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. Distressed banks are 8 percentage points more likely to accept loans exposed to hurricane risk and charge 85 basis points less for risky loans. This increase in risk taking is likely due to an under-investment in updating the risk management framework, since results are stronger for financially-constrained banks. Results are unlikely due to moral hazard, since distressed banks reduce borrower income risk. Further, accepting more loans exposed to hurricane risk is associated with lower future profitability. Overall, financial distress affects a bank's ability to adapt to emerging risks.

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

Presentations: Texas A&M University*

*Presented by co-author

Abstract: This paper studies the dynamics of local investors’ information advantage using local newspaper closures and the trades of local and nonlocal investors. Following the closure of a newspaper, investors are 10 percentage points less likely than nonlocals to trade the shares of firms in the same zip-code, and reduce the share of their local holdings by 8 percentage points, or 50% relative to the average. Local investors also make lower risk-adjusted returns on their stock purchases and sales up to 6 months following a local newspaper closure. The differences are larger for investors who trade frequently and live outside of large cities. Our results suggest that local journalism is an important source of local investors’ information advantage, and, therefore, the home bias phenomenon.

Works in Progress

1. Outside stakeholder governance with Tanja Artiga González and Paul Calluzzo

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

3. 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