Working Papers
Review of Financial Studies, Conditionally accepted Abstract: We exploit a variation in organizational hierarchy induced by a reorganization plan implemented in roughly 2,000 bank branches in India, to investigate how organizational hierarchy affects the allocation of credit. We find that increased hierarchization of a branch induces credit rationing, reduces the performance on loans, and generates standardization in loan contracts. Additionally, we find that hierarchical structures perform better in environments characterized by a high degree of corruption, highlighting the benefits of hierarchies in restraining rent-seeking activities. Overall, our results are consistent with the view that valuable information may be lost in hierarchical structures. EFMA Best PhD Paper Award, MFA Outstanding Paper Award
Abstract: How do lenders improve contract enforcement when institutions are weak? To increase pledgeability of farmers' output, a large agribusiness lender in Brazil constructs grain storage silos. Once deposited in the warehouse, grain can be seized by the lender. Warehouse access also permits a new credit contract, repayable in grain. This contract transfers the ownership of grain to the lender, restraining the borrower from diverting the proceeds. The improved collateralization increases debt capacity and lowers interest rates. The effects are stronger for municipalities with weaker courts and financially-constrained borrowers. Results resonate with credit by commodity traders to producers and custodian lending.
Unemployment Insurance, Strategic Unemployment and Firm-Worker Collusion (with Bernardus van Doornik and David Schoenherr)
Abstract: Exploiting a discontinuous effect of an unemployment insurance (UI) reform in Brazil, this paper documents layoff and rehiring patterns consistent with collusion between firms and workers to extract rents from the UI system. Firms and workers time formal unemployment spells to coincide with workers' eligibility for UI benefits. These patterns are mostly driven by industries and municipalities with large informal labor markets. Combined with a lower probability of hiring replacement workers when laying off workers eligible for UI benefits, this suggests that firms continue employing workers informally while they are on benefits. Firms benefit from collusion through lower equilibrium wages.
Abstract: Using natural disasters as shocks to local economies, we document that a bank branch’s ability to set deposit rates locally has real effects. Following disasters, branches that set rates locally increase deposit rates more and experience higher deposit volumes in affected counties. Consistent with imperfect insurance from internal capital markets, banks with more branches setting rates locally expand mortgage lending relatively more in affected counties. House prices recover faster in MSAs that have more branches setting rates locally. Our results are robust to instrumenting for the location of deposit rate-setting authority using bank mergers.
Work in Progress
Organizational Design of Risk Management (with Rajesh Chandy, Ahmed Tahoun, and Vikrant Vig)
Vertical Integration and Input Specificity (with Dimas Fazio and Thiago Silva)
Firm Risk and Firm-Worker Selection (with Bernardus van Doornik and David Schoenherr)
Propagation of Shocks and Network Fragility (with Dimas Fazio and Thiago Silva)
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