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,” 2022, joint with Bo Becker and Farzad Saidi, Review of Financial Studies, 35, 5438–5482. 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,” 2022, joint with Florian Hoffmann and Roman Inderst, Journal of Finance, 77, 2423-2470. 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.

(11) “Intermediary Capital and the Credit Market” 2024, joint with Milton Harris and Christian Opp, accepted at Management Science.

Abstract: This paper presents a tractable framework in which regulated financial intermediaries compete with unregulated investors, targeting heterogeneous borrowers. Our results highlight the central role of intermediaries' shadow cost of capital in both credit allocation and pricing. Our results can concurrently rationalize a broad array of empirical facts documented in the context of credit markets, such as the substitution between bond markets and bank loans, abnormally low yields, and the pricing effects of a security's non-cashflow characteristics.

(12) “A theory of socially responsible investment,” 2023, joint with Martin Oehmke (conditionaly accepted at Review of Economic Studies). Winner of EFA 2020 best paper prize in responsible finance.

Abstract: We characterize the conditions under which a socially responsible (SR) fund induces firms to reduce externalities, even when profit-seeking capital is in perfectly elastic supply. Such impact requires that the SR fund's mandate permits the fund to trade off reduced financial performance against reductions in social costs---relative to the counterfactual in which the fund does not invest in a given firm. Based on such an impact mandate, we derive a micro-founded investment criterion, the social profitability index (SPI), which characterizes the optimal ranking of impact investments when SR capital is scarce. If firms face binding financial constraints, the optimal way to achieve impact is by enabling a scale increase for clean production. In this case, SR and profit-seeking capital are complementary: Surplus is higher when both investor types are present.

Completed working papers:

(13) “Green capital requirements,” 2023, joint with Martin Oehmke (revise and resubmit at Journal of Finance). (NBER CF Fall 2022 presentation as video)

Abstract: We study bank capital requirements as a tool to address financial risks and externalities caused by carbon emissions. Capital regulation can effectively address climate-related financial risks but doing so does not necessarily reduce emissions. For example, higher capital requirements for carbon-intensive loans exposed to transition risk may crowd out lending to clean firms. When it comes to affecting carbon externalities, capital requirements are inferior to carbon taxes: Reducing carbon emissions via capital requirements may require sacrificing financial stability or may be altogether infeasible. However, if the government is unable to commit to future environmental policies, capital requirements can make higher carbon taxes credible by ensuring banks have sufficient capital to absorb losses from stranded asset risk.

(14) “Greenwashing and Retail investors: The case for a Taxonomy for ESG Investments?,” 2024, joint with Roman Inderst (revise and resubmit at Journal of Financial Economics).

Abstract: Our paper analyzes whether a planner should design a taxonomy for sustainable investment products when conventional tools for environmental regulation can also be used to address externalities arising from firm production. We first show that the private market provision of ESG funds marketed to retail investors involves greenwashing: Regardless of the sustainability of firms' production choices, all firms are marketed as sustainable. A mandatory taxonomy prevents greenwashing and is necessary to generate real effects of sustainable investment products. However, the introduction of such a taxonomy can only improve welfare, on top of optimally chosen environmental regulation, if financial constraints constrain socially valuable economic activity. Otherwise, environmental policy alone is sufficient to optimally address externalities.

Work in Progress:

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

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