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.

Completed working papers:

(8) “The aggregate demand for bank capital,” 2019, joint with Milton Harris and Christian Opp.

Abstract: We propose a novel conceptual approach to characterizing the credit market equilibrium in economies with multi-dimensional borrower heterogeneity. Our method is centered around a micro-founded representation of borrowers' aggregate demand correspondence for bank capital. The framework yields closed-form expressions for the composition and pricing of credit, including a sufficient statistic for the provision of bank loans. Our analysis sheds light on the roots of compositional shifts in credit toward risky borrowers prior to the most recent crises in the U.S. and Europe, as well as the macroprudential effects of bank regulations, policy interventions, and financial innovations providing alternatives to banks.

(9) “Only time will tell: a theory of deferred compensation,” 2019, joint with Florian Hoffmann and Roman Inderst (revise and resubmit at Review of Economic Studies).

Abstract: This paper characterizes optimal compensation contracts in principal-agent settings where the agent's action has persistent effects. As additional informative signals arrive over time, deferred compensation has the benefit of exploiting better performance measurement which, for any information environment, is captured by the martingale property of the likelihood ratio process. With bilateral risk-neutrality and a relatively impatient agent, optimal contracts are high-powered and feature at most two payout dates regardless of the nature of information arrival. If the agent is additionally risk-averse, rewards are paid out if and only if performance is above a hurdle that is gradually increasing over time. Our precise characterization allows for clear-cut comparative statics predictions on how the timing of pay depends on the nature of information arrival as well as agent characteristics and generates implications for the optimal duration of compensation packages and the maturity structure of claims in financial contracting settings.

(10) “The economics of deferral and clawback requirements: An indirect tax approach to compensation regulation,” 2019, joint with Florian Hoffmann and Roman Inderst (revise and resubmit at Journal of Finance).

Abstract: We propose an indirect tax approach to analyze the effects of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements in the financial sector. Different from capital requirements, compensation regulation does not target bank shareholders' preferences over risk choices directly but only indirectly via its effect on compensation costs. Whether moderate deferral requirements induce shareholders to incentivize higher risk-management effort depends on fundamentals governing compensation design, such as the information environment or managers' outside options, whereas stringent deferral requirements unambiguously backfire. We characterize socially optimal deferral and clawback requirements and their interaction with capital regulation.

Work in Progress:

(11) “Regulatory forbearance in the U.S. insurance industry: The effects of eliminating capital requirements,” 2019, joint with Bo Becker and Farzad Saidi.

Abstract: This paper documents the long-run effects of an important reform of capital regulation for U.S. insurance companies in 2009. We show that its design effectively eliminates capital requirements for (non-agency) MBS, implying an aggregate capital relief of over \$18bn at the time of the reform. By 2015, 40% of all high-yield assets in the overall fixed-income portfolio are MBS investments. This result is primarily driven by insurers' reduced propensity to sell poorly-rated legacy assets. Using a regression discontinuity framework, we can attribute this behavior to capital requirements. We also provide evidence that the insurance industry, driven by large life insurers, crowds out other investors in the new issuance of (high-yield) MBS post reform. Our findings are consistent with the view that the regulation and supervision of the U.S. insurance sector is influenced by short-term industry interests.

(12) “A theory of socially responsible investment,” 2020, joint with Martin Oehmke.

Abstract: We characterize necessary conditions for socially responsible investors to impact firm behavior in a setting in which firm production generates social costs and is subject to financing constraints. Impact requires a broad mandate, in that socially responsible investors need to internalize social costs irrespective of whether they are investors in a given firm. Impact is optimally achieved by enabling a scale increase for clean production. Socially responsible and financial investors are complementary: jointly they can achieve higher welfare than either investor type alone. When socially responsible capital is scarce, it should be allocated based on 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.

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