Working Papers

Unearthing Zombies (with Nirupama Kulkarni, SK Ritadhi, and Katherine Waldock ) [Paper]

Zombie lending interferes with efficient credit allocation. Using new supervisory data from India, we examine two reforms targeting zombie credit: a bankruptcy law and a regulatory intervention requiring that lenders recognize bad loans. Zombie recognition after the bankruptcy reform is muted in weakly capitalized and government-owned banks. The subsequent regulatory intervention goes further in forcing the recognition of zombie loans at weakly capitalized banks, but effects remain muted among government-owned banks. Consequently, credit reallocates to healthier borrowers, and they increase investment relative to zombie borrowers. Overall, regulatory action can alleviate zombie lending but frictions at government-owned banks limit its efficacy.

Foreign Currency Borrowing of Corporations as Carry Trades: Evidence from India (with Viral V. Acharya) [Paper]

We establish that macroprudential policies limiting capital flows can curb risks arising from corporate foreign currency borrowing in emerging markets. Using detailed firm-level data from India, we show that propensity to issue foreign currency debt for the \emph{same} firm is higher when the difference in short-term interest rates between India and the US is higher, i.e., when the dollar carry trade' is more profitable; this behavior is driven by the period after the global financial crisis. The positive relationship between issuance and thecarry trade’ breaks down once regulators institute more stringent interest-rate caps on foreign currency borrowing. Riskier borrowers such as importers and those with higher interest costs cut issuance most. Firm equity exposure to foreign exchange risk rose after issuance in favorable funding conditions and emerged as a source of external sector vulnerability during the `taper tantrum’ of 2013. Macroprudential policy action limiting capital flows is able to nullify this effect, such as during the market stress due to the COVID-19 pandemic.

Acquiring Failed Banks [Paper]

I study the relative importance of lending and deposit-taking for bank value. Comparing outcomes for winning banks to runner-up bidders in failed bank auctions, I find winners experience a 1.5% abnormal return and this increase is mainly due to deposits, not loans. After acquisition, the winning bank cuts lending to the failed bank’s borrowers and closes branches but it retains almost all acquired deposits. These deposits are not channeled into lending elsewhere. Rather, the acquirer is able to lower deposit rates, reflecting increased market power. Multiple results are independent of the failed bank, suggesting the findings have broader relevance.

Hedging, Liquidity, and Productivity (with Guojun Chen, and Zhongjin Lu ) [Paper]

We study the effects of liquidity and productivity on corporate hedging decisions using a comprehensive dataset of oil and gas producers. Over a longer sample period than prior literature, we discover that hedging intensity is positively correlated with unrealized hedging gains and output prices, but negatively with operating cash flows. These new empirical patterns together challenge existing risk management models as unrealized hedging gains represent an unexpected shock to internal liquidity, while both operating cash flows and output prices are positively related to productivity. Incorporating procyclical collateral capacity and production-dependent depreciation into existing models can explain our empirical findings.

Lending to Influence Politicians: County-Level Evidence [Paper]

Using changes in the composition of the US House Financial Services Committee as a shock to a region’s political importance, I provide evidence that financial institutions alter lending patterns depending on whether a county is represented by a member of the committee. The effects are asymmetric – on gaining a member, counties see no immediate change but on losing a member, there is a decline in home mortgage loans originated. This asymmetry is consistent with models that emphasize reputation building in the market for political favors. Effects are greater where the politician receives less direct contributions suggesting that these indirect contributions might be substitutes for direct giving. In the presence of limits on campaign contributions, these results emphasize alternate channels that firms may employ to influence politicians.


UGA Terry

Corporate Finance Theory (UG) – Fall 2018-2020 [Syllabus]

NYU Stern

Corporate Finance (UG) – Summer 2015 [Syllabus]
  • Awarded Commendation for Teaching Excellence