Creation, Information and External Finance, 2020
(with Daniel Urban and Wenting Zhao)
How do firms newly added to an equity index change their financing strategies? We use the formation of new equity indexes and changes to index methodology as a setting to examine how shocks to a firm's information environment affect the debt supply and financing of firms. Firms added to an index are covered by more equity analysts and have greater news coverage, resulting in higher information production. Consequently, bond liquidity improves and firms benefit from lower yield spreads on newly issued debt. Treatment firms increase their leverage by about two percentage points relative to control firms. The response is primarily in the more information-sensitive public debt market, with firms issuing more public debt.
Work in Progress
Capital Market Access and Cash Flow Allocation During the Financial Crisis(with David Florysiak)