Research

Working Papers

1.   Does financial distress affect emerging risk taking?

Presentations: Bertram Scholar Dinner; Canadian Sustainable Finance Network Conference; Federal Reserve Board; FMA Doctoral Student Consortium Workshop; Queen's University; UQAM; University of St. Gallen; University of Toronto empirical microeconomics seminar; University of Toronto financial economics seminar; University of Toronto Rotman finance seminar

Abstract: As economic damages from hurricanes rise due to climate change, banks will need to invest internally to update their risk management framework. This paper tests whether financial distress affects a bank's ability to adapt to emerging risks. Empirically, distressed banks take on relatively more emerging risk; they are 15 percentage points less likely to securitize loans that are exposed to hurricane risk and charge 88 basis points less for risky loans. Results are stronger for financially-constrained banks and are likely due to under-investing in risk management. Results are unlikely due to moral hazard, since distressed banks reduce borrower income risk.

2. Outside stakeholder governance (Draft Available Upon Request) with Tanja Artiga González and Paul Calluzzo

Presentations: Queen's University, University of Toronto's Climate Finance Roundtable, Sherbrooke University's 5th Annual Meeting in Applied Sustainable Financial Management

Abstract: Historically, stakeholders have governed firms through regulation. However, regulation requires consensus among stakeholders, which is difficult to achieve with polarized issues, such as climate change. As a result, individual stakeholders are pursuing climate litigation to require firms to reduce their environmental externalities. We model the optimal firm response to stakeholder litigation and how it compares to regulation. Since litigators target the "largest offenders", there is a competitive force among firms to proactively reduce their externality to avoid litigation, which is not present with regulation. Further, we show that regulation and litigation crowd out the impact of socially-responsible investing, since quantity constraints prevent capital markets from clearing.

3. Local information decay (Draft Available Upon Request) with Peter Cziraki, Jasmin Gider and Jordi Mondria

Presentations: Texas A&M University*

*Presented by co-author

Works in Progress

1. Are banks accounting for biodiversity risk in their lending? with Claudio Rizzi

2. What is the aggregate investor response to climate litigation risk?

Presentations: AFA Poster Presentation; Bank of Canada Graduate Student Paper Award Workshop; Canadian Sustainable Finance Network; CIREQ Interdisciplinary PhD Symposium on Climate Change; EFA Doctoral Tutorial; UCLA Climate Adaptation Research Symposium; UT Austin PhD Symposium; University of Toronto financial economics seminar