Research
Publications
The Savings of Corporate Giants with Olivier Darmouni. Accepted at Review of Financial Studies (revised November 2023).
Data: www.corporategiants.net
Media coverage:
MarketWatch, March 2024, Apple, Microsoft, Alphabet and other corporate giants have huge bond holdings, and here’s why that’s a problem
CNBC, August 20, 2020: Some companies are running mini bond funds that appear as cash on balance sheets
CBS Press Release, August 6, 2020: Bigger than Banks: Re-Evaluating Superstar Firm Holdings Reveals Major Multinationals Are Sophisticated Financial Actors
Should Information be Sold Separately? Evidence from MiFID II with Yifeng Guo. Journal of Financial Economics 142(1), October 2021, 97-126.
Winner of the Chazen Research Grant 2019 and Deming Doctoral Fellowship
Media coverage:
IR Magazine, July 10, 2020: How Mifid II has increased competition and improved research quality
Financial Times, May 25, 2020: UK and EU fund managers at odds over Mifid II revamp
Chazen Global Insights: Unbundling of Analyst Research
The Cross-Section of Risk and Returns with Kent Daniel, Simon Rottke, and Tano Santos. Review of Financial Studies, 33(5), May 2020, 1927-1979.
Working Papers
The Corporate Supply of (Quasi) Safe Assets. R&R at The Journal of Finance (revised September 2023)
Abstract: Investors value safety in financial assets, including collateral and regulatory compliance. I present a model in which investors value safety not just in traditional safe assets like US Treasuries but also in corporate debt. Shareholders thus balance regular business with creating safe assets. Using the CDS-bond basis, I derive a measure of the corporate bond safety premium, which allows for testing the model. Results show that a high safety premium boosts debt issuance for safer firms. Interestingly, this debt predominantly funds equity payouts rather than investments, consistent with managers not incorporating the safety premium to assess real project valuations.
Winner of
AQR Top Finance Graduate Award at Copenhagen Business School;
Best Paper Award at Copenhagen Macro Days Conference ;
Chazen Research Grant 2020 and Arora-Naldi Fellowship 2021.
Media coverage:
Chazen Global Insights: When Corporations Issue Debt
Financially Sophisticated Firms with Kerry Siani (revised March 2024)
Data: Map bond issuers to Compustat parent company.
Abstract: Company capital structure extends far beyond the simple choice between debt and equity. In issuing publicly traded bonds, firms often employ complex entity structures, issuing diverse bond types with varying maturity, seniority, and covenants. In this paper, we document a significant heterogeneity in bond characteristics issued by firms by the same parent company that maps to heterogeneity in prices and investor composition. Using detailed portfolio allocation data, we find that firms, like financial intermediaries, engineer assets with cash flows that meet investors' demands. We show evidence that the complex bond issuance structure employed by firms serves a dual purpose: it helps complete the market while simultaneously reducing the costs of capital to the firm.
Beyond Cash-Flows: What Drives Corporate Bond Valuation? with Felix Corell and Melina Papoutsi (revised March 2024)
Abstract: Default risk alone does not explain credit spreads of corporate bonds, which are also valued for their convenience services like collateral potential, regulatory capital compliance, and liquidity concerns. This paper uses comprehensive price and holdings data from the euro area corporate bond market to uncover the factors driving corporate bond convenience yields. We observe significant variations in these yields among different investor groups, with banks, insurers, and pension funds typically holding high convenience yield portfolios. Investor composition is important in explaining the cross-section of convenience yields and corporate bond returns. By examining the impact of the ECB's corporate QE programs, we uncover a substantial influence of monetary policy on convenience yields of corporate bonds. Our results underscore the importance of asset-specific services in driving bond valuation and shaping monetary policy effects.
Older Working Papers
Short-Selling Restrictions and Returns: A Natural Experiment with Fernando Barbosa, Marco Bonomo and João de Melo. Revised February 2020
Winner of the Brazilian Econometric Society Best Paper Award 2015.
Abstract: We show that increases in stock loan fees have strong causal impact on stock prices. We identify these effects by exploiting exogenous variation in loan fees generated by a tax arbitrage opportunity that existed in Brazil from 1995-2014. The tax arbitrage involved differential tax treatment on dividend payments depending on investor's type. Our data set allows to distinguish between equity lending transactions motivated by tax-arbitrage from those with the purpose of short-selling the stock. Variation in loan fees on tax-motivated transactions were a source of repeated exogenous variation of borrowing fees in short-selling transactions.