Knowing is Power: The Value of Judge-Lawyer Familiarity
Revise and Resubmit: Review of Financial Studies
(with Josh Madsen and Wei Wang)
Does familiarity matter? We exploit a setting where lead counsel lawyers are selected before judge assignment in corporate bankruptcies and find that cases resolve 25% faster when a judge-lawyer connection exists. The most effective connections arise through previous in-court interactions where lawyers gain first-hand knowledge of judges' preferences. Firms also incur lower legal fees and their creditors recover more when a connection exists. Judges exhibit no preferential bias toward connected firms. Given restricted private communication between lawyers and judges, our paper highlights a new mechanism whereby connections create value: non-transferable knowledge of idiosyncratic preferences.
Index Creation, Information and External Finance
Revise and Resubmit: Journal of Accounting Research
(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.
Life Expectancy and Corporate Debt Markets
(with Zhanhui Chen, Pingyi Luo, and Wenjun Zhu)
Longevity shocks induce shifts in life insurers' demand for bonds of specific maturities. We show that these shifts have real consequences for a firm's financing and investment policies. Life insurance companies increase purchases of long-term bonds when longevity increases. Consequently, long-term bond yields fall. The corporate sector absorbs these shocks by shifting to long-term debt issues while simultaneously increasing investments in long-term assets. The effects are particularly marked where life insurers are the primary holders of a firm's debt. The response is also more pronounced for firms that rely on long-term financing and those that are financially unconstrained.
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.
Discussion of "Banking on Carbon: Corporate Lending and Cap-and-Trade Policy" by Ivan Ivanov, Mathias S. Kruttli, and Sumudu W. Watugala, SFS Cavalcade 2021
Discussion of "Flexibility Costs of Debt: Danish Exporters During the Cartoon Crisis" by Benjamin U. Friedrich and Michal Zator, NFA 2020.
Discussion of "When Do Firms Risk Shift? Evidence from Venture Capital" by Matthew Denes, Finance Down Under 2018.
Discussion of "Corporate Financing in Asia through Bond Markets" by Gregory Duffee and Peter Hordahl, BOK - BIS Conference on Asia-Pacific Fixed Income Markets: Evolving Structures, Participation and Pricing, 2018
Discussion of "Banking the Unbanked: What do 255 Million New Bank Accounts Reveal about Financial Access?" by Sumit Agarwal, Shaswat Alok, Pulak Ghosh, Soumya Ghosh, Tomasz Piskorski, and Amit Seru. HKUST Finance Symposium 2017.
Discussion of "Corporate Governance Reform and Risk-Taking: Evidence from a Natural Experiment from an Emerging Market" by Santosh Koirala, Andrew Marshall, Suman Neupane, and Chandra Thapa. Journal of Corporate Finance Special Issue Conference, 2017.
Discussion of "Do Technology Spillovers Affect Corporate Financial Policies?" by Ambrus Kecskes and Phuong-An Nguyen. Financial Management Association Annual Meetings 2017.
Discussion of "The Choice between Project Finance and Corporate Financing" by Paulo P. Alves and Joao M. Pinto. Financial Management Association Annual Meeting 2017.
Discussion of "Why Do Boards Exist? Governance Design in the Absence of Corporate Law" by Mike Burkart, Salvatore Miglietta, and Charlotte Ostergaard. Financial Intermediation Research Society Meetings 2017.
Discussion of "The Impact of Bank Shocks on Firm-Level Outcomes and Bank Risk-Taking" by Hans Degryse, Olivier De Jonghe, Sanja Jakovljevic, Klaas Mulier, and Glenn Schepens. Financial Intermediation Research Society Conference 2017.
Discussion of "Do Market Prices Improve the Accuracy of Court Valuations in Chapter 11?" by Cem Demiroglu, Julian R. Franks, and Ryan Lewis. Finance Down Under 2017.
Discussion of "Reputation and Competition in the Credit Ratings Market: Evidence from Commercial Mortgage-Backed Securities" by Ramin Baghai and Bo Becker. City University of Hong Kong International Finance Conference 2017
Discussion of "Going Abroad in a Risky World: Geographic Diversification, Institutional Frictions, and Corporate Leverage" by Jongsub Lee, Leming Lin, and Andy Naranjo. China International Conference on Finance 2017.
Discussion of "Local Investors' Preferences and Capital Structure" by Binay K. Adhikari, David C. Cicero, and Johan Sulaeman. China International Conference on Finance 2017.
Discussion of "FX Hedging and Creditor Rights" by Madhusudhan Mohanty and Suresh Sundaresan.HKMA-BIS Conference on The Price, Real, and Financial Effects of Exchange Rates, 2017.
Discussion of "CSR Disclosure and the Choice between Public Debt and Bank Debt" by Weiqiang Tan, Hiu Leong Tsang, Wenminng Wang, and Wenlan Zhang. Asian Finance Association Conference 2017.
Discussion of "The Role of Trade Credit During the Recent Financial Crisis: Evidence from German Small, Medium, and Large-Sized Firms" by Jochen Lawrenz, Julia Oberndorfer, and Irene Riccabona. German Finance Association (DGF) Conference 2016.
Discussion of "Investment, Taxes, and Capital Structure: A Study of US Firms in the Early 1900s" by Leonce Bargeron, David J. Denis, and Kenneth M. Lehn. HKUST Corporate Finance Symposium 2015
Discussion of "When Heirs Become Major Shareholders: Evidence on Tunnelling and Succession Through Related Party Transactions" by Sunwoo Hwang and Woochan Kim. Korea America Finance Association Conference 2014.
Discussion of "Financial Flexibility and Corporate Cash Policy" by Tao Chen, Jarrad Harford, and Chen Lin. Asia Bureau of Finance and Economic Research Conference 2014.
Discussion of "Lending to Innovative Firms: The Role of Lender Expertise and Control Rights" by Sudheer Chava, Vikram Nanda, and Steven Xiao. HKUST Corporate Finance Symposium 2013.
Discussion of "Cultural Proximity and Loan Outcomes" by Raymond Fisman, Daniel Paravisini, and Vikrant Vig. The Interdisciplinary Center Herzliya Conference 2012.