Research statement and Google Scholar Profile

Publications (chronological):

(1) "Rybczynski's theorem in the Heckscher-Ohlin world - anything goes," 2009, joint with Hugo Sonnenschein and Christis Tombazos, Journal of International Economics, 79 (1), 137-142.
Main insight: The predictions of the Rybczynski Theorem can be reversed in general equilibrium. This "reverse" outcome implies immiserizing factor growth.

(2) "Tariff wars in a Ricardian model with a continuum of goods," 2010, Journal of International Economics, 80 (2), 212-225.
Main insight: Optimum import tariff rates in the Dornbusch-Fischer-Samuelson model of trade are increasing in both absolute advantage and comparative advantage. A sufficiently large economy prefers the Nash equilibrium of tariffs over free trade.

(3) "Expropriation risk and technology,'' 2012, Journal of Financial Economics, 103, 113-129. Winner of the 2008 John Leusner Award for the best dissertation at the University of Chicago in the field of Finance.
Main insight: Property rights (within a country) vary across industrial sectors according to their technology intensity, leading to a pecking order of expropriation. Firms can manage expropriation risk by forming conglomerates, i.e., bundling activities across sectors with different technology levels.

(4) ''Rating agencies in the face of regulation,'' 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61. Winner of the 2016 Emerald Citation Award.
Main insight: The regulatory use of ratings feeds back into the ratings of profit-maximizing credit rating agencies. Rating inflation is expected to occur for complex securities.

(5) “Markup cycles, dynamic misallocation, and amplification," 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
Main insight: We analyze the IO implications of consumption-based asset pricing. In contrast to a risk-neutral economy, oligopolistic competition produces procyclical aggregate markups if valuations are governed by preferences with a relative risk aversion coefficient greater than 1. With heterogeneous industries, aggregate fluctuations may originate purely from myopic strategic behavior at the industry-level.

(6) “Impatience versus incentives,” 2015, joint with John Zhu, Econometrica, 83, 1601-1617. Presentation Slides from Econometric Society Meeting, Boston 2015.
Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.

(7) "Target Revaluation after Failed Takeover Attempts - Cash versus Stock," 2016, joint with Ulrike Malmendier and Farzad Saidi, Journal of Financial Economics, 119, 92-106. Winner of 2016 Jensen Prize for the best Corporate Finance paper published in the Journal of Financial Economics. Online Appendix

Main insight: Capital markets interpret a cash offer as a economically large and positive signal about the fundamental value of target resources (in contrast to a stock offer). We expose a significant look-ahead bias affecting the previous literature on this topic.

(8) “Only time will tell: a theory of deferred compensation,” 2021, joint with Florian Hoffmann and Roman Inderst, Review of Economic Studies, 88, 1253-1278. Online Appendix.
Main insight: This paper characterizes optimal compensation contracts in principal-agent settings in which the consequences of the agent's action are only observed over time.

(9) “Regulatory forbearance in the U.S. insurance industry: The effects of removing capital requirements for an asset class,” 2021, joint with Bo Becker and Farzad Saidi (Forthcoming in Review of Financial Studies). Online Appendix.

Main insight: We uncover that a reform of capital regulation for U.S. insurance companies effectively eliminates capital requirements for holdings of mortgage-backed securities but not for other fixed-income assets. We analyze the effect of this reform across asset classes and document increased risk-taking, especially by financially constrained (life) insurers.

(10) “The economics of deferral and clawback requirements,” 2021, joint with Florian Hoffmann and Roman Inderst (Forthcoming in Journal of Finance). Non-technical insights in Harvard Law School Forum on Corporate Governance.

Main insight: Heuristic arguments in favor of interfering in bankers' compensation via deferral and clawback requirements suffer from the Lucas critique. Our positive analysis shows that sufficiently stringent deferral requirements always backfire. Our normative analysis characterizes whether and how deferral and clawback requirements should supplement capital regulation as part of the optimal policy mix.

Completed working papers:

(11) “The aggregate demand for bank capital,” 2020, joint with Milton Harris and Christian Opp.

Abstract: We propose a novel conceptual approach to transparently characterizing credit market outcomes in economies with multi-dimensional borrower heterogeneity. Based on characterizations of securities' implicit demand for bank equity capital, we obtain closed-form expressions for the composition of credit, including a sufficient statistic for the provision of bank loans, and a novel cross-sectional asset pricing relation for securities held by regulated levered institutions. Our framework sheds light on the compositional shifts in credit prior to the 07/08 financial crisis and the European debt crisis, and can provide guidance on the allocative effects of shocks affecting both banks and the cross-sectional distribution of borrowers.

(12) “A theory of socially responsible investment,” 2022, joint with Martin Oehmke (revise and resubmit at Review of Economic Studies). Winner of EFA 2020 best paper prize in responsible finance.

Abstract: We characterize conditions under which socially responsible investors impact firm behavior, in a setting in which firm production generates social costs and is subject to financing constraints. In this setting, impact requires a broad mandate: Socially responsible investors need to internalize social costs irrespective of whether they are investors in a given firm. If firms face binding financial constraints, impact is optimally achieved by enabling a scale increase for clean production, and socially responsible and financial investors are complementary: Jointly they can achieve higher surplus than either investor type alone. Scarce socially responsible capital should be allocated according to a social profitability index (SPI). This micro-founded ESG metric captures not only a firm's social status quo but also the counterfactual social costs produced in the absence of socially responsible investors.

(13) “Green capital requirements,” 2022, joint with Martin Oehmke.

Abstract: We study the effects of green capital requirements that give preferential capital treatment to clean loans. From a positive perspective, our analysis clarifies the differential effects of green supporting and brown penalizing factors. From a normative perspective, we contrast optimal capital requirements under a classic prudential mandate, which is affected by carbon emissions only through climate-related risks to the banking sector, with those under a broader green mandate that accounts for more general carbon externalities. While climate-related risks that affect bank stability can be optimally addressed by a combination of green supporting and brown penalizing factors, capital regulation is a less effective tool to address carbon externalities that manifest itself outside of the banking sector.

Work in Progress:

(14) “Stranded Assets," 2022, joint with Martin Oehmke and Jan Starmans.

(15) “Optimal sustainability standards," 2022, joint with Roman Inderst.

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