Positions

Assistant Professor of Finance, August 2012 - Present 

 

Education

Ph.D. in Economics, Brown University, May 2012

B.A. with Highest Honors, University of Michigan, Dec. 2005

 

Research interests

Corporate Governance, Firm Distress, Credit Markets, Credit Default Swaps

• CV

Office Hours

Tuesdays 15-17.00 in M4.21, or by appointment

 

Current Teaching

Masters in International Finance: Investments (Block 1)

Masters in Business Economics and Finance: Valuation (Block 1)

Course materials are available through the UvA Blackboard Server 

 

Past Teaching Activities - UvA

Masters in International Finance: Investments (2012, 2013)

Masters in Business Economics and Finance: Corporate Governance (2013)   

Bachelor: Corporate Finance (2012, 2013)

 

Past Teaching Activities - Brown

Instructor: Applied Microeconomics (Summer 2012), Financial Markets and Investments (Summer 2011)

Teaching Assistant: Data, Finance, and Statistics with Prof. Ivo Welch (2010, 2011)

Teaching Assistant: Microeconomics, Labor Economics, Investments, Corporate Finance (2007 - 2009)

Working Papers

• Distress Resolution Costs and Bankruptcy Risk: Evidence from CDS Markets (with Murillo Campello and Rafael Matta)

• 2014 Brazilian Econometric Society Best Paper Award  

We examine the effects of a recent change to the US tax code that significantly reduced the costs creditors incur when restructuring debt out of court. IRS's Regulation TD9599 contemplated particular types of debt contracts, allowing us to use a triple-differences approach to identify the degree to which borrowers and lenders are affected by restructuring costs. We first model the tax regime to show how CDS spreads can be used to disentangle the costs of in-court versus out-of-court restructuring. Empirically, we show that markets anticipated significantly more out-of-court renegotiations with the passage of TD9599. CDS spreads decline by record-low figures on the regulation's announcement and the drop is concentrated among distressed firms with high ratios of syndicated loans—the debt category affected by TD9599. Stock returns of these distressed firms as well as of their syndicate lenders outperformed the market on the announcement of TD9599. Together with the reduction in bankruptcy risk, distressed firms' access to syndicated loans expanded and their loan markups declined. Our analysis shows how altering regulatory constraints can improve welfare in financial distress.

 

• Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting (with Zacharias Sautner)

• 2014 MIT Asia Accounting Conference Best Paper Award 

We show that executives with more short-term incentives engage in myopic behavior by reducing investment. We document this effect by exploiting a unique event, in which more than 700 firms accelerated the vesting periods on executive stock options to avoid an accounting expense under FAS 123-R. This led to a substantial decrease in executives’ incentives—at accelerating firms 52% of unvested equity became immediately exercisable, and CEOs responded with a significant increase in both option exercises and equity sales. To identify causality, we exploit exogenous variation in the timing of FAS 123-R—firms with fiscal year ending June or later had to comply in 2005, while all other firms could postpone compliance until 2006. We show that firms that accelerated option vesting in response to an earlier FAS 123-R compliance date reduce investment. This effect is concentrated among firms that face low competition and low analyst coverage.

 

• Do Firms Replenish Executives' Incentives After Equity Sales?

After selling firm equity, executives' incentives to maximize shareholder value may decrease. How do boards respond? Theory shows boards can restore executives' incentives by shifting subsequent pay from cash toward equity. Unobservable firm-level changes that cause executives to sell equity and simultaneously reduce their need for incentives may bias estimates. I therefore compare selling and non-selling executives at the same firm. I find that boards replenish only 7% of incentives after sales, allowing some executives to accumulate substantially fewer incentives than others. I show that boards may instead focus on benchmarking annual equity grants to those of peer firms.

 

Executive Retention and Accelerated Option Vesting (with Torsten Jochem and Zacharias Sautner)

We show that equity pay conveys retention incentives by documenting that executive turnover significantly rises following the sudden elimination of vesting periods. We document this effect by exploiting a unique event, in which more than 700 firms accelerated stock option vesting to avoid an accounting expense under FAS 123-R. Option acceleration reduced executives' retention incentives by allowing them to keep newly vested options when departing the firm. Our identification exploits FAS 123-R’s almost-random, staggered compliance dates—firms with fiscal year ending June or later complied in 2005, while firms with earlier fiscal year ends did not comply until 2006. We find that the rise in executive turnover corresponded precisely with firms staggered compliance dates. Our results are large: in response to option acceleration, CEO turnover, for example, rose by 76%. We find no change in turnover of outside directors, who own only few accelerated options.

 

Work in Progress

The Consequences of Loan Renegotiation for Distressed Borrowers (with Murillo Campello and Janet Gao)

Corporate Taxes and Executive Option Exercises: A Path to Promotion? (with Reint Gropp)

 

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