Working Papers

Specialized banks and the transmission of monetary policy: Evidence from U.S. syndicated loan market (Job market paper)

Using a sample of U.S. syndicated loans, I examine the impact of banks' sectoral specialization on credit supply in response to monetary policy shocks. First, I show that banks rebalance their portfolios towards their specialized sectors following an expansionary interest rate shock. After a 25 basis point rate reduction, banks increase credit to their sector of specialization by 4% more relative to the other sector. The effect peaks at 10 quarters, with results driven by easing periods. This result holds when controlling for sector-level opportunities and concurrent banks' market structure characteristics. Consistent with the notion that banks specialize in given sectors to leverage their informational advantage, I find, at the bank level, that lenders with more specialized portfolios display improved income performance and reduced loan delinquencies upon expansionary rate shocks. Finally, I document that industries that borrow more from specialized banks register higher debt growth in response to monetary easing shocks. I interpret my results through a model where banks have heterogeneous monitoring technologies across sectors, generating higher lending and responsiveness to rate change in the industry of specialization. My findings emphasize the dual effect of bank sectoral specialization. Specialized banks show heightened responsiveness to monetary policy by increasing credit within their specialized sector and qualitatively align with a redirection of loans toward high-quality projects.

Presented at: Finance Seminar – Pompeu Fabra; CREi Macro Lunch Seminar – Pompeu Fabra; BGSE Ph.D. Jamboree; SAsCa PhD Conference; NSE Workshop; MadBar Workshop; IWFAS 2023; UA Eco Junior Workshop: CREi International Lunch Seminar – Pompeu Fabra; SAEe 2023, Econometric Society Winter Meeting 2023

Customer capital and corporate borrowing (Joint with Luigi Falasconi  and Lukas Nord) draft available soon

This paper investigates the relationship between customer acquisition, debt structure, and firm dynamics in the US. Using a sample of publicly listed firms, we find that firms allocating significant resources to attract customers have a debt composition tilted towards unsecured credit. In addition, firms with higher fractions of customer expenses issue higher amounts of unsecured debt relative to secured debt when raising additional funding. We propose and test a novel mechanism in which firms with higher customer expenses can leverage their going-concern value to boost their debt capacity through unsecured borrowing. To rationalize our empirical results, we developed a theory of firm dynamics with customer capital and uncollateralized debt to study the joint dynamics of firms’ customer base and their borrowing.

Presented at: BGSE Ph.D. Jamboree 2021 

Exposure to idiosyncratic house price risk and bank portfolio allocation (Joint with Francisco Amaral)

We examine the relationship between bank exposure to house price risk and loan portfolio choice. Using transaction-level real estate data for the U.S., we document that banks exposed to higher idiosyncratic house price risk provide a significantly greater amount of real estate loans compared to commercial loans. We delve into the underlying mechanism behind this result by demonstrating that banks exposed to higher levels of idiosyncratic house price risk have lower mortgage-backed security ratios and face higher foreclosure discounts. Exploring cross-county variation, we show that higher levels of idiosyncratic house price risk are associated with lower securitization levels and higher spreads. These patterns qualitatively align with banks facing higher liquidity constraints due to lower mortgage securitization, ultimately leading to a crowding-out effect on commercial lending.

Bank's productivity and firms' outcomes   work in progress

This paper studies the implications of banks’ productivity on lending relationships. I document how banks’ ability to generate revenues over their input of productions affects banks’ security design and its implications for firms’ investment exploiting a sample of US syndicated loans over the period of 1994-2020. Firms that match with productive banks face a steeper pricing function for a given level of borrower risk, which is associated with a premium for matching with productive banks as these lenders can allocate more funds for riskier borrowers. Small firms that match with productive banks invest more and grow faster. At the bank level, I document that this lending behaviour is not associated with higher bank risk-exposure, but instead is related to better screening technology and information gathering. 

Presented at: Finance Seminar – Pompeu Fabra